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While the calls for globally coordinated regulation for cryptocurrencies is a noble effort, the practicality of the situation is far from ideal.

The regulation of cryptocurrencies across the world is a constant battle for investors in a rapidly expanding and constantly changing ecosystem. 

Various regulatory agencies around the world view digital assets in a different light that vary significantly from one another.

Recently, executive board member of the European Central Bank (ECB) Fabio Panetta mentioned in a written statement for a speech to Columbia University that regulators should follow a globally coordinated approach while regulating digital assets. He said that the world should have digital assets regulated by the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) rules of the Financial Action Task Force.

Panetta also spoke about strengthening public disclosure, reporting on regulatory compliance in the industry and setting up certain “transparency requirements” and “standards of conduct.” He stated:

“We need to make coordinated efforts at the global level to bring crypto-assets into the regulatory purview. And, we need to ensure that they are subject to standards in line with those applied to the financial system. We should make faster progress if we want to ensure that crypto-assets do not trigger a lawless frenzy of risk-taking.”

Practicality of global regulation in question

The ECB applying such rules across the European Union is one thing, and having the same rules apply to the all the countries in the world is a whole other due to the fact that ECB can behave as the regulatory entity in the EU. Still, there is no clear understanding of which regulatory body would have the authority to conduct such coordinated regulatory activities.

Even more recently, Ashley Alder, chair of the International Organization of Securities Commissions — an association of market regulators — spoke about this aspect in an online conference organized by the Official Monetary and Financial Institutions Forum. He elaborated on the need for a joint body that will be tasked with coordinating the regulation of digital assets around the world and could even be a reality within this year.

On May 16, the Basel Institute of Governance and the International Academy of Financial Crime Litigators published a paper that also called for further coordinated action against unlawful crypto markets. The paper suggested that investigators that are involved with cryptocurrencies should invest in learning approaches and technologies to keep up pace with the evolving techniques of criminal organizations and entities.

Cointelegraph spoke with Bianca Veleva, head of legal and regulatory compliance at Nexo — a crypto lending platform — about the advantages of a global regulatory approach. She said:

“The adoption of a unified legal framework and/or principles for crypto-related activities may prove beneficial in terms of accelerating the legislative efforts of countries which have not yet recognized the advantages that the crypto industry brings, following from the comprehensive framework that more forward-looking countries have already adopted and implemented.”

As the digital assets landscape expands and regulations begin to get clearer, a new paradigm could be underway wherein international regulatory consensus unifies. The mass adoption and increasing use-cases of digital assets and blockchain technology alike are bound to provide a solid foundation for the eventuality of a consensus among regulating bodies and nations.

However, there are many countries that have outright banned their citizens from indulging in cryptocurrencies and even their services. A prime example of that would be China, which announced an outright ban on digital assets in September last year. There are a total of nine countries that have banned cryptocurrencies, in addition to China: Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia have a blanket ban on crypto, according to a Law Library of Congress report from November 2021.

Recent: El Salvador’s Bitcoin play: What does the current slump mean for adoption?

This difference in the way various countries view digital assets could serve as the biggest obstacle to a globally coordinated regulatory framework. Igneus Terrenus, policy advocate at Bybit, told Cointelegraph that while a global regulatory system makes sense for tracking fund flows and reducing regulatory arbitrage, the reality is that there is no universal regulatory body capable of imposing it upon sovereign states. Realistically, it will have broader impacts on citizens and residents of countries that responded positively rather than countries that choose not to partake.

Terrenus added that “A blanket framework that fits the whole world does not seem to be attainable given the disparities between countries in even existing financial regulations. A feasible model would focus on easing the exchange of information between entities and jurisdictions, which tax authorities are already doing via the banking system, deploying zero-knowledge proof technology to prevent fraud and improving regulatory clarity and consistency.”

Another aspect to consider in the hypothetical eventuality of globally accepted regulations for cryptocurrencies is that a consensus between various countries at different stages of adoption could lead to innovation being stifled and a plateau in adoption rates. Veleva said:

“Any joint efforts of unifying the currently pending EU regime for crypto-assets with the United State’s legislative framework may be a double-edged sword. They may, in fact, impede the pace of innovation and crypto adoption at an EU level and lead to greater regulatory difficulties for crypto companies.”

Coordination like never before 

Despite the difficulties and challenges involved, some participants in the digital assets ecosystem remain positive about a move toward globally coordinated crypto regulation. 

Justin Choo, group head of compliance of Cabital — a cryptocurrency trading and passive income platform — told Cointelegraph that the current approach that countries have taken couldn’t be more varied when compared with traditional asset classes like equity, debentures and managed investment schemes that work with a regulated framework.

