Lots of people still have lots of different ideas about the future of crypto and how the industry should progress. But the consensus is growing around a path that highlights responsible regulation of crypto and healthy interaction and cooperation between crypto, governments and the traditional financial system — a meeting and integration of worlds to create a whole new one.
This perspective gained further ground in February when the Financial Action Task Force (FATF), a G-7 organization meant to consider ways to combat money laundering, met for a conference in Paris and released a report with a significant number of declarations and suggestions regarding crypto. Here are the main takeaways from this important document:
1. Recognition of virtual assets
One of the biggest concerns about crypto to date has been about security and its potential use as a way of going under the radar of law enforcement. But in its report, the FATF stresses that virtual assets are to be recognized as assets of real value. Why would an organization built to find ways of combating nefarious financial activity recognize the value of something that many still see as a way to finance illegal activity without oversight?
First, the experts at the FATF must recognize that with just a few exceptions, the crypto community is made up of anything but cyber criminals. This acknowledgment by an important organization like the FATF is a signal to governments and the entire world that crypto isn’t to be sidelined. Second, the FATF clearly sees that belief in the value of virtual assets has crossed a threshold of no return. Rather than pretending that it doesn’t exist, it’s time for everyone to recognize that many users consider virtual assets to have real-world value.
This grant of legitimacy is a clear indicator that crypto has come a long way, and is here to stay. Even if bodies like the FATF wanted to ignore crypto, they can’t do so any longer.
2. Need for regulation
That being said, the FATF is clear that crypto should not be given free reign or continue with no oversight or sense of accountability. Instead, the report highlights the need for regulation of the crypto industry, noting that this is indeed the current trend and the most responsible way forward.
We at eToroX are of the same mind, and that’s why we are regulated out of Gibraltar. Smart regulation prevents nefarious activity in the crypto sphere while protecting consumers, businesses and regulators alike from uncertainty. Regulation can also facilitate the growth of crypto by increasing confidence and trust among potential users. It can create a framework for crypto that serves as an easy stepping stone from traditional finance to crypto, paving the way for responsible development in the future.
3. Placing responsibility on national governments
The FATF doesn’t stop at highlighting the need for regulation, or the need to combat money laundering and the funding of terror organizations — it specifically lays responsibility at the feet of national governments. While many believe in blockchain as a potential replacement for government oversight, that day is not yet here, if it comes at all.
Instead, the report states that exchanges and wallets should be required to hold a license in their home countries and, in some cases, in the territories where they offer services. It even goes so far as to say that sanctions should be placed on companies that fail to meet this requirement. Government has an important role to play in the crypto sphere. In many ways, government oversight does need to be broad and flexible, but the framework it can offer will help create a healthy ecosystem for all.
While the FATF is essentially advocating for governments to embrace crypto, crypto ventures should embrace regulation. In order to achieve oversight that still allows for innovation and growth, crypto businesses should be working closely with governments to forge the financial world of tomorrow, and as the FATF shows, the responsible way to do that is together.