A G-20 meeting attended by the world’s economic leaders last month concluded that government regulations on cryptocurrencies were overdue. It was proposed that specific recommendations should be finalised by the summer of 2018.
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The mere mention of government regulations strikes fear into the hearts of cryptocurrency firms. Rumblings emerging from the financial sector typically call for a ban on digital currencies.
Fortunately, some of the threats were laid to rest during the meeting between global watchdogs in Buenos Aires. Acting chairman of the Financial Stability Board, Mark Carney, declared that crypto-assets do not pose a risk to the stability of financial markets.
However, there is a continued concern that extreme price fluctuations and anonymity issues encourage money laundering. The number one concern is that digital currencies are being used to hide funds garnered from illicit activity.
With central banks persistently arguing cryptocurrencies lack institutional governance, fin techs should expect regulatory bodies to deliver a response later this year. Regulators want the Financial Action Task Force (FATF) to advance global implementation.
Cryptocurrency regulations around the globe
There has been a lot of talk about government regulations this year but very little action. Anonymity is the only concern that has been addressed. Cryptocurrency exchanges and platforms are obligated to report suspicious activity and request user identification.
However, to date, there are few countries that have coherent directions on cryptocurrencies. Government officials and financial experts have said that more regulations are needed to prevent illegal activities and protect investors against a lack of security in the crypto space.
Although a ban on cryptocurrencies is unlikely, the financial sector prefers to treat digital coins as assets rather than currencies. Using digital assets for the purpose of trade and industry is being scrutinised.
China has taken a hardline and banned the buying and selling of cryptocurrencies. Although The People’s Republic is expected to soften its view, the Chinese government has frozen bank accounts associated with exchanges, and shut down bitcoin miners.
The US Treasury Deputy Director Sigal Mandelker applauded the sentiments of China, which could cause be a concern for fin techs in the United States and further afield.
Europe is getting mixed messages. Whilst most authorities are calling for regulations, chairman of the European Banking Authority, Andrea Enria said it would be more effective to prohibit banks and other financial institutions from holding or selling cryptocurrencies.
Traders that are concerned about the rules that will be imposed only need to look at Japan. The Asian country is a stronghold for cryptocurrencies, and the first country to implement a solid legal position around digital currency.
In 2016, the Japanese government passed a law that required cryptocurrency exchanges to register with the Financial Services Agency. Firms that fail to comply with legislation are issued with suspension notices. The laws have also prompted exchanges to set up a self-regulatory body.
It seems inevitable that regulatory bodies will stamp their authority on the cryptocurrency scene. To make sure your company meets with compliance directives, contact ICLG for all legal guides .Otherwise, you may be at risk of a suspension or worse – you could be shutdown.