Regulators should look at effective ways of encouraging the use of blockchain-based currencies, rather than enforce a ban and drive them underground, a leading academic has suggested.
Jai Singh, Sessional Lecturer in Finance with the ICMA Centre, which is part of the Henley Business School, said that many people with a stake in the crypto market are looking to the US to see how the Securities and Exchange Commission will regulate the market.
“That will determine a lot for the coming year,” he said. “Users have climbed from 18 million to 35 million over the last year, and that’s in the context of a downturn into the market with a lower volume being traded. Ethereum is perhaps a bit different, as it is more of a platform than Bitcoin, which is starting to look a little outdated.”
Singh said that calls for the outright outlawing of crypto should be resisted in favour of sensible regulation. Currently Bitcoin, for example, is banned in China, Russia, Thailand, Vietnam, Taiwan, Ecuador, Colombia, Bolivia, Bangladesh and Kyrgyzstan.
“The crypto exchanges are getting stronger in terms of AML and KYC rules,” added Singh. “Some are saying that people who are using crypto should come out in the open, or it will face a ban. But governments don’t want it all to disappear underground in a peer to peer market, so it’s more likely that regulators will follow leaders like Singapore and Malta by incentivising the use of blockchain.” He pointed out that Nasdaq, Fidelity, ICE, NYSE and Goldman Sachs are strengthening the infrastructure supporting cryptocurrencies, with the four institutions set to operate trusted custodial solutions, futures markets, and exchanges to serve investors in the traditional financial market.
“As transaction monitoring technologies, surveillance, and KYC systems become more sophisticated, it will be challenging to claim that cryptocurrencies are in any way more exposed to criminal activities and money laundering than fiat money,” he added, observing that in 2018 alone, two banks, Danske and Deutsche Bank, suffered two money laundering scandals that surpass the entire market cap of cryptocurrencies.