Regulators all over the world are driving hard on digital assets, conjuring up the scenario of clamping the wings of a bird to prevent it from flying away. They believe that the cryptocurrency has grown to maturity and should be controlled, though it is not in nature of the digital asset to be regulated, the regulators have insisted on control.
In his report, the founder and CEO of AAX, Peter Lin, stated that the cryptocurrency has enjoyed enough freedom to be regulated. He went further to say that crypto regulation is only a healthy approach, the outline of the global regulatory framework is taking shape at the moment and we should embrace it.
Why the Regulators Think Cryptocurrency Should be Regulated.
According to the International Monetary Funds document defining the digital money, the extent of risks and policy recommendations; privately issued Stablecoins is risky to the consumers and financial stability. This can be proven when measured against, Liquidity Risk, default risk, market risk, and foreign exchange risk.
It further stated that digital assets could thrive and draw capital inflows away from fiat currencies in countries with a high inflation rate and weak institutions. Noting that the virtual assets service providers (VASPs) such as crypto exchanges will find it difficult to comply with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
This happens because the digital assets are chained in a decentralized technology with stakeholders scattered across the globe.
What should be the Starting Point for Cryptocurrency Regulation?
The Central Banks can protect monetary policy, prevent monopoly by issuing their digital currency, just as it is being considered in China. They can provide issuers of Stablecoin with access to central reserve and approve public sector partnership.
Operating license should be granted based on supervision and VASPs’ ability to profile customers, monitor transactions and report suspicious activities. Industry-standard could be defined to secure wallets and clients data, transactions being done in compliance with Know Your Customer (KYC), AML, and CFT regulations.
Cryptocurrency regulation will increase growth and sustainability in the industry. It is important as well for the digital asset to become the reserve currency and break away from all limiting forces.
