The next step for cryptocurrency regulation

Singapore’s government is exploring regulating cryptocurrencies. Creating a legitimate and stable market will benefit investors and governments alike.

Editorial

Singapore’s central bank announced it is looking at ways to effectively regulate cryptocurrencies. Singapore is a fintech hub and does not currently regulate digital currencies. Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore (MAS) said, “we are assessing if additional regulations are required for investor protection”.

Sources: Blackmoon Crypto, Channel News Asia, Deal Street Asia (I), (II)

Cryptocurrencies are “an index of money laundering”

Digital currencies require regulation to protect investors. Blackrock CEO Larry Fink was the latest high-profile investor to warn of the dangers. When asked if he would start investing in cryptocurrencies, he said they were “more of an index of money laundering than anything more than that”.

More regulation is also required in the arena of Initial Coin Offerings (ICOs). Investors have little information on ICOs and have no idea where their money is going. Without regulation, there is no guarantee investors are investing in a real product. There is also no refund structure in place if the company does not deliver a product.

Investors need regulation. They need to know their investment is going to a legitimate company. There need to be clear guidelines for ICOs. Investors need to know where their money is going. They need to have assurances they are investing in a real company with a real product. They also need to know they can get their money back if the company fails to meet its promises.

Banks and currency houses control and regulate the exchange of fiat currencies. It helps combat money laundering and the use of cryptocurrencies in illicit activities. Cryptocurrencies should be regulated in the same way. Banks could open accounts for cryptocurrency exchanges. This would promote transparency. It would reduce the use of Bitcoin and other currencies for illegal activity.

Would regulation mean the end of digital currencies?

Opponents to regulation argue that an unregulated environment draws investors to cryptocurrencies. Investors like digital currencies because of their lack of regulation.

ASEAN governments do not tax proceeds from cryptocurrency investments. Capital gains tax does not apply. Cryptocurrencies exist in a realm outside of government control. This is what investors find alluring.

Regulation could be have a positive impact on cryptocurrency markets

Regulation, when done correctly, could be beneficial to cryptocurrency markets. Clear regulations on ICOs would draw more investors, including larger venture capitalists.

Improved transparency and exchange regulation would give the market more legitimacy. South Korea outlawed anonymous trading, and it did not damage the popularity of digital currencies. The country remains the third largest market for Bitcoins in the world.

Cryptocurrencies are a new phenomenon. Governments have an opportunity to craft regulation which will appeal to everyone. The MAS in Singapore has used regulatory sandboxes to explore new Fintech regulations. There is no reason why the same approach would not work for digital currency regulation.

A regulatory sandbox would create an environment for experimentation. Governments, investors and financial institutions could explore the impacts of regulation.

Cryptocurrencies are here to stay. We have had the cryptocurrency boom; now we need the regulatory boom. ASEAN can lead the way in creating a flourishing cryptocurrency market with integrity.