Both the US and the UK seem to have concluded that trying to adapt to the crypto industry is better than allowing it to thrive overseas. Stablecoins could be the way to go
Comment: This year has seen some unusual twists in the cryptocurrency world, even for a technology with a turbulent history. Crypto has played an unlikely supporting role in the war in Ukraine, starting with Ukrainian leaders explicitly seeking donations of cryptocurrency to help fund new military equipment. Over $100 million in crypto donations followed, and President Zelenskyy has since signed a bill to legalize cryptocurrency as an asset class in Ukraine.
Crypto has long been associated with a small cabal of young and wealthy “crypto bros”, but examples such as those in Ukraine paint a much bigger picture of what the technology is all about and for whom.
Illia Polosukhin, the organizer of Unchain, a charity that distributes humanitarian aid in Ukraine, points out that “a bitcoin transaction takes 10, 20, 30 minutes against a bank transfer which can take two or three days, and you can’t be sure that – by then [the Russians] could have bombed a national bank”. Polosukhin also notes that crypto, being digital, means Ukrainian refugees can access funds without having to carry cash.
Having evolved from a perceived Ponzi scheme to a technology with real utility and a long list of new applications, crypto is increasingly recognized as a legitimate force for technological change. Despite all the decidedly mixed sentiment about applications like non-fungible tokens, cryptocurrency adoption and usage follows like the early growth of the internet. According to a study, the number of crypto users doubled in 2021 in Asia-Pacific, the United States and Latin America, even as cryptocurrency prices fall. It is no longer easy to view this level of sustained growth as a fad or a bubble, and countries are beginning to think about how crypto will fit into their existing economic and legal systems.
A spying opportunity in the cryptosphere. The UK government has just announced a series of policies aimed at making Britain “a global hub for crypto-asset technology”. In particular, the government has planned to recognize stablecoins as a legal form of payment – a class of cryptocurrencies that are pegged, often to a fiat currency like the US dollar or euro.
Stablecoins offer many of the benefits associated with traditional cryptocurrencies (fast transactions, ability to interact with “smart contracts” – self-executing programs programmed on a blockchain), without the price volatility that goes up and down. They are not “illegal” per se in most jurisdictions, but they do operate in a gray area that tends to worry financial institutions and traditional businesses.
It’s a big change for a big economy like Britain to officially recognize stablecoins, giving the technology Her Majesty’s seal of legitimacy. This type of policy is always criticized, and the timing of the announcement did the British government a disservice. On the same day, the Governor of the Bank of England gave a harsh speech on the risks of this new technology. He described cryptocurrency as “the new front line for scams” and “an opportunity for the outright criminal.”
While it may seem odd that Britain is happily rolling out the red carpet in the face of these warnings, incorporating cryptocurrency into the state’s regulatory framework doesn’t mean scammers get a free ride. . The reverse is more likely: while the proposed policy allows stablecoin issuers to operate legally in Britain, they must comply with new regulatory guidelines and oversight to do so.
Other countries are also beginning to walk this regulatory tightrope, seeking to bring legitimate cryptocurrency activity into the fold of the legal system while tackling fraud, scams, and other unsavory corners. of the cryptosphere. The executive order issued by the White House Biden last month sums up this dilemma.
The executive order directed federal agencies to adopt an approach to cryptocurrency that protects Americans from “illicit financial risks, including money laundering, cybercrime, and ransomware,” and also ensures that America “remains at the forefront of…development and design of digital assets and the technology that underpins new forms of payments and capital flows”. Ignoring calls from leading Democrats such as Elizabeth Warren that the feds should clamp down on the crypto industry, the Biden administration has framed its approach as seeking instead to encourage “responsible innovation.”
A streak of pragmatism is discernible through each of the different approaches taken by Ukraine, Britain and the United States. Ukraine is obviously in a battle for its own survival and will rightly cling to any tools that might come in handy. The United Kingdom and the United States of course have their own interests as the main financial centers of the world economy. These governments would likely prefer not to see decentralized cryptocurrencies proliferate at all, given the possible long-term risk to their respective monetary systems. But they seem to have concluded that trying to adapt to the crypto industry is the lesser evil than allowing it to thrive overseas.
This fascinating dynamic of centralized states taking into account decentralized technologies and economies is further complicated by the fact that central banks in most countries, including New Zealand, are actively exploring central bank digital currencies. They are essentially cryptocurrency adaptations of a country’s fiat currency (like the New Zealand dollar) and can change the way we think about money and how it works.
The way cryptography is used is changing, as Ukraine shows, and the underlying technology also continues to evolve and develop. These shifting sands pose tricky regulatory questions, but it is encouraging to see some countries beginning to chart a way forward.
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Quest For Cryptocurrency Legitimacy | Writing – Tech Tribune France
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