In recent regulatory news, the Shapeshift co-founder and chief operating officer, has given a damning appraisal of the current regulatory climate surrounding cryptocurrencies in the United States. The president of Germany’s Federal Financial Supervisory Authority, Felix Hufeld, has indicated that the principal concern of German regulators regarding cryptocurrency will be seeking to ensure financial stability, rather than concerns pertaining to individual investors. The U.K’s Financial Conduct Authority has published an open letter to the CEO’s of businesses offering “services related to cryptoassets” regarding financial crime risks associated with virtual currencies.
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Shapeshift Co-Founder Says U.S. Cryptocurrency Regulations are Worsening
Following the passing of Bill 5031 in Washington and New York, which demands that cryptocurrency exchanges provide regulators with customer information and trading data, Shapeshift has emerged as one of the most vocal critics of the new, and the current direction in which U.S. cryptocurrency regulations are heading.
In a recent interview, Jon, Shapeshift’s co-founder and COO, stated “I would say in the US it’s actually gotten worse […] especially in the last 6 months. I think the explosion of value in 2017 brought a lot of these regulators into the space and made them more concerned. Most of them don’t understand what the heck it (cryptocurrency) is, but they want to control it.” Jon also accused regulators of failing to “give clarity,” stating “all these companies and lawyers and lobbyists are left to read the regulatory tea-leaves […] Nobody knows what the rules are and everyone’s just left to figure it out, that’s a dangerous place to be.”
Jon described decentralized exchanges as comprising a form of resistance to the current regulatory climate on the part of the cryptocurrency community. Of decentralized exchanges, the Shapeshift COO stated, “I think it’s a lesson to the smart regulators in the space that if they don’t work with companies, they’ll push things that way, and it’ll become harder and harder for them to have an impact in the space. The more regulators push hard, the more things become unregulatable.”
Jon concluded by advocating a collective approach among companies in the cryptocurrency sector to push for a more amenable regulatory apparatus, stating that he hopes “more and more of the crypto companies do band together to help educate the regulators in the space and try to work together to do something productive.”
German Crypto Regulations Will Strive for Financial Stability, Not Protection of Individual Investors
Felix Hufeld, the President of Germany’s Federal Financial Supervisory (BaFin), recently delivered a speech addressing cryptocurrencies, in which he emphasized the regulator’s primary intention as being preserving financial stability, rather than issues concerning individual investors.
According to a rough translation, Mr. Hufield stated “We will not be able to protect every single investor from his fate, and that can not be the task of state supervision. Once again, the maxim is that we must act on a prudent or regulatory basis if financial stability as a whole is threatened.”
Overall, Mr. Hufield spoke favorably of cryptocurrency and distributed ledger technology, stating that he “consider[s] the applications that start where there is a lack of effective control mechanisms or trustworthy institutions to be promising. Among other things in foreign trade or development aid, Blockchain’s promise of confidence and efficiency in cryptography and immutability may prove beneficial.”
U.K. FCA Publishes Open Letter to CEOs of Businesses Offering “Services Related to Cryptoassets
The United Kingdom Financial Conduct Authority has published an open letter to the CEOs of businesses that offer services pertaining to virtual currencies seeking to warn of the financial crime risks associated with cryptocurrencies.
The letter asserts that whilst “There are many non-criminal motives for using cryptoassets [..] this class of product can also be abused because it offers potential anonymity and the ability to move money between countries,” advocating that businesses “take reasonable and proportionate measures to lessen the risk of [firms] facilitating financial crimes which are enabled by cryptoassets.” Said measures include “developing staff knowledge and expertise on cryptoassets,” and “ensuring that existing financial crime frameworks adequately reflect the crypto-related activities which the firm is involved in.”
Mohammed Adil Siddiqui, compliance professional & founder of The CFD Trading & Compliance Forum, commented on the letter, stating, “The FCA’s recent notice to banks and financial institutions servicing the cryptocurrency sector comes as no surprise, it’s typical of the regulator‘s approach when things are getting from bad-to-worse. Despite the global regulatory framework around virtual currencies gaining prominence, there are fundamental weaknesses that the watchdog finds uneasy, namely ‘source of funds’. With cryptos, the possibilities to circulate funds from lands few and far between is as easy buying milk, and banks, exchanges and the wider market must act swiftly. The CFD Trading & Compliance Forum welcomes the guidance note and expects regulators to take more stringent & drastic actions by way of legislation to ensure that preventative measures are applied pre-the-use of these innovative financial instruments. And banks, that have questionable or suspicious transactions should carry out the appropriate checks as earliest as possible to maintain confidence and reduce the possibility of financial crime and inefficient activities distorting the marketplace.”
Do you agree with Shapeshift’s appraisals of the current regulatory climate in United States? Join the discussion in the comments section below!
Images courtesy of Shutterstock, Shapeshift
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