So I was logged on catching up on ‘Brexit’ news, when I caught sight of a programme on the BBC discussing the possible regulation of cryptocurrencies. I certainly think the panel was discussing regulation of DLT (distributed ledger technologies). But what intrigued me most was the array of distinguished guests or panel members featured. Somewhere in the crowd, I saw ‘Dan-the-man’ (find him in the pictures). I also saw my country man, the executive from ‘Coinfloor’, Obi Nwosu on the panel.
I also thought: I am going to write about this for Steemers because it appears ‘Dan-the-man’ has some history with STEEM. I wonder whether he is going to write about this fascinating meeting with the Bank of England’s Treasury Committee. I am sure whatever he does say (that is if he writes) will prove interesting.
Obi from Coinfloor was giving things the usual spiel; regulation is a matter for forward-thinking governments and visionary policy makers. (Obi’s outfit uses among others, British Virgin Islands in addition to the United Kingdom). The other jurisdictions (other than the UK that is) have in place: regulations or regulatory frameworks that oversee the ‘behaviour’ of exchanges which have cryptocurrency offerings (crypto(s) for short) or deal in (crypto or crypto-related assets). These jurisdictions, Obi claimed are also very knowledgeable about ‘the space’.
Already, there is some confusion introduced into my report because I am not sure if it is the Exchanges that are to be regulated and not the crypto-assets ‘or currencies themselves’.
The management of risk appeared to be an underlying concern of the speakers on the government side. Everyone recognises that investing in crypto-currencies (i.e. price speculation) is inherently risky but I suspect that what worries the would-be regulators is not the fact that many exchanges make it possible for markets to be made in crypto but that somehow ‘the behaviour of users of crypto at large’ is very unpredictable and therefore not subject to familiar controls. This idea that common folk can prefer another form of exchange or money other than government-backed, jurisdiction-based, fiat-currency is scary…
Obi continues as (I paraphrase) … so, you can develop a good or a service; offer it for sale online and opt to accept payment in a cryptocurrency (say, bitcoin). This is one way of getting bitcoin: (when that good or service receives patronage). Or you could set up some rigging to mine bitcoins directly; the only way to get paid will be when you are rewarded by the network for mining ‘blocks. But miners are not without costs, he said (electricity rates for instance are a constant worry).
And there are other costs: (a properly set up mining rig could cost £2000-£4000 to procure and set up). And if you mine with a pool, then there could be a significant ‘time-cost’ too before that first pay-out happens (if at all). Yet one feels that these types of things commonly engaged in by citizens could not possibly be the sorts of things which the UK government (or governments are) mean to ‘regulate’. This may not be so strange when you compare this to the response of Chinese authorities to the crypto-related activities of her citizens, where it is said that regulation is rife and the government it seems has clamped down or is clamping down on everything crypto.
The lawyer from America (Marco Sintilo) representing ‘Blockchain’, kept harping on ‘harmonisation’, which I took to mean an appeal from him (on behalf of his sponsors) for governments around the world to adopt a common approach towards regulating the activities of the Exchanges. Yet because governments already regulate exchanges, one wonders whether regulation of the ‘crypto space’ means extending existing regulation which covers securities Exchanges to cover cryptos. Before adopting such an approach, governments have to run the gauntlet of definitions: existing regulations cover only securities or trading in securities. Is Bitcoin a security?
Are crypto currencies securities? That’s two questions just now.
If we assume we are addressing one category – then, the true question is: can cryptocurrencies be securities? A second question rears its head, if so, which ones? Because traditionally, a security in the sense in which we are discussing, is a financial instrument such as a stock or bond, representing rights of ownership or creditorship, traded on exchanges. Some say this definition cannot be applied to something whose price wildly swings about as the prices of most of these cryptocurrencies do. Therefore regulation cannot be applied to these new asset classes, just yet. Problem there.
To get around the problem Obi’s Coinfloor only trades in Bitcoin, Bitcoin Cash (over-the-counter) and one more (Ethereum, I think he said). These are the main ones apparently.
There were other subject matter experts on the Panel, the managing director of e-toro, Iqbal Gandham (fronting a crypto venture CryptoUK himself) and the analyst from FT (Financial Times), Isabella Kamniska. These also made comments for their various constituencies and concerns.
Through everything, I think categories of use of/for crypto-currencies emerge. On the one hand, you have the activities of common citizens exploring their own private options with cryptos – some mining for a reward and others denominating the prices of their goods and services (online and off it) in crypto-currencies and slowly feeling their way away from fiat currencies. On the other hand, there is the rather specialist activities of the traders whose only forays into the space is by price speculation in other to turn a quick profit. One would have to include the activities of those recently trying to float new crypto-coins (by way of dodgy ICOs) in the latter category.
The current perturbation which governments are showing to enter the space – either as regulators (of the traders) or joiners-in-earnest with government sponsored crypto–currencies to their names (?) will be interesting to watch. Perhaps authors and other analysts will hang back and write a few more books about the ways in which world governments make their entries eventually. I think governments invariably hate anything they cannot properly tax. And cryptos I suppose currently fit in that category.
At the bottom of government worry is taxation, that reveals the government’s ‘fear of missing out’.
