More than 500 years passed between the founding of the world's first bank, Monte dei Paschi di Siena, and the development of the 1988 Basel Accords, the first set of World Bank standards.
According to this benchmark, global policymakers are ahead of the curve in devising standards for cryptocurrencies that emerged just 13 years ago with the debut of Bitcoin in January 2009. Forums such as the Basel Committee on Banking Supervision, the Financial Stability Board, and securities regulator IOSCO are already discussing global standards for cryptocurrencies.
But this year brings new urgency to these negotiations. The FSB warned that stability risks could “rapidly escalate” due to the explosive growth of the cryptocurrency market, as well as increased links with the regulatory sector and widespread adoption of currencies by individuals. .
Mairead McGuinness, the EU's commissioner for financial services, said at an FT event on February 17: “Growing and unregulated things could cause big problems if we don't deal with them. “There is,” he warned. She spoke about the current situation of young people. He invests in cryptocurrencies for “fun” and takes financial advice from video-sharing platform TikTok.
“Collective activities, if unregulated, are alarming and this is why principles for the entire crypto space are needed globally,” she stressed.
The borderless nature of crypto trading companies, where decentralized businesses may be spread across physical areas and servers, further highlights the need for a global approach to policing crypto trading companies. .
“There are crypto businesses that appear to be everywhere but physically exist nowhere,” Mark Steward, head of enforcement and market oversight at the Financial Conduct Authority, said at the same February 17 event. Stated. “This is a red flag for everyone and should be of concern to regulators around the world.”
Half a world away from the FCA, Ashley Alder, chairman of the Hong Kong Securities and Futures Commission and chairman of global securities regulator Iosco, believes coordination between the various domestic and international regulators is “of paramount importance”. There is. “We want to explore a holistic and integrated approach to virtual asset activities and reduce regulatory arbitrage, or differences in rules between regions,” he said.
But while policymakers in major financial centers agree on the need for global standards, Benoît Coulet, then director of the Bank for International Settlements Innovation Hub, said in December that each jurisdiction had a “different trajectory. “There is a risk of pursuing this and creating a system that can be used globally.'' It's contradictory. ”
The EU already has regional principles proposed in the Markets in Cryptoassets (Mica) Directive. It was submitted to the European Parliament in October 2020 and is expected to come into force around 2024, covering everything from storing digital assets to selling and trading them, providing advice and exchanging them for hard currency.
Meanwhile, in Hong Kong, Alder said his agency is “pragmatically and creatively applying existing powers” to regulate cryptocurrencies in the same way it regulates other securities. Or, as he puts it, “based on a 'same business, same risks, same rules' approach.”
More formal rules are coming. Hong Kong is currently developing legislation to ensure that all crypto-assets traded on these platforms are subject to the same regulations, “regardless of whether they fall within the traditional definition of 'securities'.” We are promoting.
Neighboring China has taken a more absolute approach. In September, authorities declared all crypto activity “illegal” and said they would investigate Chinese nationals working on foreign crypto exchanges.
Singapore has instead introduced cryptocurrencies into its anti-money laundering regime. A spokesperson for the Monetary Authority of Singapore said the regulator was “ready to adapt its rules as necessary to manage the policy balance” between supporting innovation and managing risk.
In the United States, Securities and Exchange Commission Chairman Gary Gensler has given his agency, as well as agencies such as the Commodity Futures Trading Commission, powers to provide “stronger oversight and investor protection” for most cryptocurrencies. We're asking Congress to give it to us. Markets that “straddle” regulatory frameworks. He warned that they were “rife with fraud, fraud and abuse”.
The CFTC also warned of the dangers of “enforcement regulation” and called on Congress to set clearer rules about what is legal and what is not.
In the UK, the FCA has begun registering crypto companies that comply with anti-money laundering rules, and has warned that it will crack down on advertising if cryptocurrencies are added to the FCA's financial facilitation system. “We need broader legislation here,” Steward said at a recent FT event.
In addition to these national regulatory actions, all major regions say they are mindful of global developments and are participating in international discussions. One official said the EU's Mica Directive will help the international It points out that it is designed to implement recommendations where they exist. Term bond.
Still, this does not mean that differences in regulatory treatment cannot creep in, even among systems with common objectives of protecting consumers and maintaining financial stability. For this reason, cryptocurrency regulation is currently on the FSB's agenda.
FSB Chairman Klaas Nott said: We have the power to convene. . . We bring together central banks, the Ministry of Finance representing the ultimate legislator, supervisory authorities, banks, insurance and securities, and some international organizations. They are all at the FSB table. ”
Knott predicts that the FSB's work on global cryptocurrency standards could progress “significantly in 2022.” The next step is for these standards to be published and quickly implemented by the 24 FSB member states and other countries.
Everyone is hoping that with swift action, the fate of cryptocurrencies will not be as ignominious as Monte dei Paschi's. Monte dei Paschi was once renowned as the world's oldest bank, but is now best known as the bank that came closest to collapse during the eurozone financial crisis.
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Letter of reply to this article:
Let’s hope the US follows Europe’s crypto lead / From Susan Freedman, Head of Public Policy at EC2 Ripple, London, UK
Let your crypto platform provider set best practices/From David E Rutter, Founder and CEO, R3 Former CEO, ICAP, London EC2, UK