When compared to crypto-forward countries, Choo stated that “I would imagine that a globally coordinated regulatory system wouldn’t go as far ahead as what El Salvador and Argentina are doing simply because the governments of developed countries whose currencies are reserve currencies wouldn’t be ready to give up the economic prowess — which is often used to influence international diplomacy — that they already have in favor of cryptocurrencies.”

Global coordination on crypto regulation will require collaboration within the industry and from regulators across the world in a manner that is never seen before. Terrenus said:

“Paternalistic protections based on decades-old laws may not be the most helpful approach. Truly sensible, meaningful and impactful regulations should encourage transparency when it comes to the terms, ownership breakdown, vesting schedules and accurate representation of annual percentage yield of crypto projects. This would improve the overall information symmetry and reward investors who do their own research.”

Especially after the recent highly-publicized fiasco with the Terra blockchain and its stablecoin, TerraUSD (UST), regulators have begun to take a closer look at the feasibility and viability of stablecoins as well. The European Commission has also revealed its intentions of placing a blanket ban on large-scale stablecoins, considering the massive economic and investor impact that was triggered by the crash of UST and Terra (LUNA) in the Terra blockchain.

Recent: Enforcement and adoption: What do UK’s recent regulatory aims for crypto mean?

As the adoption of digital assets increases, moving from one adoption and innovation cycle to another, the evolving regulatory landscape will be the most vital part of the transition of digital assets penetrating the masses. A global regulatory framework seems like the ideal solution for the transition, but the obstacles set in the way of implementing such a framework will make the transition a long process and it is highly unlikely that it would happen within a year.

Andreessen Horowitz — a crypto-friendly venture capital firm — recently released its “2022 State of Crypto” report, highlighting that the growth of decentralized markets has gone to a total value locked of more than $100 billion just within two years after the concept was first introduced. The report estimates that decentralized finance (DeFi) would be the 31st largest U.S. bank by assets under management.

It is only natural that such a rapidly expanding industry will require regulators and central banks to innovate and evolve at the same pace. Even if a highly laborious globally-coordinated regulatory framework slightly stifles innovation, the protection of investors is always the prime concern for regulatory bodies across the globe.

8 thoughts on “Ideas vs. practice: How are regulators working together on crypto?

  1. I'm gonna be the devil's advocate here.

    People keep whining about how hard it is to use crypto and how easy it is to get scammed. I say if crypto gives you full control then you gotta step up and take full responsibility. Honestly, there's a part of me that don't understand people invested in crypto/blockchain when they whine after losing money through their own decisions and actions.

    Outside of crypto you can be an idiot to a degree since there are institutions and organizations (that you pay for their services) who catches you when you fall on your ass. There are failsafes in place, some regulations of some sort. Credit cards could be cancelled when suspicious transactions are detected for instance.

    But in crypto, since people want full control, then they'll have to take up full responsibility as well. It is your own fingers executing the buy and sell options after all.

    Crypto won't be mass adopted if idiots keep whining about actions they made themselves, and putting the blame on others, and not taking responsibility of themselves.

  2. I feel like I have to vent some of my thoughts after being in the crypto space for 10 years. Not trying to trigger anyone here. I still love crypto, and will hodl my favorite projects. But we have to stop kidding ourselves, this is most of the time not about the tech.

    Cryptocurrency is successful because of the volatility of the markets, not the usability of the product. Most are slower, more complicated, confusing, and risky to use than the current financial situation. Without a value attributed to a coin or a token that can fluctuate, crypto would have 1% of the enthusiasm it does now. Even with the same technology and advantages.

    For instance –

    Bitcoin lacks real world use cases, and when it is used in volume transaction costs explode. It takes 10 minutes to confirm one block, and 6 block confirmations take 1 hour. Visa is near instant, venmo etc. Replacing 3rd world countries financial system with bitcoin will backfire. Bitcoin in its current state has value in large part because of programed scarcity. People hold bitcoin as a store of value just as many collectors will collect rare physical coins. When people buy bitcoin they don't measure the success of bitcoin based on what it does, but rather if their portfolio has increased or decreased in USD/fiat value.

    Smart contract projects have more tech. More use cases. More complexity. But are they really any different? Project/coin sentiment on reddit purely revolves around if the coin candles have been red or green.

    You may not love crypto, you may just love the markets. Venting over. I may be wrong here. Just my 0.02 sats.

  3. Many have been calling for it for weeks now. Well here we go…. Alts are crashing and the Bitcoin dominance is at 46%.

    My stop losses triggered about an hour ago and the coins are still dropping. Avalanche down 10%, Solana down 7%, Fantom 10%, Lolring down 14%. Even Ethereum is bleeding heavily.

