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Technology is rapidly transforming the way we transact with one another. As these developments indicate, Bitcoin and cryptocurrencies are playing an increasingly important role.
There is an article on this topic in the media every day and within the past years, industry attitudes towards the Bitcoin – cryptocurrencies – blockchain triangle have varied from sheer criticism to absolute praise and action. The same goes for regulation in this already volatile space.
Regulation vs innovation: always a chicken-and-egg discussion
In spite of all the advantages it provides and its market potential, Bitcoin is still regarded by many with critical eyes for many reasons. Regulation, or better said, the lack of it, is without doubt, among the key factors.
The world`s countries have taken various approaches on the matter. To give only some examples: both Europe and the US still keep the topic under discussion at the time of writing.
They have no coherent direction on cryptocurrency regulation other than that there will be some soon. China on the other hand has taken a firm approach by clamping down on all things cryptocurrency-related.
India has adopted a similar stand, voicing similar concerns: money laundering, illegal activity proliferation, sponsorship of terrorism and tax evasion, to mention but a few. Switzerland seems to have an open attitude towards the industry, while Sweden is set to become among the first economies to introduce its first cryptocurrency.
The relationship between regulation and innovation will always be subject to interesting debates (e. g. does the former encourage or stifle the latter?). And although there is a dire need for regulation in the crypto space to ensure consumer protection, first of all, what such regulations (will) look like in various regions/ countries is definitely interesting to watch. A gift and a curse, since industry participants have now started to take the matter into their own hands, in a clear attempt to regain public confidence and encourage governments to call for more regulation.
4 frontrunners in crypto self-regulation
The UK, US, Japan and South Korea have already made some significant efforts towards self-regulation. A recent gathering by the Commodity Futures Trading Commission’s Technology Advisory Committee (TAC) had developments within the blockchain and distributed ledger technology (DLT) landscape and virtual currencies on the agenda.
A top commissioner with the CFTC suggested that players in the cryptocurrency industry should consider adopting self-regulatory standards and “industry-wide” best practices to policing the new technology-driven space.
In an almost similar move, last month the South Korean regulator voiced some hopes that it expects the country to turn into a hub for cryptocurrency trade and more significantly, “normalize” the virtual coin business in a self-regulatory environment.
In September 2017, China banned ICOs and shut down Bitcoin exchanges. Immediately after, but not surprisingly, South Korea became an important cryptocurrency trading hub, taking up much of the void left by China.
In the words of Choe Heung-sik, chief of South Korea’s Finance Supervisory Service: “The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation”.
According to the latest developments in the country, it seems that authorities might adopt a lighter regulatory touch. This is a significant change in tone from the Justice Minister’s previous warnings that the government was considering shutting down local cryptocurrency exchanges.
In recent news, another Asian market has made the news with an interesting initiative. In February 2018, Japan revealed plans to establish a self-regulatory body consisting only of government-approved marketplaces.
Last but not least, the UK market is also witnessing some interesting developments. During the same interval, seven of the largest crypto companies have announced they are going to form a UK cryptocurrency trade body. Dubbed CryptoUK, the initiative aims to be among the first self-regulation bodies in this booming industry. The self-regulating body has drafted a code of conduct, as the basis of any upcoming regulation in the field. “There was a lot of misunderstanding, and we wanted to try to raise awareness and actually work with the regulators, the government, et cetera”, according to Iqbal Gandham, Chairman of CryptoUK.
Just like in any industry, to avoid any form of abuse by industry participants in the cryptocurrency space and to take full advantage of the positive effects generated by the new technology, regulatory bodies must issue regulations on the topic.
Self-regulation can generate an effective impact. And since collaboration is the new innovation, a balanced approach involving cooperation between regulatory and self-regulatory bodies has higher chances to instill trust and transparency in the market – 2 necessary ingredients for progress.
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