Digital assets should be regulated on a global scale, argues Sagar Sarbhai, Head of Government & Regulatory Relations, APAC & Middle East at Ripple. He flags up Thailand, Abu Dhabi and Japan as examples of forward thinking policymakers driving demand while protecting customers.
In a blog post, Sarbhai notes that the latter country has a long-standing progressive attitude to digital assets and exchanges. As other major Asian economies like China and India opted for bans, Japan boosted its position. Today around half of the world’s virtual currency trade happens there.
Most other countries are, however, reluctant to introduce regulations. Some don’t believe that the market is big or important enough to bother. Others are concerned about money laundering and risks for crime or terrorist financing associated with digital assets.
Furthermore, in countries with complex FX regulations, regulators are weary of introducing new regulatory frameworks. India’s central bank for example, the Reserve Bank of India (RBI), in a recent affidavit to the Supreme Court of India suggested that Bitcoin cannot be considered as valid currency or money because of the existing Foreign Exchange Markets Act (FEMA).
Also, lack of regulation is often encouraged by the digital asset market itself. “The original digital asset, Bitcoin, was an anti-establishment reaction to the 2008 financial crisis. Regulation makes this tool of revolution a part of the system they’re trying to overthrow. When there are no rules, certain groups can profit from the chaos,” says Sarbhai.
Three-prong approach to regulation
He adds that Ripple believes in collaborating with regulators and working within the existing financial system. “Ripple leverages a combination of distributed ledger technology and the digital asset, XRP, to make cross-border payments faster, cheaper and more efficient. We believe regulation will help organisations use digital assets to develop innovative solutions, while also protecting consumers who use these services or invest in digital asset markets,” he writes.
The venture has long advocated a three-pronged approach to regulation focused on use-cases, that addresses risks to consumers and also provides guidance to banks on leveraging digital assets. Japan is a prime example of how this kind of progressive and thoughtful regulation can work, Sarbhai concludes.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.