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The World Economic Forum recently published a report where it detailed the importance of cryptocurrency regulations. The adoption of digital currencies by almost all of the sectors of society has without a doubt skyrocketed during this ongoing global health crisis and regulators are having a hard time keeping up with its growth.
The issues at hand
The organization noted that cryptocurrency systems as of late may well seem to be lacking attributes that are crucial for sovereign monetary regimes. Concerns range from knowing your customer norms, licensing requirements, data and privacy considerations, and anti-money laundering regulations.
With that in mind, the issues that were listed have been suggested by the WEF to be discussed via international cooperation. In line with this, financial institutions like the Bank for International Settlements are now checking on the technology for streamlined payment settlements.
The organization even pitched to proportionately apply the existing monitoring and record-keeping framework within the crypto space. Additionally, WEF highlighted the need for lawmakers to balance the mitigating risks and allowing innovation with a clear set of rules.
SEC Commissioner Hester Pierce recently agreed that regularity clarity is still lacking within the realm of cryptocurrencies. Peirce – a.k.a. “Crypto Mom” – also touched on the topic of what is deemed as slow and inflexible regulations that drive innovations out of the United States.
Cryptocurrency chokehold
Further, a conservative regulatory approach could likely result in a so-called jurisdictional arbitrage since the technology is decentralized in nature.
An excellent example of this is the one happening in China. What went down there is that the country’s authoritative government imposed a crackdown on bitcoin mining operations that ultimately led to these miners opting to search for friendlier pastures overseas. Banning it could be a huge blunder on China’s part.
However, it needs to be pointed out that a probable reason as to why they resorted to such a move is to promote their own central bank digital currency dubbed the digital yuan. China found a new avenue to invade the privacy of its citizens.
Going back to banning crypto, Mercy Corps Ventures’ Senior Technologist Alpen Sheth shared some thoughts about such an idea. According to him, banning cryptocurrencies will not prevent adoption.
Instead, this will only limit regulators’ abilities to guide market activity around the networks and address their unique potential risks.
Letting it all loose could be a bad idea as well
With that, one might think that it will be smooth-sailing if regulators will just let it all loose. The fact is that the regulation of cryptocurrency will have a similar negative effect as applying a tight grip to it. This could lead to fraud and substantial losses to investors. However, it was pointed out in WEF’s report that unlawful activities involving crypto constituted only 0.34 percent of all crypto transactions which is way lower than the ones seen in the conventional financial systems.
That said, it was recommended that both private and public sectors should work hand in hand to look for solutions that could provide an acceptable approach to this.
Singapore is just one of the countries out there that makes sure both innovation and compliance could be well utilized. The city-state is as of late hailed a forerunner in granting licenses and regulating crypto businesses.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
