• The World Economic Forum has released a white paper on crypto asset regulation, assisted by its Digital Currency Governance Consortium.
• The need for regulation is urgent and cooperation is key, according to the paper.
• The authors identified a range of challenges to crypto asset regulation and proposed several regulatory frameworks for comparison’s sake.
The World Economic Forum Releases Crypto Asset Regulation White Paper
The World Economic Forum (WEF) has released a white paper on crypto asset regulation, assisted by its Digital Currency Governance Consortium. The authors concluded that global coordination is necessary to prevent ambiguity, regulatory arbitration and inconsistent enforcement in the world of digital currency.
Challenges Faced By Crypto Asset Regulation
The paper identified a range of challenges to crypto asset regulation due to its unique nature. These include anonymity provided by crypto mixers, self-hosted wallets and decentralized exchanges as well as increased interconnectedness with traditional finance which poses potential contagion risks from the crypto industry.
Classifications Of Regulatory Frameworks For Comparison
In order to compare various approaches to regulating digital currencies, the authors classified them into three categories: outcome-based; risk-based; and agile regulation. Outcome-based regulations are characterized as “same risk, same regulatory outcome” while risk based ones consider the level of intervention based on activity’s level of risk. Agile regulations adopt an iterative approach involving multiple stakeholders in policymaking rather than leaving it solely up to governments.
Examples Of Regulatory Frameworks Used Around The World
Switzerland’s Financial Market Supervisory Authority was held up as an example of an agile regulator while Switzerland and Japan were cited as examples of self-and co-regulation respectively. Meanwhile, the United States was seen as employing ‘regulation by enforcement’ due to lack of meaningful discussion about what should or should not be regulated in this sector.
To conclude, the WEF’s white paper seeks to set out clear guidance for governments and regulators around the world looking into how best regulate digital currencies and their associated ecosystem in order ensure safe use without creating unnecessary barriers for innovation within this sector.