The World Economic Forum has published a paper analysing the regulatory approaches to the crypto industry, and also given recommendations to the governments and industry
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The World Economic Forum, assisted by its Digital Currency Governance Consortium, released a paper on crypto asset regulation, recognising the urgent need for regulation and cooperation.
The paper explained the necessity of global coordination for crypto asset regulation so as to avoid ambiguity, regulatory arbitration and inconsistent enforcement.
A host of challenges to crypto asset regulation were recognised by the authors of the paper, and these challenges included the presumption of “same activity, same regulation”. It claimed, “Crypto-assets and their ecosystem do not always fit squarely into the existing activity-based, intermediary-focused approach of regulation, even where crypto-asset activities mirror those of the traditional financial sector.”
The crypto regulation is further complicated by the anonymity of crypto mixers, self-hosted wallets and decentralised exchanges. This combined with the growing interconnectedness of the crypto industry with traditional finance accelerates potential contagion risks. As it is, the traditional finance industry was only recently full of “turmoil.”
The paper classified regulatory frameworks into several categories for facilitating comparison. Those considered were the “Outcome-based regulation”, that is characterised as “same risk, same regulatory outcome,” and the risk-based regulation, in which the activity’s level of risk determines the level of regulatory intervention.