Regulating cryptocurrencies looks increasingly like settling on crypto as securities, as adviser signals BIS position.
Another signal that cryptocurrencies are likely to be regulated as securities was sent at the annual meeting of the Bank for International Settlements in Basel. Speaking to delegates, Hyun Song Shin, the BIS economic adviser and head of research, said many cryptocurrencies should be considered the same as stocks and bonds. Mr Shin explained, ‘If people pay to hold the tokens for financial gain, then arguably they should be treated as a security and come under the same rigorous documentation requirements and regulation as other securities offered to investors for a return.’
Regulatory future concerns
Uncertainty over regulation of cryptocurrency is currently stalling, as the market awaits G30 recommendations in the Autumn. So far this year, the US$268 billion cryptocurrency market has lost 56 per cent of its total value amid mounting concerns over the regulatory future. Three months ago, Mark Carney, the Bank of England Governor, endorsed the US Securities and Exchange Commission's view that holding crypto exchanges to the same standards as those that trade securities was wise. Mr Carney argued that it is appropriate to incorporate the digital currency ecosystem into the rest of the financial system, subjecting it to the same regulatory approach and the same ‘rigorous standards.’ The British central bank is currently reviewing potential new rules as part of a task force with the UK Financial Conduct Authority and the Treasury.
Vital for success
The BIS, which carries out research on issues related to monetary and financial stability, issued a report concluding that bitcoin is inadequate to be a form of legal tender for storing value or handling the volume of transactions that are processed in the current financial system. The bank listed three major ‘shortcomings’ that will keep crypto from replacing money as ‘scalability, stability of value, and trust in the finality of payments. The regulatory outcome will have a huge effect on how the market will work in future, and determine the future of the burgeoning crypto industry. Market experts all agree getting clarity on how they'll be regulated is vital to future success. You can read more by GLP’s Editor at Large Dr David Cowan on cryptocurrency regulation at Raconteur/The Times here.