WEF publishes crypto asset regulation recommendations for government, industry
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, the paper found.
Global coordination is necessary for crypto asset regulation to prevent ambiguity, regulatory arbitration and inconsistent enforcement, the paper argued. The authors identified a range of challenges to crypto asset regulation, including the presumption of “same activity, same regulation,” claiming:
The anonymity provided by crypto mixers, self-hosted wallets and decentralized exchanges also complicate regulation. Meanwhile, increasing interconnectedness with traditional finance increases potential contagion risks from the crypto industry, which was only recently full of “turmoil.”
Related: Blockchain features on WEF whitepaper as a tool to fight climate change
The paper created a variety of classifications of regulatory frameworks for comparison’s sake. Outcome-based, which is characterized as “same risk, same regulatory outcome,” and risk-based regulation, where the level of regulatory intervention is determined by the activity’s level of risk, were considered.
Agile regulation “adopts a responsive, iterative approach, acknowledging that policy and regulatory development is no longer limited to governments but is increasingly a multistakeholder effort.” Regulatory sandboxes, guidance and regulators’ no-objection letters were cited as examples of an agile regulatory approach.
Switzerland’s Financial Market Supervisory Authority was held up as an example of an agile regulator. Switzerland and Japan were cited as examples of self- and co-regulation.
The United States alone was seen as the home of regulation by
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