As Bitcoin and the cryptocurrency industry grows, a pressing matter continues to linger, the topic of regulation and the nature of governments.
Interestingly, Bitcoin was originated to escape this exact problem, being a peer to peer currency outside of the realm of governments and traditional fiat governance.
As more adopt cryptocurrencies or rather, speculate in the cryptomarkets, it seems that cryptocurrencies have been turned into more of a new asset class that should be regulated, rather than a phenomenon that would overthrow the power and control of governments.
Governments are stepping up their efforts of regulation, taxation, and implementation of anti-money laundering in the emerging cryptomarket, so what’re the significant concerns to institutions like the World Bank and other organizations?
The international monetary fund has contributed to the song of regulation sung by governments across the world. They, too, are calling for global collaboration on the matter of regulating Bitcoin and it’s fellow cryptocurrencies.
The international organization, which works to foster global monetary cooperation and secure financial stability has issued a statement earlier talking about the need for conformity in regulation.
Gerry Rice, a representative of the IMF, commented: “Greater international discussion and cooperation among regulators, yes, would be helpful.”
At the current moment regulations have been imposed by each country in several ways, they either look to others and follow exactly or look at what the larger picture and choose according to what they deem best.
For instance, the Philippines, Japan, Singapore and countries like Estonia, Belarus and other Eurasian nations have favorably regulated Bitcoin. These countries might have done so because they see more significant benefits from embracing the crypto and blockchain industry than shunning it.
Countries like the U.S have given licenses for several exchanges to operate and have implemented taxation on the emerging digital asset class. Talks in the U.S have revolved more around anti-money laundering without any acknowledgments to further regulation or banning of the industry.
Even in the general conservative EU countries, the consensus seems to revolve around taxation and the prevention money laundering. Other concerns in this matter expressed by European watchdogs have been that of speculation on protecting investors and loss of funds. They’ve noted aspects of derivative instruments like CFD’s being high risk and very speculative.
The continuing stance seems to be on the measure of protection of consumers, as the representative of the IMF noted recently, it would be beneficial if regulatory bodies could collaborate on the potential issues that these emerging currencies could have on individuals and the macroeconomy.
A continuing matter of concern for the agency seems to that of the rapid rise of prices in these digital assets, the higher the rate of the risk, the larger the risk that is being borne by the individuals participating. The matter poses larger risks if individuals and entities are using more forms of leverage to invest or speculate in the market. Thus, awareness of the present risks and potential for loss is something that market participants have to take into account when contributing to the space.
Why they call for global regulation
A concern in regulation that is posed by these authorities is the fact that bitcoin is global; thus, regulations that occur at the state or national level won’t do as much good. They believe that there must be more collaboration in regulation to control the decentralized global phenomenon of Bitcoin.
Are the concerns overweighted?
The cryptocurrency market capitalization is still a meager 543 billion, thus, only being a small part of the global economy. The total market capitalization of mined gold is about 7.8 trillion. Some financial institutions warn that there might be cause for concern if there were to be issues in the cryptocurrency market, noting that it could affect stocks. Yet, if the cryptocurrency market receives corrections as it has over this past couple of days, crypto capital typically flies back to fiat.
The questions that remain
What does a potential global coordination of the regulation of Bitcoin look like? What does that look like from a technological and banking standpoint in the regulation of users?
For instance, will users be limited on a monthly basis on the amount of money that they can place into cryptocurrency exchanges?
What effects will this have on the growing crypto economy and the many companies that are formed in this space?
We’ll have to wait and see.