The global financial crisis of 2008 brought changes to the financial industry, especially in its regulatory systems. New rules were put in place to protect consumers and make banks more transparent. The cryptocurrency market is going through similar upheavals, although not all countries are taking a similar approach.
Where is regulation at right now?
Some countries, most notably China, have taken an extreme approach to what is seen as a “dangerous movement.” It banned ICOs and crypto exchanges, blocked Chinese citizens’ access to overseas exchanges and cut off the power used by Bitcoin miners.
Other countries, like Estonia, Switzerland, Malta and Gibraltar are more open to crypto and each one is putting a regulatory system in place that supports growth.
Others are sitting on the fence and watching what happens elsewhere. South Korea falls into this group, as does the USA. They aren’t exactly against crypto, but they haven’t made many moves to provide a clear-cut regulatory system. In the USA, some states have decided on regulations, while other states are waiting for federal bodies to make a definitive decision about regulations. The UK is also undecided and only exploring various ideas at the moment.
What is the future going to be like?
It’s difficult to answer this. Some, like Christine Lagarde of the IMF, view cryptocurrencies as an asset. Lagarde has further emphasized that since crypto-assets are global entities, the framework to regulate them should correspondingly be a global one. However, that might be difficult to achieve in practice, not least because some of the most prominent countries supporting crypto are not in G20.
And, talking of G20, it is currently gathering data. According to Argentina’s central bank chief Frederico Sturzenegger, the group will offer “very concrete, very specific recommendations” in July, in advance of the November 2018 summit in Argentina.
Regulation is essential if investors are to have confidence. However, it needs to be contemplated at some length and not just a quick fix. As Kevin Murcko of CoinMetro writes in blockchaintechnology.com: “The temptation to put out legislation quickly shouldn’t come at the expense of the quality of the legislation itself. Nor should it stifle opportunities offered by such an exciting new market. Heavy-handed approaches will only serve to drive activity underground or overseas.”
Regulators should also be blockchain believers and informed about it, because this is a very specialised sector, and the regulations they devise “should balance the need for greater legal boundaries with the commercial opportunities this industry offers in its infancy,” Murcko says.