    You might still be here, and well done. But this is the final smash we have been waiting for. Nothing is happening in crypto, nothing. So why the fact we managed to limp along since Terra fucked us all means nothing – all the prices were being held up by speculation alone.

    We're about to find out exactly what our coins are worth – what their value is.

    How far could we drop? I'm guessing Bitcoin under $25k by the weekend.

  4. The current limitation of tokens that power web3 is that fungible tokens are an excellent way to represent financial assets such as equities and governance rights, and non-fungible tokens could improve ownership rights using the power of blockchains. However, there is no built-in infrastructure to represent a digital identity and reputation.

    SBTs could be the way to solve this issue by allowing minters to send tokens to a receiver who cannot send the SBT to another party. If the minter lost their trust in the receiver, the minter holds the right to burn the token.

    At first, SBTs might not seem revolutionary, but they could represent and digitize many of our interactions in the real world.

    Universities could give SBTs to their graduates, and in the case that the employer needs to see the certification, they could check the student's wallet that they, indeed, attended the school. This has the potential to remove fraud in many sectors.

    A person's CV could be built by a collection of SBTs issued by the employers that verify that the person worked for that employer.

    A visa application currently requires a lot of paperwork. Imagine a scenario where the government issues an SBT, and you provide a wallet address to get a visa to travel to a country.

    SBTs have the potential to solve many inefficiencies in our society when it comes to digital identity and reputation on-chain. With so many builders in web3, I am excited to see how we apply SBTs in the short future.

  5. Has anyone else noticed how few TA posts they are seeing over the last 6 months or so?

    It's almost like… the previous chart history in a liquid, uber-dynamic, sentimental and ever changing market (with regular major news/change factors) doesn't actually mean much for the future price?

    I just find it interesting that most TA advocates use it to (mostly) predict and attempt to justify positive predictions. But all seems to go quiet during periods of boringness / reductions.

    Or maybe the negative TA posts don't get noticed as much and we've just missed it.

  6. It’s a common thought process around here to load up on alt coins and I’ve been victim of this thought process as well.

    Just keep in mind that DCAing into the big guys (BTC and ETH) can still lead to life altering money. You don’t have to make 10,000% gains on a random shit coin.

    For example last time everything took a shit BTC was around $3,000 and ETH was around $100 at the trough.

    Using ETH as an example, even buying a couple ETH around those prices would have been big money.

    My ultimate point is that the blue chips are the sure thing. You don’t really have to time anything you just have to spend time in the market to see gains.

    The NFTs, stable coins and alt coins are not the way. There’s simply too much risk.

    Expand your thought process and don’t think, “what’s going to make me rich in six months” to “how can I put myself in a future position that’s basically guaranteed to increase my wealth”.

    Don’t get caught up in the idea that your “projects” are going somewhere or that you actually fucking “believe in the project”. Alt coin websites that are posting dumb fucking news linked to moronic “news articles” trying to generate buzz are generally a sign it’s a shitcoin.

    This goes for XRP, ADA, VET and (insert anything besides BTC and ETH here).

    Their PR teams are shilling you.

    We haven’t even seen the bottom yet, not enough suicide hotline posts.

  7. Coinbase finally sent me the notice that:

    We completed our investigation of one or more recent transactions which violated our Cardholder Agreement. We've determined that you do not meet the criteria to unblock your card.

    As a result, your Coinbase Card will remain blocked from more spending and can no longer be used.

    The only recent transactions were payments to my Citi Double Cash card. And while that is not specifically on their exclusion list, they apparently didn’t like paying out $1300 in rewards this year.

    So fair warning to anyone else doubling up on rewards…

    Now just as soon as they release my ETH2 I’ll be done with them completely.

  8. During the Bull run of 2020 and 21, I thought I understood crypto. Massive players were entering the market. More mainstream acceptance. So much FOMO. The halvening is in 2024! Bitcoin is inflation proof!

    I considered dumping everything into crypto. Taking out leverage.

    But I didn't because this sub would have posts from vets saying – dont do that. Warning that crypto winters are coooold and hard.

    So I DCAed in. I avoided alt coins. I didnt spend more than I can afford to lose. I diversified into energy stocks.

    Now its the end of the world – and I feel fine! No leverage so my crypto can sit there. I have cash so I dont need to panic sell. Im actually getting ready to buy when we truly hit the bottom!

    So thanks to all the gloomy bastards who spent the last two years warning to be careful – I was ready for this shit show because of you.

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