Cryptocoins are the only type of currency that is not backed up by any government or central bank, and this makes them both convenient and exciting, simultaneously effortless to use and actually challenging to trade. Cryptos are still poorly regulated, but is this a good or a bad thing?
Cryptocurrencies are described as a “decentralized consensus network“, meaning that all participants in the blockchain need to validate the crypto transaction and thus form a consensus to approve it. With cryptocurrencies slowly outgrowing the hype, it’s becoming obvious that this new way of paying for goods and services could pose a challenge to fiat money.
Nonetheless, cryptocurrencies keep forking into rivaling chains, thus causing further imbalance in an already imbalanced system. Not only are businesses failing to find ways of attributing a more constant, tangible value to cryptos, but they are also at risk of entering the digital economy in an unfortunate moment, marked by the collapse of public trust. Crypto is still largely unstable for the business world.
Though hailed as the cryptos’ best trait, the lack of official regulations actually contributes to their high degree of volatility and uncertainty concerning their future development.
So should we regulate cryptocurrencies and if yes - how? Apparently, it depends on which country you ask.
While countries like South Korea, Russia, and China are cracking down on crypto, others, like Lithuania or Switzerland are moving in a more favorable direction for the blockchain community and the entire digital economy altogether.
It’s clear that the European Union will move towards adoption to certain cryptocurrency rules. Moreover, the EU should be a pioneer of smart and flexible regulation of crypto-economy setting optimal rules equal for everyone. Smart regulation will build trust, enable innovation and faster economic growth.
There‘s another progressive European-wide initiative, recently initiated by David Siegel, the CEO of Pillar projects. The international working group is seeking to define an open-source equity token standard. The group involves a number of companies that are crafting a standard for equity tokens, as well as the Chamber of Digital Commerce, and other blockchain groups in the US and Europe. HODL Finance has also joined the group.
It is possible to apply AML and securities law, clarify taxation and accounting aspects. The problem is recognized, and the solution will be here very soon.
Vytautas Senavicius, Ph.D., the legal counselor of HODL finance, the European crypto-backed loans company.