Cryptocurrency: regulation horizon and world experience
Cryptocurrency regulation has always been a topic for discussion in the last few years. The Financial Times’ Crypto and Digital Assets Summit based in London this year became a place of conversation on this matter too.
The use and mass adoption of cryptocurrencies would open up huge opportunities for business and society as a whole. In 2021, the global volume of transactions with major cryptocurrencies increased almost 7 times to a record $16 trillion, the Singapore-based software development, blockchain analysis and cybersecurity consulting company Chainalysis estimated. This value is comparable to the size of the world’s second economy — China. The number of people owning cryptocurrency has grown by more than a third over the past year. There are almost two hundred crypto exchanges operating in the world, where more than 13,000 cryptocurrencies were listed.
Regarding this situation, any cryptocurrency, which was created as a spontaneous and unregulated alternative to national currencies, has become the subject of close attention of regulators around the world. The requirements for the operation of crypto markets are accepted in most countries, but the main changes are ahead.
However, attempts to regulate cryptocurrencies are not always successful. Despite the fact that many first world countries like the UK or France are willing to be crypto hubs, they face problems related to the decentralised nature of cryptocurrencies. Francois Villeroy from Banque de France stated that central banks provide trust, and unregulated cryptos are a stimulator for innovation, but they need to be regulated in the end. Regulatory institutions are concerned about the rapid growth and lack of regulations in crypto. Crypto users should be aware of money laundering, and terrorist involvement.
Another representative of the European economic system, Pierro Cipollone from Banca d’Italia supports this position on crypto regulation being the pillar of crypto mass adoption. People are afraid of crypto when they don’t understand its mechanics and risks. The regulation can help here. If you don’t regulate crypto then people will be scared — no mass adoption is possible in this scenario.
But not only Italian and French experts think that at the moment the crypto market moves much faster than a regulator. Canada also tries to curb crypto horses. In this state, cryptocurrencies are regulated by analogy with securities. Crypto companies and crypto exchanges must be registered with the securities market regulator (Canadian Securities Administrators). The list of CSA requirements that they will have to fulfil for this is quite long. Cryptocurrency ETFs operate in the country, the purchase, sale and ownership of cryptocurrencies by citizens are not restricted by law, and more than a quarter of Canadians invest in cryptocurrency.
But not all the countries had a positive experience with cryptocurrencies. And El Salvador’s case is an illustrative example of it. Susan Friedman, Head of Public Policy Ripple shared her vision of this situation. El Salvador hastened to adopt Bitcoin as a national currency while having neither a regulatory framework nor energy resources. This case demonstrated how the hassle and illusive dreams about crypto opportunities can be destructive.
Speaking about the crypto regulations it’s necessary to remember not only about the opportunities that crypto can give but about its downsides. The Crypto industry changes extremely fast with no chance for regulators to adapt to its tempo. In addition, the problem of security and transparency of cryptocurrencies remains relevant in many jurisdictions. Nevertheless, we can already observe successful attempts by some states to regulate cryptocurrencies.