Governments Begin to Embrace Cryptocurrency
Matt Stankiewicz, an Associate at The Volkov Law Group, joins us to discuss global regulation of cryptocurrencies. Matt can be reached at [email protected].
The world is abuzz about cryptocurrency. By this point, most everyone has heard of Bitcoin, and may even know about some of the other big players in the world such as Ethereum, Ripple, Litecoin, and countless others. The technical specifics may be foreign to some, and we will address several of those basics in upcoming posts, but first we wanted to focus on the regulatory currents.
The market capitalization of the cryptocurrency industry is currently hovering around $500 billion. The space has experienced tremendous growth in a short period of time while operating in a largely unregulated environment. Many refer to the markets as “the wild west” because, for those that are unfamiliar, it’s far too easy to fall for various schemes plaguing the space right now. So it should come as no surprise that governments would step in and attempt to protect consumers and regulate the market. However, predicting the regulatory future is arguably more difficult than predicting the prices of these assets. It would come as no surprise to anyone if governments attempted to completely crack down on cryptocurrency – and indeed, that is the case in certain countries.
China unsurprisingly expressed its desire to maintain a high level of control over the market, especially with regards to the individual exchanges. Earlier this month, China effectively banned all foreign cryptocurrency exchanges by utilizing its Great Firewall of China. The country has already banned initial coin offerings (“ICOs”). South Korea, a major cryptocurrency market, has done the same, and India indicated they may follow suit.
Despite this, the dark clouds are beginning to part as other governments have suggested a willingness to embrace the technology. Switzerland has moved to embrace cryptocurrencies and blockchain technology. At a crypto-conference in January 2018, Swiss economics minister Johann Schneider-Ammann claimed that he wanted the country to be a “crypto-nation.” The country is working to develop an appropriate regulatory framework and many major companies in the sector are already utilizing the country as a work base. Through 2017, Switzerland and the U.S. were neck-and-neck in terms of total money raised through ICOs.
Earlier this month, Christopher Giancarlo, Chairman of the U.S. Commodity Futures Trading Commission (“CFTC”), and Jay Clayton, Chairman of the U.S. Securities and Exchange Commission (“SEC”), presented their thoughts on virtual currencies in front of the Senate Banking Committee. Despite many fearing the worst, the two presented very balanced and, in some cases, positive thoughts on the sector. Mr. Clayton went as far as to say the government should “embrace [this] pursuit of technological advancement.” Mr. Giancarlo discussed several benefits of blockchain, and noted that, with sound policy, this technology would “allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity.” Shortly afterwards, the CFTC issued a warning about “pump-and-dump” schemes and opened up its whistleblower line to those affected.
At this point, there is little doubt that the blockchain technology is here to stay. What the future may hold for Bitcoin or any of its counterparts is still wildly uncertain, but many governments are now stepping forward to help ensure the advancement of this technology.