In another moment of noted reaction in the world of the crypto-craze, the advocates of cryptocurrency have expressed fear upon the announcement of possible crypto regulation by Angela Merkel, German Chancellor and her counterpart, Emmanuel Macron, President of France.
The pair met January 19 2018, to discuss what many governments are coming to view as an unavoidably thorny issue. The decentralized nature of Bitcoin and other cryptocurrencies, especially when coupled with the inherent volatility of market sentiment and potentially delusional public enthusiasm for crypto, has finally made it to the agenda of world leaders.
Billed officially as “a risk for financial stability” in the meeting’s rationale, the EU leaders’ stance comes hot on the heels of recent South Korean government announcements expressing a similar sentiment. In the week of the South Korean discourse, Bitcoin’s market shed some $83 billion in value before the week was over.
While South Korea has since been at pains to distance itself from any autocratic overtones of that discussion, and a glance at the business world will show that millions are still being pumped into setting up crypto exchanges in South Korea, the landscape remains what it is.
Clearly, world governments are being forced to at least note, if not regulate, cryptocurrency implications for the wider national economy.
Cryptocurrency investors are now braced for further losses as it is broadly accepted that any mooted European regulation will not only shave the shine off crypto, but also spur regulatory emulations across the globe.
Bitcoin was trading at around $11,22 on January 21, 2018. It’s a sobering thought that it was valued at $0.06 in 2010. Yves Mersch, a European Central Bank Executive Board member, prompted alarm in December 2017 by labeling Bitcoin a real threat to finance models and overall financial stability.
“There are now banks which hold positions in bitcoin. It is a matter for the supervisors to judge how big the risks are. What concerns me most, is when financial market infrastructures such as stock exchanges enter this business. That poses a major threat to financial stability.”- Yves Mersch
Investors are fearful that all of the doomsayers might well prove to be right in their insistence that Bitcoin is a bubble waiting to pop. Any rumblings from the corridors of power send waves of fear across the globe, as Bitcoin’s value could be harmed or even shattered by this kind of intervention.
At its heart, Bitcoin is not backed by any legal or otherwise regulatory support. The decentralized nature of cryptocurrencies is to many both the delight it offers and the curse it suffers, and the latter is what is starting to prod regulators into action.
One of Harvard University’s Economics professors, Kenneth Rogoff, said in October 2017 that the value of Bitcoin was largely a product of its anonymity. Regulation of the crypto could forever remove that value and strip the whole concept of its worth.
Rogoff is quoted as saying “Were Bitcoin stripped of its near-anonymity, it would be hard to justify its current price. Perhaps Bitcoin speculators are betting that there will always be a consortium of rogue states allowing anonymous Bitcoin usage, or even state actors such as North Korea that will exploit it.”
On the flip side, entrepreneur and financial expert Andreas Antonopoulos has openly stated that any attempt at regulating Bitcoin or any cryptocurrency would be an impossible task, saying: “The question is not whether Bitcoin should be regulated, but whether it can be regulated. The reality is ‘No’. The rest is nostalgia.”
Others have echoed this sentiment, although from different perspectives. Joachim Wuermeling, a member of the board of directors of the German Bundesbank, has also suggested that isolated legislation aimed at regulating Bitcoin will be futile unless it legislation is enacted on a global scale.
Others, among them Christopher Keshian, co-founder and managing partner of APEX Token Fund, welcomed the promise of regulation. Keshian advocates regulation as the tincture needed to cure negative perceptions of cryptocurrencies while curbing the fraudulent activity.
He said: “Frankly, we encourage a regulatory crackdown, in particular increased scrutiny on irresponsible and fraudulent ICOs and greater focus on cases against unregistered persons acting as agents, brokers, and investment professionals in the cryptocurrency space.”
In December 2017, the UK Treasury was upping its efforts to curtail money laundering through cryptocurrencies, one of the dark options made available by a decentralized and anonymous currency. It seems that an awareness of the potential ramifications of digital currencies for government is already pronounced, while the implications are now filtering down to the talking heads of state.
Merkel and Macron’s proposals are to be presented to the G20 summit scheduled for November 2018.
Feature image by Richard