Numerous countries are currently hosting a hot debate: should cryptocurrencies be considered as securities? Or should they fall in a wholly different category? Do they have financial validity? How to effectively (and fairly) regulate them?
The category in which these assets fall will dictate how (or what) they are considered, paving the way for a proper regulatory framework. But since they are relative newcomers in the financial landscape, coming up with answers is not always a simple task.
Cryptocurrencies “Fail Basic Financial Tests”
The Bank of England (BOE,) through Huw van Steenis, has taken part in the debate. Mr. van Steenis currently acts as the senior adviser to BOE’s Governor Mark Carney. This week, he told a widely recognized financial news site that cryptocurrencies mostly fail the most fundamental and basic financial tests.
The adviser, an expert in financial matters, was emphatic in his opinion when asked whether these assets had the potential in them to turn into a threat to economic stability. “I’m not so worried about cryptocurrencies. They fail the basic tests of financial services. They’re not a great unit of exchange, they don’t hold value, and they’re slower,” were his exact words, letting the world know some of the most notorious shortcomings of digital assets.
Mr. van Steenis has had an extensive working experience in financial institutions and organizations, having provided his knowledge and services at Morgan Stanley and Schroders, among others. At the moment, he is heading a piece regarding the future of finance.
Speaking about the specific case of the Bank of England, the institution for which he serves as a special advisor, van Steenis observes that the process for registering new entrants into the banking systems represents a significant obstacle to overcome, especially when these entries are technology companies.
This, along with the fact that, according to van Steenis, conventional banks are not quick to adjust to new technologies and adopt them, is a problem. “What I love when meeting with fintechs is their obsession with customers. The challenge is will they get customers before the traditional banks can innovate,” he stated.
The Quest for the Right Regulatory Framework
The United Kingdom has taken its time to develop a relevant regulatory framework when it comes to cryptocurrencies. Last year, in March, the country’s Treasury delegated the legal task of coming up with proper regulations to the Cryptoassets Taskforce, which encompasses the Financial Conduct Authority and the BOE.
The organization, according to UK’s Finance Minister Philip Hammond, will have a huge responsibility at its hands: developing industry standards for enabling and fostering collaborations between fintech and banks and supporting innovation in the field.
In the month of October, the Cryptoassets Taskforce published a detailed report on how to handle cryptocurrencies and related assets. It proposed a system in which they are defined into three types: exchange tokens, security tokens,
By Andres Chavez