Ripple Wants Government Regulation of Cryptocurrency

I have always believed regulation was inevitable and this is actually one of the reasons I invested in Ripple.  It’s no surprise that they are calling for regulation as they benefit the most.  As worried about them as I am (saving for another article) this is an excellent hedge against this inevitability.  Ripple stands to profit from this as it already has very good relationships with big finance and governments.  Any regulation is very likely to benefit Ripple the most.

Ripple’s, Ryan Zagone, ironically titled, “head of regulatory relations” has called on the UK to adopt 3-regulatory moves and has suggested they take a cue from Japan.  This is both good and bad, regulation, if fair and easy to follow can remove uncertainty and strengthen the countries that do it right.  I think Japan is a good example of regulation that has gone right and helped cryptocurrency flourish.

Zagone has called on the three issues to be regulated “namely consumer protection, financial stability and anti-money laundering “.  Consumer protection is a given and I wonder why no one has also said “insurance coverage” as this would take most of the risk out of holding cryptocurrency and the risk of theft and hacks.  When it comes to “financial stability” it depends on what he means and what the UK government would take it to mean?  I would take it that this would be the part that would help out Ripple and possibly stunt the growth of competitors to Ripple.  When it comes to anti-money laundering this is a given but again, how do you do it without harming or offending law abiding citizens?  Or will these laws and regulations be a pretext for both Ripple and Big Banking to squash the abilities of everyone else?

The UK Central Bank’s, Mark Carney has said the following about cryptocurrency.

  • “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities,” Carney said in a speech on Friday.
  • “A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system,” Carney said.
  • Carney also slammed the ability for cryptocurrencies to fulfil the role of money, saying they are “failing” as a medium of exchange and are “proving poor short-term stores of value.”
  • “This extreme volatility reflects in part that cryptocurrencies have neither intrinsic value nor any external backing. Their worth rests on beliefs regarding their future supply and demand —ultimately, whether they will be successful as money.”
  • “At present, in my view, crypto-assets do not appear to pose material risks to financial stability,” Carney said.

Well, Mr. Carney was as honest as he could be, from the banking sphere and without losing his job.  I agree that there is almost nothing backing most cryptocurrencies, aside from mining investment.  However, this is about the same, if not better than fiat which is printed without any backing of assets since the gold standard has long been abandoned.  But let’s read between the lines, he wants regulation and he wants cryptocurrency held to the same standards as traditional finance, but at the same time slams it as being a poor store of value (like Soros who now says he’s investing).  Regulation will be tricky, because you are then giving all cryptcurrency legitimacy as currency by regulating it as such or even to traditional financial standards.

Everyone has their own interest in all of this but it will be interesting to see how this plays out.  The game is different now and governments cannot easily seize crypto assets, nor can they shutdown major players who can move away from their jurisdiction with the click of a button.  If smart people are in charge of regulation they will do it right, but if bankers alone are involved, and continued to feel threatened, I predict carnage, and that it will ultimately harm or even topple our current financial system.

Let’s hope things go smooth and that regulators are not influenced too much more when it comes down to it.

 

Countries where cryptocurrency, coins, tokens and ICOs are banned

There has been a lot of activity lately in the world with governments banning cryptocurrency and ICOs but this should come as no surprise as there has been strongly worded messaging about this for some time.

China bans ICOs and shuts down Exchanges
This had a massive impact on the valuations of coins such as Bitcoin, Litecoin, Etherum, Dash etc.. but things have since recovered since the 2017/09/04 law passed in China but serves as a warning and example of what government intervention can and cannot do.

http://en.people.cn/n3/2017/0904/c90000-9264331.html

Chinese authorities on Monday ordered a ban on Initial Coin Offerings (ICOs), a nascent form of fundraising in which technology start-ups issue their own digital coins, or “tokens”, to investors to access funds as the rapidly expanding market spawned concerns over financial risks.

Starting Monday, ICO activities should be halted, and ICO platforms should not engage in exchange services between fiat currencies, virtual coins and tokens, said a statement from the People’s Bank of China.

South Korea Bans ICOs

The good news is that while ICOs are banned it does not appear that trading in the currencies themselves is banned.
http://www.nasdaq.com/article/south-koreas-ico-ban-a-reaction-to-serious-concerns-over-cryptocurrency-investment-practices-cm854236

In fact it appears South Korea plans to allow trading but wants more regulation and safeguards:

South Korea Makes it Legal to Transfer Cryptocurrencies Internationally

Singapore

Although not by law, many companies in Singapore dealing in cryptocurrency have had their accounts closed:

https://www.out-law.com/en/articles/2017/september/singapore-banks-closing-accounts-of-cryptocurrency-firms/

Countries subject to strict or promising strict regulations

Nearly every country has taken a similar line where they are making a legal framework and claiming that ICOs are subject to the same laws and rules as IPOs. However this doesn’t appear to have been translated into law. It also doesn’t address the question of how holders on the coins will be impacted but one would guess that in the future they may be subject to capital gains tax and treated like traditional stock investments.

This list of countries includes:
EU, Hong Kong, Canada, Singapore and many other countries around the world.

Hong Kong Regulators Warn ICO Tokens May be Securities Under the Law

SEC: ICO Tokens Like Those of The DAO are Securities Subject to Regulations

Canadian Regulators Say Cryptocurrency ICO/ITO May be Subject to Securities Law

Is the regulation valid, practical and legal?

This is a hard call for me to understand in the sense that these cryptocurrencies are just that, digital currency and currently people are not taxed or penalized for simply exchanging, buying and/or holding different currencies.

It may also be interesting to see what the large exchanges, businesses and users do in response such as unprecedented regulation and laws. It may be that some of the regulations and laws imposed around the world may be found invalid or unenforceable in the end.

What are your thoughts and as always please let me know if I’ve missed any new developments around the laws of cryptocurrency.