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More than 10 years has passed since the launch of Bitcoin, but the cryptocurrency industry remains largely the preserve of blockchain enthusiasts and fintech startups. The reason why mainstream financial institutions have yet to fully embrace the potential of digital assets is clear to the European Commission’s Advisor for Digital Innovation.
Taking part in a panel discussion on regulation at Swell 2020 – the annual gathering of the world’s trusted leaders in financial services and blockchain technology – Peter Kerstens said:
“Regulated financial instruments tend to attract regulated financial institutions. The lack of a regulatory framework is, in my view, one of the reasons why we haven’t seen a further development of this.”
One country that is making progress on regulation is South Africa. But as a Special Advisor to its Central Bank, Angela Itzikowitz acknowledged to the panel, figuring out how crypto fits with existing financial legislation is extremely challenging.
“First we had to consider: was is it just a question of new wine in old bottles or should we go back to the drawing board?” she recalled. “Most of our legislation regulating assets or securities…requires a central issuer [which] is missing in the token or crypto space. A token can [also] change its nature. It may start out as a utility token, but during the course of its lifetime become a security token. So how do you regulate it?”
Speaking from Washington DC, the Blockchain Association’s Executive Director Kristen Smith agreed that the changing nature of tokens contributed to the lack of an overarching regulatory framework for crypto assets in the US. But she noted that the country’s policymakers are finally catching up.
“This is an ecosystem that has been evolving so quickly and there ...
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