Cryptocurrencies’ persistent growth and ever more mainstream adoption are keeping international monetary authorities on their toes.
In fresh comments this week, Stefan Ingves, the governor of Riksbank — Sweden’s central bank — said that digital assets’ rising popularity raises the stakes for regulators, central bankers and lawmakers worldwide:
“When something gets big enough, things like consumer interests and money laundering come into play. So there’s good reason to believe that [regulation] will happen.”
Devising regulatory frameworks for an asset that was initially designed to circumvent the very architecture and rules of traditional finance is no easy task. In the United States, Federal Reserve Vice Chairman of Supervision Randal Quarles raised his concerns that current regulatory provisions for crypto are inadequate, indicating that the Fed is in the process of looking into how best to tackle the issue. Quarles’ remarks were made amid a week of wild volatility in the cryptocurrency markets, with Bitcoin (BTC) temporarily shedding a steep $15,000 in value in one fell swoop.
The European Union has, meanwhile, pledged to “put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector” by 2024 — one that will, equally, tackle the risks involved in these technologies’ mainstream uptake.
In Sweden, Åsa Lindhagen, the minister for financial markets, has said that the government is already engaged in strengthening regulatory standards for cryptocurrency exchanges. Various crypto regulatory approaches remain, she said, a “work in progress at the international level.”
Ingves has himself remarked that cryptocurrency regulations “will probably come at different times in different areas.” Yet when it comes to the “very important issue” of money laundering, Lindhagen pointed to the need for cross-border coordination between regulators worldwide.
As regulators mull how to approach the phenomenon of decentralized crypto assets, the Swedish central bank is meanwhile making headway with its development of a central bank digital currency, the e-krona. Its proof-of-concept uses Corda, a distributed ledger technology solution from R3. Ingves has previously indicated the currency could be operational within five years.