Three trends have emerged in the area of cryptocurrency regulation, and the challenges facing regulatory bodies are hampering the growth of the digital asset space. Still, regulating the industry would work better if designed to embrace cryptocurrencies instead of restricting them, according to blockchain development company Blockchain Intelligence Group (BIG).
BIG chief executive Lance Morginn commented in a press release:
“Today's cryptocurrency market and the development of national regulations are still in their early days... Three emerging patterns are clear across major countries currently grappling with the new era of digital currencies.”
According to BIG, cryptocurrency regulations should focus on optimizing the industry's contribution to the growth of the financial landscape rather than limiting it. Regulators should also prioritize accountability instead of absolute control.
BIG believes that “the cryptocurrency industry can play a role by providing insight into innovative policy recommendations that could match the rapid innovation occurring in the digital currency marketplace.”
Morginn listed the three emerging patterns in crypto regulation and provided recommendations for addressing the challenges.
Trend No. 1: Increased awareness of security risks
As the world starts to accept the growing usage of cryptocurrency, various jurisdictions have come to recognize the necessity to tackle security risks. The US Treasury Department, for example, wants to "make sure that they're not used for illicit activities." The government of the UK is pushing for proper due diligence on cryptocurrency transactions, and oversight bodies in Asia have acknowledged the need to address security risks through regulation.
Recommendation
BIG says legislation should ensure any technology cannot be employed in criminal activities like money laundering, sanction evasions, and terrorist financing. Regulators should engage with the industry and put emphasis on promoting mutually beneficial approaches to anti-money laundering and counter-terrorist financing campaigns, as well as know-your-client and know-your-transaction checks.
Trend No. 2: Lack of unified approaches
Despite the obvious need to regulate cryptocurrencies, governments seem to be at a loss as to the best way of moving forward. The US has "no coherent direction on its cryptocurrency regulation other than that there will be some soon," and "Russia, like South Korea, can’t seem to decide how it wants to handle cryptocurrency regulations.” Some parts of Asia have lax rules, while others are taking a heavy-handed approach.
Recommendation
Instead of individual countries drafting their own rules, a cross-border approach to policy formation would be better because of the borderless nature of cryptocurrency transactions. Governments have to consider the lack of restriction in digital currency movements. Intergovernmental organizations such as the Financial Action Task Force (FATF) could be tapped to share information and intelligence gathering, particularly in combating international crimes that involve digital assets.
Trend No. 3: Substitute for fiat money and sanctions avoidance
Since Venezuela launched its oil-backed cryptocurrency Petro, other countries have announced similar moves to circumvent international sanctions and solve their money problems. Reports have indicated that Crimea, Iran, and Russia are planning to launch digital currencies. Last year, Nigerian residents used cryptocurrencies to avoid controls put in place to stop the country's recession.
Recommendation
The growth of cryptocurrencies suggests regulators should rethink risk management and consider introducing new solutions to address the emerging threats while promoting the advantages associated with virtual currencies.
We should also expect criminals, individuals, and even nations to leverage cryptos in way that have not been possible with fiat. With the rules changing, governments must adapt their approach to addressing the risks and collaboration with the industry will provide valuable insights.
This article appeared first on Cryptovest
