Recent advancements in market regulation for cryptos is an encouraging sign; however, more legislation is needed to add additional safeguards, according to Obi Nwosu, CEO and co-founder of Coinfloor.
A recent report by FinTech Global found that blockchain & cryptocurrency funding is on track to surpass last year’s record despite crypto market uncertainty. Q1 2018 saw $820.1m invested across 50 deals in the third strongest funding quarter to date. The $820.1m invested in Q1 equates to 29.2% of last year’s total, meaning funding is on track to beat record levels.
Despite cryptocurrencies and initial coin offerings maintain their monument amongst entrepreneurs and investors, regulators are still struggling to get to grips with legislation. With more and more capital being pumped in, regulators are increasingly calling for the ability to treat cryptocurrencies more like fiat money in a bid to fight financial terrorism and fraud. Some countries are taking a more -harsh approach and banning them outright, while others are looking to foster innovation through the correct legislation.
“Recent advancements in market regulation have left us encouraged of things to come,” Nwosu told RegTech Analyst. “The introduction of appropriate regulation, infrastructure and technological solutions will help cryptocurrencies achieve their full potential in delivering both social and economic benefits as originally intended.”
Last year, South Korea banned initial coin offerings to protect investors from fraud. However, earlier this week, lawmakers in country were widely reported to be looking to submit draft bills to legislate regulations for burgeoning sector.
The EU commission also recently release plans for regulation, with proposals to amend Article 2 of the 4AMLD to add to the list of obliged entities virtual currency exchange platforms as well as custodian wallet providers.
The Securities and Exchange Commission in the US has warned investors about dangers of the ICO and recently made it clear that it won’t be bending the rules for cryptocurrency when it comes to defining what is or what isn’t a security.
With different countries taking different approaches, Nwosu said Conifloor has been ‘incredibly impressed’ with Gibraltar’s ‘forward-thinking’ approach to regulation
“We have set up Coinfloor Exchange Gibraltar. We have been working with them for over a year. They have taken a strong policy around AML and CTF, countering terrorist financing. They have also looked at policies around custodianship of cryptocurrency, treating customers fairly, and they have taken a broader look at the market. This is what I was recommending that the UK should look at as well, as an example.”
According to a report by Chainalysis, there has been a significant reduction in cryptocurrencies being used for illicit purposes, dropping down from 30% in 2012 to around 1% in 2017. Nwosu has been left encouraged by recent moves and welcomes any additional measures to address illicit transactions.
“Right now, it is a crucial time to address concerns around price volatility and market manipulation of cryptocurrencies, as the market is still in its infancy,” he added.
“Clear regulatory and legislative framework is needed to provide additional safeguards to the market, allowing institutional players to enter the market with confidence. Once these institutional players enter the market, the increased volume and liquidity that they will offer will help to stabilise the price and make it safer for consumers.”
Earlier this year, seven cryptocurrency companies set up the UK’s first crypto trade association in a bid to inject more legitimacy and transparency into the sector while authorities weigh up a potential clamp-down. Coinfloor, a the longest-established group of cryptocurrency exchanges for institutional or sophisticated investors and traders, is a member.
The Bank of England (BoE) recently issued a letter to the CEOs of banks, insurance companies, and designated investment firms warning them of the ‘reputational risks’ of getting involved with cryptocurrencies.
In response, Iqbal V. Gandham, chair of CryptoUK, said the U.K. has the potential to become a world leader within the crypto economy and urged governments and regulators to ensure the country is well-positioned to seize the opportunities that this sector could bring.
Nwosu echoed his comment: “The market is at an early stage. The lack of regulation is one of the things preventing it getting to a mature stage. We want it to get to a point where the price stabilises. Price volatility has been reducing all the time, and one thing that has caused that is the increase in volume and liquidity entering the market.
“There are a number of institutional players that would like to get into the market, but they can only deal with other regulated institutions. If they enter the market, they will bring the disciplines that relate to that, but they will also massively increase the liquidity, stabilise the price and make it a safer place for consumers and investors alike.”
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
