The World Economic Forum (WEF), taking a firm step in the crypto field, asserts the urgency of crypto regulation for industries and governments. A pivotal report released by the organization highlights that cryptocurrencies have become a global focal point, and the WEF is no exception. So, what does the report entail?
Cryptocurrency Report
The WEF, with the contribution of the Digital Currency Governance Consortium, has published a regulation report on crypto. The report states the urgent need for regulation and emphasizes that collaboration plays a key role. Currently, no globally accepted legal framework or standard is in place. This framework, which will shape the destiny of crypto, is unable to come into effect as the US and EU have yet to finalize their local regulations.
The report advocates for global coordination for crypto asset regulation to prevent uncertainty, regulatory arbitrage, and inconsistent application. Authors identified several challenges to crypto asset regulation, including the assumption of “same activity, same regulation”. The US SEC Chairman Gensler, who often mentions this subject, insisted that if Apple follows these rules, crypto companies should as well, disregarding the innovation brought by the new technology.
The report articulates: “Crypto assets and ecosystems do not always fully conform to the current activity-based, intermediary-centric regulatory approach, even when crypto asset activities mirror those in the traditional finance sector.”
Global Cryptocurrency Regulation
Authorities are emphasizing the urgency of crypto regulations on a global scale, and the WEF has publicly expressed its view on this matter. The study explores various regulatory framework classifications for comparison.
Risk-based regulation, characterized as “same risk, same regulatory outcome,” is considered, where the level of regulatory intervention is determined according to the risk level of the activity. Agile regulation adopts a responsive, iterative approach, acknowledging that “policy and regulatory development are no longer limited to governments and are increasingly a multi-stakeholder effort.” Agile regulatory approach examples include guidelines and regulators’ rejection letters.
The Swiss Financial Market Supervisory Authority is given as an example of an agile regulatory institution. The report characterized the US as an example of regulation through sanction.
This approach is not recommended for establishing a framework because ‘regulation through sanction’ obstructs a meaningful discussion on what should and should not be regulated. Policymakers and sector stakeholders need to cooperate across jurisdictions to provide consistency and clarity. Given these new technologies have started from a transparent position, it is possible to envisage even better regulatory tools to address cross-border concerns.
The Biden administration is currently labeling its political rivals, the Republicans, as a group backing cryptocurrencies and disregarding national interests. This attitude became more pronounced during the debt ceiling process. US President Biden stated that by blocking cryptocurrency taxes, Republicans deprived the government of $18 billion in revenue.
