Regulating the cryptocurrency industry as a path to mainstream adoption

Regulating the cryptocurrency industry as a path to mainstream adoption

Electroneum became the first cryptocurrency in the space to comply with KYC/AML regulations in 2018

In January 2020, the new pan-European legislation regulating cryptocurrency went into effect. That means Europe has decided to gradually tighten the rules for the crypto space by introducing stricter requirements for companies operating in the industry.

Although the amendments were to be transposed into national law by 10 January to be precise, EU member-states are at different stages of the regulatory implementation. The approach to complying with the Pan-European directive has also varied between countries. Some governments opted to expand their regulatory frameworks beyond what Brussels was requiring but the fact is the regulations have gone into effect.

Many cryptocurrency projects will undoubtedly scramble to fulfill the regulatory requirements, some will reject government oversight as they advocate total decentralisation and privacy of users, others will embrace regulations as they see view them as the clear path to mainstream crypto adoption. UK-based Electroneum is far ahead of the pack because they became the first cryptocurrency in the world to become fully KYC/AML compliant in Q4 2018.

The 2020 directive is simply an updated version of the Fifth Anti-Money Laundering Directive, which entered into force in July 2018. European Union member states are obliged to integrate it into their legislation by January 20, 2020.

One of the key goals of this regulation is to extend the scope of anti-money laundering laws to cover crypto exchange platforms and wallet providers. The directive also contains provisions regarding know your customer (KYC) rules and procedures.

Story image

In a 103-page study, the Directorate-General for Internal Policies of the European Parliament says “more and more regulators are worrying about criminals who are increasingly using cryptocurrencies for illegitimate activities like money laundering, terrorist financing and tax evasion.”

The report acknowledges that the misuse of cryptocurrencies in illegal activities is insignificant when compared to fiat currency. That amount of crypto reported to be wrongly used is far less than 1% of the total amount of fiat currency being used for the same purposes. The United Nations Office on Drugs and Crime reported that in one year US$800 billion to US$2 trillion is laundered globally.

Two key arguments for crypto regulation

Regulators around the world have two key arguments when talking about imposing rules on cryptocurrency, which are consumer protection and financial stability.

“We need to ensure innovation works in the interest of consumers,” Christopher Woolard, a senior regulator at the UK’s Financial Conduct Authority (FCA) said recently. His comments came on the heels of Facebook’s plans to launch Libra, which has caused havoc among financial authorities globally. “And we need to consider the wider impact on the market integrity and stability,” Woolard added.

The FCA has warned Facebook and other cryptocurrency issuers against attempting to cut corners and disavowing calls for regulation. Again, Electroneum early on saw the benefit of complying with regulations and it is push for global adoption of ETN, is working in many countries with governments to find ways to appease them by demonstrating a will to follow all financial rules.

The co-inventor of blockchain, Dr Scott Stornetta, said many cryptocurrency projects reject the notion of becoming regulatory compliant.

He said he “admires companies that like Electroneum are flexible about their means of getting from here to there. That includes finding ways to co-exist with the regulatory environment rather than attempt to subvert it.”

In the words of regulators and crypto leaders

US Financial Crimes Enforcement Network Director Kenneth Blanco in October 2019 warned cryptocurrency startups have to comply with anti-money laundering laws (AML) and the Bank Secrecy Act (BSA) or else face the consequences.

“What we tell everybody is if you’re going to innovate, you better make sure that you’re complying with your regulations prior to executing that innovation or prior to going to market,” Blanco said. “You have to make sure you comply with the law first and then you can execute. You must comply and we as a regulator … we will make sure that you do and you are going to have a hard time if you do not.”

Ripple Global Head of Government Relations Michelle Bond said “we believe it is the responsibility of industry leaders to work together to help policy makers as they review the regulatory landscape and shape the regulatory landscape and shape conditions that will enable this technological innovation to thrive.”

Story image

Facebook’s Mark Zuckerberg has been facing regulatory issues and speaking with regulators around the world who are deeply concerned with the impact his cryptocurrency project Libra may have on global financial stability. He feels that lawmakers in the US are stifling innovation and putting the country’s financial leadership at risk.

“While we debate these issues, the rest of the world isn’t waiting,” he told US lawmakers who are opposed to the idea of a corporate-led currency that would undermine the governments control over monetary policy.
“China is moving quickly to launch similar ideas in the coming months,” he warned. “If the United States does not innovate, our financial leadership is not guaranteed.”

Electroneum CEO Richard Ells recognises that the biggest hurdle the cryptocurrency space is facing is regulation, but highlights that it is the only way to spur adoption.

“Proper regulation makes people comfortable to work with the environment. As soon as the cryptocurrency industry adopts regulations, users, merchants, service providers and corporations fear of crypto will decrease dramatically,” he said.

Ells adds that Electroneum has prioritised regulatory compliance and this has unlocked many amazing opportunities which have been instrumental in making the ETN Everywhere a true reality as merchants and service providers are increasingly showing interest in accepting their crypto as payment.

This is a massive step towards making the AnyTask freelancer platform and the TaskSchool free eLearning resources a huge success. The beta launch of the former is scheduled to happen later this year and the full launch is expected to happen in Q1 2020.

So as financial watchdogs around the world move towards regulating the cryptocurrency space, Electroneum is already positioned to vastly increase its already massive 3.3 registered user base, which makes this crypto a top four by number of users preceded only by Bitcoin, Bitcoin Cash and Bitcoin Gold.

Part 1: Crypto can help empower the billions of unbanked and living in poverty

Part 2: The financially excluded can only dream of the things we take for granted

Part 3: Can Electroneum make a difference in the lives of the unbanked or poor?

Part 4:  The evolution of payments

Part 5: Milton Friedman spoke of Internet currencies long before Bitcoin

Part 6: Building a new cashless financial ecosystem giving billions access to the global digital economy

Part 7: The evolution of cryptocurrency and regulations since the inception of Bitcoin

 

 

 

BLOG
About Electroneum

Having attracted nearly 4 million registered users in just under three years, award-winning Electroneum is making great strides toward becoming a top 10 crypto in usability as just over 1,900 merchants, and service providers in over 170 countries around the world accept ETN as payment. More than 2.6 million app downloads have taken place. Approximately 175,000 mobile top-ups and more than 296,000 app-to-app transfers have taken place with ETN by our Electroneum users. AnyTask is Electroneum's global freelance platform and has seen over 444,600 people register to the website as either buyers or sellers, with over 6,050 tasks listed. AnyTask does not charge freelancers any fees or commissions, and unlike all other leading freelance platforms that take up two weeks to get freelancers paid, it takes minutes to get paid after the buyer approves a task. Electroneum is one of the world's first fully KYC/AML compliant cryptocurrency. It is also one of the few blockchain networks that are insusceptible to a 51% attack. It is the greenest cryptocurrency in existence and the only one to have launched its very own affordable US$40 smartphone designed for the needs of people in developing regions. It is currently the only cryptocurrency that has a direct collaborative agreement with two mobile network operators. It is presently the only crypto that works with NGOs as their trusted blockchain transaction validators. And the only cryptocurrency to allow for an in-depth examination for publication, and verification for public knowledge. Check out ETN Everywhere and ETN Donate.