WEF develops guidelines for governments and businesses to follow when regulating crypto assets
Global organisations, regulators, and the cryptocurrency sector may work together with the help of insights from the World Economic Forum’s analysis of regulatory methods.
With the help of its Digital Currency Governance Consortium, the World Economic Forum has published a white paper on the subject of crypto asset regulation. The report concluded that regulation is necessary immediately and that collaboration is essential.
The report stated that ambiguity, regulatory arbitration, and uneven enforcement might be avoided if there was global coordination of crypto asset regulation. The authors noted many obstacles to crypto asset regulation, such as the assumption of “same activity, same regulation,” arguing:
“Even when crypto-asset operations are similar to those in the conventional financial sector, “the ecosystem surrounding crypto-assets does not always fit squarely into the existing activity-based, intermediary-focused approach of regulation.”
Crypto mixers, self-hosted wallets, and decentralized exchanges all provide a layer of secrecy that makes regulation more difficult. Meanwhile, the crypto business has lately been experiencing a lot of “turmoil,” and its growing interconnection with conventional banking raises the possibility of a contagion effect.
In order to accommodate the fact that policy and regulation formulation are now a multistakeholder effort, rather than the exclusive province of governments, agile regulation “adopts a responsive, iterative approach.” An agile regulatory strategy was described, with examples including regulatory sandboxes, guidelines, and no-objection letters from regulators.
The Financial Market Supervisory Authority of Switzerland was cited as a model of efficiency among regulatory agencies. Self-regulation and mutual regulation were held up as examples by pointing to Switzerland and Japan.
It was widely believed that regulation through enforcement originated only in the United States. As the writers put it:
“There can’t be a productive conversation about what should and shouldn’t be regulated if “regulation by enforcement” is the method used to construct the framework.”
Three main suggestions were offered to both international organisations and regulatory bodies, as well as the crypto sector as a whole, in this report. The need of coordinating and sharing best practices was emphasised. Given the open nature of these emerging technologies, more effective regulatory measures to handle international issues are within reach.