In the current climate of cryptocurrency regulation, we see a sudden shift amongst the multinational institutions and government agencies handling the regulation of securities, towards a global acceptance of the digital asset. Japan has suffered greatly from hacking into crypto exchanges. In responding to the threat, the country has become the leader in enforcing a regulatory body put in place the Japanese Cryptocurrency Exchange Association in April 2018.
It was the January 2018 Coincheck hacking event that resulted in the loss of more than $500 million worth of NEM. Demonstrating a faulty infrastructure in Japan’s cryptocurrency exchange platforms the FSA stepped in assessing the security within exchanges and shutting down many in the process. Self-regulation has become the best path forward. To ensure consumer protection, exchanges will remain under pressure with strict compliance standards. The self-regulated body titled Japan Cryptocurrency Exchange Association is chaired by Taizen Okuyama while remaining CEO of Money Partners a forex firm that entered the crypto space. The JCEA includes 16 exchanges, bitFlyer, BitPoint, Xtheta, Tech Buro, QUOINE, and SBI Virtual. The JCEA also consists of the Japanese Cryptocurrency Business Association and the Japan Blockchain Association. There will remain stiff penalties for platforms that flout the rules and regulations of the Association.
With Japan setting up self-regulation association, central banks globally have taken note. In observing the increased efforts nearing the end of 2018, it is safe to say cryptocurrency is more respected and viewed as a legitimate asset class amongst governments across the globe.
The Financial Action Task Force consisting of 37 countries, tackling financial crimes internationally has publicly stated intention to release a global cryptocurrency regulatory framework by June 2019. Such rules will also be enforced undergoing U.S. sanctions, including nations such as Iran and North Korea and Venezuela. Each country will be expected to thoroughly license or regulate cryptocurrency exchanges as well as companies which provide encrypted wallets. Regular reviews will take place to ensure all member states are actively engaging in compliance standards. President of the FATF Marshall Billingslea stated the organization will provide guidance on a risk-based approach to regulating virtual asset service providers including their supervision and monitoring.
Hong Kong Securities and Futures Commission
In a race to instill global regulatory standards, the Hong Kong Securities and Futures Commission announced in late October 2018, efforts to provide a formal regulatory environment for cryptocurrency exchanges and investments. The SFC chief Ashley Alder is working to provide firmer regulation not outright ban like Mainland China.
United States Securities and Exchange Commission
While the United States, Securities and Exchange Commission’s Enforcement Division has been significant efforts to crackdown on ICO projects in the hundreds. With this pressure, dozens of firms have agreed to refund investors money and pay fines, rather than attempt to reach a legal compliance. Despite the lack of a clear regulatory framework from the SEC, the United States Senate has been putting pressure on the agency to formulate a framework due to the urgent need of guidelines unique to cryptocurrency exchanges.
The sudden effort globally to clampdown on ICOs demonstrates an acknowledgment of the power such startups have been able to build in a short period of time. The first step towards protecting consumers from potential crypto scans is appreciating the popularity of exchanges such as Binance making almost $200 million USD by January 2018 and Coinbase close to achieving a billion USD in revenue. To attract global interest in the cryptocurrency space, countries must protect consumers while remaining open for business ensuring growth.
Written by Shermineh Saleh Esmati
As the CEO and founder of Cyrus BC Inc. Shermineh provides advisory services to promote the interests of her clients through the application of innovative products. One focus of Cyrus BC is to bring deliverable blockchain initiatives to the attention of investors focused on the security and socio-economic benefits of the technology.
With a background in foreign policy and intelligence analysis, Shermineh has been using her grasp of geopolitics to aid blockchain companies to best pursue growth while respecting international cryptocurrency regulations and blockchain policy. To ensure the expedited adoption of fintech products she is working with Blockchain Intelligence Group, New Economies DLT and building collaborative efforts for AI blockchain projects soon to be announced.
Shermineh has experience advising intelligence agencies, political leaders, management consultancies and human rights organizations. In the pursuit of developing an expertise in international security, Shermineh obtained her bachelor’s degree with a Specialist in Political Science at the University of Toronto and is completing her master’s degree in Government at Harvard University. To further Canada’s efforts in emerging technology she is also a member of the Blockchain Association of Canada and an Advisor to the Open Source Data Committee at the Treasury Board Secretariat in Ottawa, Canada.