By Andrei Skvarsky.
According to the chief executive of Panxora, a cryptocurrency exchange based in Hong Kong and London, there are serious obstacles to building fair and efficient cryptocurrency regulation mechanisms, both nationally and internationally.
One of the hurdles is alleged global control of cryptocurrencies by the United States, Gavin Smith told EmergingMarkets.me in an email.
Regulators themselves are also a problem as they need “an understanding of cryptocurrency” to come up with systems that can protect the rights of the individual without making crypto businesses less competitive.
“In order for cryptocurrencies to be accepted into the mainstream, regulation is essential. However, this is no easy feat – regulators need to balance protecting the rights of the individual with maintaining a competitive stance in the global marketplace,” Smith said.
“There is also a danger of over-regulation,” he said, citing the United States as a case in point.
He slammed the US government for categorising all cryptos as securities and for criminal action against foreign companies for activities that are against American law but legal in their own jurisdiction, which, he argued, amounted to control of crypto markets across the world.
“In the US, regulation is now based on the approach that all cryptocurrencies are securities – regardless of purpose. If cryptocurrencies are classed as securities, the need to verify the identity of both buyer and seller in any transaction makes it practically impossible to use cryptocurrency as a unit of exchange. It becomes economically unfeasible to buy a coffee or a T-shirt with cryptocurrency if you have to verify your identity every time you want to make a purchase,” Smith said.
“Furthermore, the US authorities are controlling the development of cryptocurrency globally by imposing draconian fines and sometimes criminal proceedings on companies. This can apply regardless of whether businesses are operating in a perfectly legal manner in their own jurisdiction,” the Panxora CEO said.
“This casts a cloud of doubt for companies operating outside of the US. It is difficult to create a business that may be perfectly legal in the jurisdiction where you operate, but still risks prosecution by the US federal government. Until sovereign governments introduce more measures to protect the businesses operating within their borders, the US is being handed unchecked power in controlling the development of the crypto-economy.”
Regulators across the world have a few things to learn to avoid inadequacies in crypto regulation, according to Smith.
“Central banks have a very clear and limited mandate to maintain the stability of a country’s banking system. That focus could hamper the development of cryptocurrency, which could in turn make that country much less competitive in the future world economy,” Smith said.
“Ultimately, the rights of the individual need to be protected. Financial regulators already have a framework in place to deal with a broad range of financial instruments – investments, insurance and financial markets. They need to gain an understanding of cryptocurrency to create the tools needed to introduce regulations into the market.”
About 85 per cent of Panxora’s clientele are retail customers, but the company will shortly launch an application programming interface (API) to cater to institutional and professional clients. Smith said.
In the first quarter of 2019 the firm is going to launch a cryptocurrency-focused hedge fund, Panxora Crypto 1. The fund has been using artificial intelligence to “successfully trade proprietary assets since early 2017”, he said.
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