Since the launch of Bitcoin and its blockchain technology system in 2009, there have been growing calls for global regulators to take concerted, joint action to regulate cryptocurrency. Yet after nearly a decade of mixed global reactions to Bitcoin, Ethereum, and the like — ranging from hostile to wary to welcoming — most countries in 2018 appear no closer to coming to a consensus on how to regulate the burgeoning industry. While the collective response to cryptocurrency stalls, however, certain countries in the EU – notably France, Malta, and the UK – are forging ahead to position themselves as world leaders in the non-sovereign currency and the Distributed Ledger Technology (DLT) that powers it.
With the global economy feeling anxious around the uncertainty presented by the expanding use of cryptocurrency, it’s not surprising that the threats and opportunities presented by crypto assets were at the top of the agenda during the G20 financial leaders’ summit in Buenos Aires. Regrettably, however, while the working group acknowledged cryptocurrency has the “potential to improve the efficiency and inclusiveness of the financial system and the economy,” they stopped short of taking specific action towards regulation. Instead, they issued a joint statement opting for a July deadline for recommendations on what data is needed to build a regulatory framework for crypto assets. In other words, they’ve taken little more than baby steps at a time when calls for more concerted action are growing increasingly strident.
Meanwhile, however, other countries, notably in Europe, have already started taking action, frustrating with waiting for a strong consensus from forums like the G20 and eager to leverage the economic opportunities offered by Bitcoin.
Take France, where lawmakers have proposed the creation of the legal status of “crypto assets service providers,” a measure French officials believe is a necessary first step towards regulating the sector. In a recently published opinion piece, French Minister of Economy Bruno Le Maire also revealed that his government will be proposing initial coin offering (ICO) regulations to position Paris as a hub for ICO headquartering, which he says will improve the fundraising process for start-ups. He has asked Jean-Pierre Landau, the former second deputy governor of the central bank, to write a draft bill on cryptocurrencies within the next weeks.
Likewise, in Malta, the government aims to be a trailblazer in the oversight of blockchain-based businesses, becoming the first country in the world to introduce a regulatory framework for blockchain technology in January. Under the terms of the draft bill, the government will create a Malta Digital Innovation Authority (MDIA) that will serve as a central regulator and oversee the operations of all entities that deploy cryptocurrencies. The MDIA will also provide crypto providers with incentives to base their businesses on the island and create ethical standards for legitimate blockchain use. Already, the government’s commitment to enacting progressive measures for blockchain-based commercial activities have produced results, with Binance, the world’s largest crypto exchange, announcing plans to move from Japan to Malta.
In addition to these plans, the Malta Gaming Authority (MGA) – which oversees a lucrative sector that serves as a principal contributor to the island’s economy – has also signalled it plans to allow Bitcoin use at its casinos and gaming facilities. Last year, going a step further than most regulators, the MGA commissioned a series of tests that took place in a controlled setting, or so-called “regulatory sandbox,” before Malta-based gaming operators can accept cryptocurrencies.
Meanwhile – likely with Brexit concerns front of mind – the UK is also making moves to boost the local cryptocurrency industry. Earlier this month, Chancellor Philip Hammond announced he is moving ahead with his country’s own “crypto task force,” made up of regulators and officials from the Bank of England and the Treasury. The aim is a new legal infrastructure for the UK blockchain industry that could create a “stable, flourishing” cryptocurrency exchange with the right regulatory framework. The UK central bank has already been exploring fintech issues for several years, and plans to integrate blockchain technology into its business-as-usual activities just as cryptocurrency begins to gain more legitimacy.
Of course, sceptics of cryptocurrency point to the inherent problems that non-sovereign currency presents, such as money laundering, tax evasion, and wild swings in value. The pseudonymous or anonymous nature of cryptocurrencies also makes it more difficult for states to identify criminals or seize assets. Yet given the potential offered by cryptocurrencies, and particularly the blockchain technology they rely on, this is all the more reason for regulators to come up with the right solutions to govern this burgeoning industry.
After all, blockchain and other forms of DLT can be used not only to power Bitcoin, but could also be used to transform other sectors such as banking and finance, manufacturing, clean energy, and government financial management systems. Mercina Tillemann-Dick of the Global Blockchain Business Council recently summarized it well: “Unless G20 countries get it right, we may give the opportunity to other countries to fill that space.” Clearly, a number of states have already caught on to just that.