By David Henderson, Founder of Sweetbridge
As cryptocurrencies soar in value and are increasingly adopted for mainstream use, blockchain regulation has become a pressing issue for governments worldwide. While China has recently cracked down on ICOs and cryptocurrency exchanges, some nations in the European Economic Area (EEA) have actually become the world’s most progressive in embracing this rapidly-developing technology. Still, the lack of uniform regulation across the board will prove to be a roadblock as blockchain companies seek to develop further.
Smaller territories, with relatively higher independence and control over their legislation, are especially well placed to effect rapid change to legislation in encouraging the establishment of blockchain and crypto companies in their jurisdiction. The increased agility (for example, cantonal law applies in Switzerland) also allows amending this legislation to introduce legislation, disclosure and transparency as and when this is agreed on.
Switzerland has become one of the main European hubs for cryptocurrency and blockchain development. This has been spearheaded by the Crypto Valley Association, a Swiss non-profit blockchain and cryptographic technology ecosystem, which has started to develop an ICO Code of Conduct in light of China’s recent ban of token crowdsales. It hopes to publish a set of guidelines for companies considering an ICO to follow in order to create clear, flexible rules around its legality. Switzerland has remained a welcoming place for blockchain and digital currency startups, with the city of Zug where many projects are founded adopting the nickname “Crypto Valley.”
In addition, Estonia has expressed interest in creating a national cryptocurrency that would be used within its borders, both as currency and as a national identity. Should this come to fruition, it would be rank among one of the largest milestones to date for cryptocurrency.
Members of Finland’s central bank authored a paper outlining the remarkable properties of bitcoin. They concluded that unlike centralized industries, bitcoin is a decentralized monopoly that is run by a protocol. While bitcoin may have the largest amount of market share for digital currencies, its monopolistic position does not act like a traditional monopoly in economic terms. These economists argue that there is in fact no need for governments to regulate bitcoin due to its decentralized infrastructure. This is a novel stance to take in comparison to the FCB’s European counterparts, which have expressed the need to develop government policies surrounding digital currencies.
Some countries may feel that the industry may be too nascent for governments to adopt or regulate. However, blockchain is more mainstream that it might appear: Deloitte has reported that more than 90 central banks are currently engaged in discussions about blockchain and that 80% of those banks will initiate distributed ledger technology projects by the end of 2017.
Even the International Monetary Fund has taken an encouraging tone about the potential of blockchain and cryptocurrencies. The fact that many banking institutions have started to successfully adopt blockchain technology also means that regulation cannot be far behind in the jurisdictions they serve.
The EEA’s willingness to consider blockchain regulation promises an optimistic future for startups looking to do business there. However, developing consensus around a technology that is still not widely understood will surely prove difficult. These nations will also need to adopt policies that feature sufficient flexibility for long-term sustainability in a rapidly-changing industry. Despite these challenges, the countries that are able to craft such policies stand to reap significant economic rewards.