Some cryptocurrency products, such as Stablecoin and Initial Coin Offerings, may attempt to mimic or offer variations of products or activities in the financial sector, justifying their designation as financial products or activities. Identifying what may and may not justify such a designation is a better starting point for regulation.
Perhaps more importantly Special regulatory approach It is related to the misleading of such crypto assets. The distinguishing feature of the blockchain and cryptographic arrangements should be thought of as just a different form of “back office” for recording ownership and transactions.
Important considerations
Just as regulators apply different operational risk regulations to product providers, one has paper-based ledgers and processes, and the other is computer-based, so cryptocurrencies must be used.
An important consideration of regulatory methods, rather than back office arrangements, is the economic function performed by the product or service.
Further problems arise from a “system-focused” approach to regulation (similar to the proposed CASSPR regulation) compared to a “functional approach”. The “institutional” approach is relatively straightforward, but there are two main risks.
One is that the same features provided by different institutions are regulated in different ways, creating a non-uniform competition.
Second, other institutions can emerge outside the regulated sector to provide the same functionality, such as the growth of “shadow banks” engaged in similar (but slightly different) credit-creating activities as regulated banks. is. (In this case, the provider of such a shadow (or “ghost”) activity may be referred to as “CASSPR”, even if it is not a friendly ghost!)
Cryptography is not a financial asset, although it is touted by its promoter as a future form of private funding to challenge fiat currencies.
There is no doubt that crypto eco-spaces need some form of regulation to protect inadequate and vulnerable individuals (and institutions) from unjustified involvement and unprotected risk-taking.
The potential to profit (or lose) from gambling in crypto positions does not reflect skill or good knowledge unless you have the skills to predict “crowd madness”.
This sector is growing rapidly as it is relatively easy and low cost to enter Ecospace as a creator / supplier of various cryptocurrencies and tokens.
To be successful, you need to attract interest in new products. Therefore, a surge in marketing and advertising praising product strengths and potential benefits.
It is imperative to curb misleading advertising, marketing and advice. This is probably easier if the activity is subject to regulation of financial products and services.
However, designating pure gambling activities as a financial instrument gives them the credibility of being unfit, perhaps promoting unjustified growth and making the regulatory job of dealing with information-deficient consumers much more difficult. ..
