A Little Background
Although it has taken a little while, regulators are now finally beginning to see that the tokens that are native to a Cryptocurrency are indeed fundamental to a Blockchain. The two have to work hand in hand – it is an integral part of the operation.
Cryptocurrency regulation is still very much a new concept and in a lot of cases a blank piece of paper. The majority of Cryptocurrencies and indeed countries do not have regulations in place to help support day to day operations. A couple of countries – including the likes of Malta and Gibraltar – are now becoming the forerunners in regulation and will most likely set the trend for many others to follow. However, without the foresight to develop and instil regulation, there is a much lower chance for investors and governments to take the new digital economy seriously.
It is becoming increasingly important that regulations are produced for the digital economy to fit the role that this new generation actually sits in rather than push a square into a circle hole. Old financial regulations simply do not fit the Cryptocurrency world – this is a matter of fact. Saving time and money in the short term by not developing Cryptocurrency specific regulations is not only short sighted but does nothing for the digital economy in the mid or long term.
Classification Of Tokens
On top of this, there is also the issue of whether a token should be regulated as a utility token or a security token. This argument has been around for a while now. In Singapore, the Swiss Financial Market Supervisory Authority has certainly been leading the way. This organisation has taken it one step further and set out three categories of token: payment; utility and asset. The first category is for the likes of Bitcoin and Litecoin etc with the second class dedicated to Ethereum and all of the ERC-20 tokens. The final asset tokens are those which are governed by the country’s securities jurisdiction. Alternatively in Malta and Gibraltar, a more open stance has been taken with regulations around Cryptocurrencies, their tokens and ICOs. The USA and its Securities Exchange Commission has been well known for its opinion that all tokens fall under the securities category. It was fully expected that all of the tokens that have been sold so far should well have been done so under the security regulations. However, recently the Securities Exchange Commission has taken a softer approach and it looks as if they are now wavering more towards the utility side.
In The Future
There is still a long way to go with the regulation and legality of the Cryptocurrency industry. There needs to be a lot more of an understanding of the nature and complexities of the industry in the first place. However, we are definitely moving in the right direction with more and more countries beginning to grow in knowledge and confidence. With the regulation comes the much need security of the industry and the development of best practice which will hopefully start to alleviate the ridiculous amount of scamming and fraudulent activities that are taking place at the moment. Finally the penny is hopefully dropping!