It’s the issue that never seems to go away: regulation. Some crypto advocates insist it is good for the industry, paving the way for mainstream adoption among consumers and businesses alike. Others warn a legal framework will only end in tears — stifling innovation and putting digital currencies at a disadvantage to fiat, which central banks remain determined to protect.
Ultimately, we have seen both scenarios come true in the real world. Switzerland has been forming a reputation for being a crypto-friendly nation. Two institutions focused on providing banking services for crypto clients have been granted licenses by the Swiss Financial Markets Supervisory Authority — undoubtedly a major milestone. The positive attitude toward digital assets undoubtedly contributed to Facebook’s decision to base its not-for-profit Libra Association there. And figures indicate that the country’s blockchain industry is reaping the rewards associated with this “open for business” approach — with a report suggesting that the value of Switzerland’s top 50 blockchain companies doubled to a collective $41 billion in the first half of 2019.
Then we have the other side of the coin. The United States has been especially tough with its crypto regulation, slamming the brakes on Libra for fear it could undermine the dollar and even threaten the global economy. Some politicians have practically been pulling their hair out at this stance, warning that stymying innovation could see countries with more nefarious means get a foothold in this burgeoning industry.
You also have countries like India that have threatened to impose strict laws on those who deal in cryptocurrencies — potentially resulting in punishments as severe as a 10-year jail term. Such a hardline stance, especially combined with the fact that crypto businesses have been effectively cut off from banking services, has resulted in a number of exchanges closing. There have also been warnings that India could suffer a “brain drain” as talented developers and entrepreneurs take their skills elsewhere, potentially meaning the economy loses out on billions of dollars in revenue. To add insult to injury, the government has been dragging its heels on enforcing the law — and it wasn’t introduced to parliament in the winter session, prolonging uncertainty.
So, what are the pros and cons of crypto regulation? Will it ever be possible for this fledgling industry to sit comfortably alongside traditional financial institutions? And given the fragmented landscape, with some countries embracing digital currencies and others shunning them, will this technology ever go global?
Crypto regulation: The pros and cons
Known crypto advocates have been exceptionally wary of any prospect of crypto regulation. Take a look at the Apple co-founder Steve Wozniak, who has warned that most countries will want to assert as much control as possible to preserve revenue streams. Others worry it could have huge ramifications for two of crypto’s unique selling points: transparency and anonymity. Then there’s the argument that Bitcoin and the cryptos that followed are intended to be decentralized — fully divorced from the financial infrastructure that caused a devastating recession back in 2007 — and bringing crypto into the fold would eliminate some of the freedoms that made it so appealing in the first place.
Regulating crypto and blockchain startups could also transform the way investments are carried out. For all of their flaws, initial coin offerings enabled crypto users of all budgets to contribute to the projects they’re passionate about — and treating future fundraising drives in a similar fashion to securities risks shutting these investors out in favor of higher net-worth individuals. There’s a risk that laws and frameworks would also struggle to keep up with the breakneck speed of the crypto and blockchain industry, conjuring up similar scenarios to those seen with the likes of Google and Facebook as the internet started to gain prominence. In a similar vein, many in the crypto world are worried that they would end up being regulated by officials who simply don’t understand the technology underpinning it.
Not everyone agrees that regulation needs to be calamitous for blockchain and crypto. Again, referencing initial coin offerings, some argue that the introduction of stringent regulations has the opportunity to introduce some vital investor protections that those on the stock markets take for granted. Regulation could also deliver the much-needed seal of approval that has been holding many institutions from taking the plunge — injecting billions of dollars’ worth of capital into the industry and driving regulation forward. Ensuring that crypto startups meet the same standards as companies going through initial public offerings could also increase the quality of new projects. However, this wouldn’t be without cost. Initial coin offerings, initial exchange offerings and security token offerings often take place with speed and efficiency — and stringent regulations and disclosure measures would inevitably slow things down.
There’s also the oft-quoted issue of crypto scams. The industry has been around for more than a decade now, and yet it has still been struggling to shake off the issue of fraudulent ventures that continue to cost vulnerable investors millions of dollars. Some argue that the fact these incidents are continuing to happen with such frequency serves as proof that the crypto world needs experience to gain legitimacy. On the other hand, others say self-regulation is the solution — an opportunity to create checks and balances by getting crypto businesses to mark each other’s homework and ensure that everything remains above board.
What lies ahead for crypto regulation?
With so many diverging opinions, and so much uncertainty over where the crypto and blockchain industry will be from a regulatory standpoint in the coming years, intelligence from prominent exchange executives, central banks, governing bodies and investors can be invaluable when it comes to assessing the mood music.
The Crypto Finance Conference says its aim is to provide light in the darkness, acting as a lighthouse in the choppy waters of the industry’s regulatory standing. Experts are on hand to answer personal questions, and a plethora of networking opportunities are provided so attendees can forge meaningful contacts and delve into areas of personal interest in greater depth.
Held in the Swiss Alps resort of St. Moritz from Jan. 15 to 17, 2020, there are already several sessions on the agenda that tackle the issue of crypto regulation head on. There’s an overview of regulatory and infrastructure development on Wednesday, alongside an insight into the approach that central banks are taking toward national digital currencies and tales from the global regulatory frontline. Thursday delivers a deep dive into Switzerland’s ecosystem, the international challenges associated with banking in the world of blockchain and crypto.
The already substantive agenda is going to receive a further boost as additional sessions are announced in the coming weeks. For the sharpest analysis on what lies ahead on the bumpy road toward regulation, the Crypto Finance Conference is shaping up to be an essential fixture as the industry heads into a brand-new decade.