The Regulation of Cryptocurrency Summit held in central London today was a timely opportunity to reflect on the dramatic rise and fall of cryptocurrency values since the beginning of 2018.
It came following the most recent price drops across all major cryptocurrencies – including Bitcoin – which has almost halved in value compared to earlier this year. Despite the predictions of values falling even further the crypto hype is here to stay and with it comes the inevitable need for its regulation.
Prominent business leaders and regulators such as the FCA and AMF gathered at the summit to discuss all aspects of cryptocurrency regulation both on a global and domestic scale as well as state to debate their views on a range of areas such as the current state of developments, risks and regulation of ICOs, a code of conduct for cryptocurrencies, and technological challenges of regulating cryptocurrencies.
But, perhaps most importantly, they discussed the recently-released Cryptoassets Taskforce report, which was announced by the Chancellor of the Exchequer in May 2018, as part of the government’s FinTech Sector Strategy.
The anxiousness of regulators to harness the new technologies unleashed by digital currencies is undeniably evident, and although jurisdictions such as Malta, Gibraltar and Japan are leading the way by introducing dedicated crypto legislation, many panellists agreed that the regulatory environment for crypto space remains incredibly fractured.
The approach and interpretations vary greatly throughout the globe, however, as was interestingly noted by Domitille Dessertine, Head of Fintech, Innovation and Competitiveness Division at AMF (Autorité des marchés financiers)- the stock market regulator in France – the risks associated with cryptocurrencies and cryptoassets are in fact very similar to traditional financial risks.
Whether this provides a good starting point for building a sensible crypto regulatory framework is yet to be determined but, in doing so, special features such as DLT attached to cryptoassets should also be taken into consideration.
No substantial risk
The recent report published by the Financial Stability Board (FSB) points out that cryptoassets do not currently pose a substantial risk to global financial stability. However, this could well change if/when cryptocurrencies are being widely used.
While monitoring the size and growth of cryptoassets is crucial to understanding the potential size of the impact, should valuations fall, the actual absence of regulation remains as the biggest regulatory challenge of all.