About more than 2,000 different coins exist right now, each of them having its own distinct and unique characteristics, uses, as well as communities, where there are masses of different blockchains, exchanges, and platforms – all of which answer to competing values and needs. In fact, this profusion is one of the fundamental driving forces behind innovation in the crypto sphere. On the other hand, it arguably acts as a block against widespread adoption, because the lack of associated standards means that some morally problematic endeavors give the rest and bad name.
2017 saw an intensifying push towards producing international standards for the crypto industry. Some groups like Global Digital Finance have arisen with the aim of fostering universal criteria on how platforms are running, just as groups such as the Blockchain Association and CryptoUK are now focused mostly on some requirements at a national level. These types of organizations count the likes of Coinbase, Circle, Bitstamp, as well as others as members, notwithstanding often being less than a year old.
But, while still holding the promise that crypto is going to avoid stringent government regulations by learning how to regulate itself, also there is a concern that global standards might hamper innovation, and that crypto, almost by nature, is not meant to be standardized.
The Global Digital Finance or GDF
The executive director of Global Digital Finance or GDF, named Teana Baker-Taylor, said that the London-based association has the purpose of demonstrating that self-governance and driving best practice is actually critical for the consumers of the industry, as well as their confidence in crypto assets, as the sector continues maturing, and in concert with developments in regulation.
We can say that GDF is seeking to develop voluntary guidelines, as well as codes of conduct for exchanges, wallet providers, token sales, and even cryptocurrencies, and ratings websites, and while it has been launched only in March, it already has a strong roster of members.
However, GDF does not only work on codes of conduct for token sales, as well as crypto exchanges. They are also busy devising a taxonomy of cryptos, which seeks to divide coins into three broad types: financial asset tokens, payment tokens, and consume tokens.
As there is a lot of misunderstanding, confusion, and conflict among the governments in the world on how to define cryptocurrencies, this attempt to produce a clear taxonomy of cryptos is much needed. But, seeing as how such organizations remain mainly averse to classifying cryptocurrencies as money and or assets, there is going to stay the worry that the taxonomy of GDF may simply be disregarded by governments, as well as regulators.
The increasing interest of governments in crypto regulation
Despite the possible opposition or resistance on the part of governments, the groups such as GDF could have emerged precisely as of increasing the interest of the government in cryptocurrency regulation. Anyway, their emergence at such a time is actually presenting the world with a golden chance to participate in the shaping of government policy.
In October of this year, the FATF, which is an intergovernmental group created by the G7 in order to fight money laundering – adopted a variety of changes to its standards concerning the regulation of virtual assets. Also, besides money laundering, the new recommendations were focused primarily to the financing of terrorism, leaving plenty of freedom for exchanges, token issuers, as well as crypto-services to operate following the needs of their users, and their own logic.
The FATF Recommendations demand monitoring or supervision only for the aims of AML or CFT – Anti-Money Laundering and Countering Financial of Terrorism, and it does not imply that virtual asset service providers are subject to stability or consumer/investor protection safeguards, and they do not suggest consumer or investor protection safeguards.
Just said, the FATF sees no reason for doing anything about the volatility or the decentralization of crypto, which implies that it wants to leave the much of decentralized nature of the crypto intact. Saying this, some other governmental groups want to do something more than just prevent crypto from being utilized for crime or terrorism.
For instance, the chairman of the German Federal Financial Supervisory Authority, or BaFin, named Felix Hufeld, affirmed his view that global community needs to produce international standards governing the handling of ICOs, saying that the number of ICOs and the volume of money per ICO are both getting higher. Investors have mostly minimal rights, according to him.
While the governments and the governmental bodies in the world are slowly waking up to the idea of seeing cryptocurrency regulation at a global level, the crypto industry is increasingly producing some new trade institutions which are beating them to punch when it comes to the development of standards.
CryptoUK has been established in March, with the purpose to produce self-regulatory standards for the crypto industry of UK. However, the chairman of CryptoUK, named Iqbal V. Gandham, stated that there is an appetite at their company for some international coordination.
He said that the focus of CryptoUK since its launch was on the United Kingdom – securing proportionate regulation there is their priority, but they also support collaboration on regulatory approaches internationally, particularly learning the lessons, the good and the bad ones, from some other jurisdictions.
Reasons to believe the crypto industry will develop international standards
As most of the other self-regulatory trade bodies, like Blockchain Association, the Japan Virtual Currency Exchange Association, as well as the Blockchain Foundation of India, work primarily at the national level, global collaboration on regulatory approaches is going to be fundamental if the cryptocurrency industry is to enjoy uniform international standards.
Also, there is a growing willingness among cryptocurrency-related companies to work with one another on the development of international standards.
For a lot of reasons to believe that the cryptocurrency industry is sooner or later going to develop international standards, as well as adopt them at a large scale. However, there is a question which still remains, about whether these standards will simply give the public some greater confidence in crypto or they will have the unfortunate side effect of constraining innovation.
Similar to this, there is also the risk that standards could actually put compliant companies at a disadvantage, compared to those corporations or digital currencies which directly flout them. As the decentralized nature of crypto provides people, as well as groups with some greater scope to disregard centralized authority, this can be a real danger.
But, once the international criteria are in place, as well as recognized, it will become much likelier that the companies which do observe them are going to have a much better chance of working with and influencing regulators – something that is going to put them at a competitive advantage. It was confirmed that there is a robust appetite among crypto-related firms to foster, as well as follow strong universal standards.