Cryptocurrency regulation has become more of a concern for governments around the world in 2017, as digital currencies have gained prominence and market capitalization at astonishing rates.
In early September, the Chinese government made two back-to-back announcements that rocked the wider cryptocurrency markets. First, the regulators of China indicated that ICOs, the popular initial coin offering craze which has spread around the globe as a new means of fundraising, would be completely banned. Then, China followed that announcement with another, indicating that bitcoin exchanges across the country would be suspended. (See more: How Might China’s Ban Affect Bitcoin?)
These news stories have significant implications for the wider cryptocurrency space, both in terms of the relative size of China's market and for broader reasons, too. Now, Coin Telegraph reports that other governments are apparently taking a cue from China and are considering whether stricter regulation of the cryptocurrency and ICO spaces may be beneficial.
Controlling But Not Banning
According to the report, countries like Japan, Singapore, and the U.S. are reevaluating how to officially regulate ICOs. Unlike China, hwoever, the report suggests that these countries' authorities are looking for ways to control ICO endeavors without completely banning them.
The issue, then, is how to do this effectively. Cryptocurrencies are, by nature, alternative assets, meaning that regulators have long had a difficult time classifying them under preexisting sets of policies.
Different Strategies Emerge
Japan, for its part, is preparing to introduce rigorous regulatory oversight on cryptocurrency exchanges in October. The Financial Services Agency (FSA) is considering how to manage ICOs in order to restrict the possibilities of money laundering and fraud without also stifling legitimate business.
On the other hand, the Monetary Authority of Singapore released a memo in August suggesting it will regulate the sale of cryptocurrencies that relate to products which are under current securities regulation. The memo states that "ICOs are vulnerable to money laundering and terrorist financing...risks due to the anonymous nature of the transactions, and the ease with which large sums of monies may be raised in a short period of time."
The U.S. Securities and Exchange Commission has cautioned investors in digital tokens to be skeptical and vigilant against potential schemes that could be used maliciously. (See more: SEC Suspends Trading for First Bitcoin Capital Shares.)
While these and other governments have largely decided that an outright ban of cryptocurrencies would likely yield few benefits, and that completely eliminating cryptocurrency transactions within a country is likely impossible, they are now looking for ways to exercise some control. Finding the correct balance may be a challenge, however, although the area of interest seems to be at the intersection of cryptocurrencies and fiat currencies, digital money exchanges.