Policymakers at the Basel, Switzerland-based Bank of International Settlements (BIS) are publicly fretting that tax evasion and money laundering are the only real “business case” for cryptocurrencies – but the Federal Reserve Bank, the US Congress, and leading private sector experts seem to believe a new regulatory regime can effectively police the market for alternative currencies.
During his first speech as head of the BIS, a bank that acts as a banker for the world’s central banks, Augustin Carstens, earlier this month said that a “policy intervention” is needed to prevent cryptocurrencies from utilizing the world’s legitimate financial networks.
Some fear that that the BIS will move to halt the use of credit cards backed by cryptocurrencies, or that Coinbase and other exchanges, like Binance and Coinmama, will be singled out and excluded from credit card networks, or, worse still, that regulators will treat the alternative payment methods emerging online like a Ponzi scheme.
Not all policymakers are aligned on this issue. Jerome Powell, a member of the Federal Reserve board, and President Trump’s nominee for chairman of the Federal Reserve Bank, said there are some technical issues with the new technology. But he added that these private-sector ‘alternatives’ to conventional currencies may do their job effectively, if the proper ‘governance and risk management’ policies were adopted by the US government.
The US Congress is also getting involved in the matter – and the lead is being taken by free market, libertarian-oriented Republican lawmakers.
SEC Regulation Coming Soon
Digital assets like Bitcoin presently fall into a jurisdictional netherworld between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Treasury Department, the Federal Reserve and the 50 states.
“The SEC is properly the lead on the issue,” said Republican Representative Bill Huizenga, chairman of the House Financial Services Subcommittee on Capital Markets, in an interview with a wire service reporter. The panel will hold hearings on the issue in coming weeks.
The Congressman said the spectacular growth of the alternative currency market had made him more at ease with government oversight. “Six months ago, we didn’t see this explosion. The marketplace has changed,” he said.
Security is a concern. Hackers are quite active in the sector, stealing $530 million of digital currency from Japanese exchange Coincheck just last month. Volatility is another worry. Bitcoin, the best known virtual currency, created just nine years ago lost over half its value earlier this year after surging more than 1,300 percent. Some investors have seen swings of 1,000 percent in a week with digital assets.
Regulation Around the World
China’s Central Bank has rejected cryptocurrencies, perhaps influencing the thinking of the BIS. But American entrepreneurs in the cryptocurrency space are not backing off their bullishness. They think that if particular jurisdictions crack down on cryptocurrencies, like Beijing, others will emerge that will be safe havens.
In fact, the governor of Puerto Rico on Friday told a TV cable news outlet that he would welcome blockchain technology developers and cryptocurrency developers to his island enclave, devastated economically by Hurricane Maria last fall. He’s holding a conference next month to see if regulatory changes could transform the territory into “crypto-Rico,” he said.
“Exchanges in China have moved out of China, at least temporarily, to continue their business efforts,” says Evander Smart, founder of Bitcoin University, in an exclusive interview with Grizzle. “Miners worldwide are largely unaffected, except again, maybe in China, where the state wants to totally control all aspects of domestic economics. Everyone seems on the same page in Japan, and South Korea seems to be getting there.”
Smart said the nations that work with Bitcoin, “and apply a light hand in regulation, will profit from the tax and job creation that Bitcoin’s industry is generating every day. Those who cannot handle this new industry will only force other nations to gladly take in the job and revenue, as Japan has done in 2017, quickly picking up where China left off, largely removing themselves from the market a year ago, going from 90+% of the global trade volume to under 5% today,” he concluded.
Another expert says software developers can relocate to new environments quickly as mobile knowledge workers. Punitive regulation will be met with walking shoes. “Given ‘software developer’ is the number one paying job in the world and ‘crypto’ known as public blockchain software is the fast growing software type, there are plenty of jurisdictions whose executives understand the economic value of having a jurisdiction friendly to cryptocurrency and public blockchain development,” Anthem Blanchard, CEO of Anthem Vault, the world’s largest retailer in the bitplay space, in an interview with Grizzle.
“Any crackdown efforts on cryptocurrencies by overseas jurisdictions has proven futile as crypto organizations tend to be de-centrally organized and operated. Thus crypto organizations are easy to move to friendly jurisdictions and this has proven to be the case several times.”
That may well be the case, but informal regulation, in the form of higher prices from, say credit card vendors, for cryptocurrency conversion, may be unavoidable, during the time before policymakers reach a consensus on cryptocurrency policy.
How Crypto Exchanges Are Affected
In a blog posting, the digital currency exchange, Coinbase, on Thursday commented on the increasing fees that Visa and Mastercard are charging customers who frequent its site. They’re portraying this as a temporary glitch – but it is one that crypto-consumers are nervously eyeing with fear that bigger, punitive charges are soon coming from the conventional banks that run credit card operations.
“Over the last few days, some Coinbase customers may have experienced additional charges and/or refunds when purchasing digital currency with a credit or debit card. We know this experience is frustrating. We are actively working with the card networks and processors to investigate these issues,” the company said. “Coinbase will ensure that each affected customer will be refunded in full for any erroneous charge. Our processor confirmed that any erroneous charges will be refunded over the next few days.”