EU and US governments and legislators have issued a number of crypto-related communications over the past few days and weeks. They are in line with the war in Ukraine and the horrors it has brought (and sometimes react to it). In the most dire situations, the benefits of cryptography can hardly be demonstrated in any more powerful way. For people in unstable countries, this is not news. They have long known that it is beneficial to separate the value of a currency from the predicament of political events on earth. But because of the benefits, there are risks. And the war in Ukraine highlighted them as well.
Managing these risks without reducing innovation is a challenge for the future. The rule of law must play a role in this effort. The guiding principle should be “decentralized but regulated”. EU, US and other MPs are beginning to understand this. They are now trying to get the right balance. This process is time consuming and inevitably repeated. It also requires meaningful international collaboration. A high level of unity across the jurisdiction is a necessary factor for the entire new system to emerge over time. Supporting this process is a very valuable endeavor for everyone involved.
Ukrainian refugees are looking for shelters in neighboring countries and elsewhere. Some of them managed to bring cash – a bunch of Ukrainian hryvnia. Still, their desire to turn it into something to eat disappeared as soon as they tried. With the exception of dire exchange rates, few institutions are willing to exchange Ukrainian hryvnia for euros, US dollars, or other tradable currencies. After all, their plight is the same as the plight of those who couldn’t bring money in the first place. Their savings were trapped in a crashed bank in Ukraine. Indeed, neither these banks nor the Central Bank of Ukraine nor the Government of Ukraine can blame the depletion of national savings. But still, the money is gone. For everyone affected, it’s not reassuring that holding a cryptographically filled electronic wallet’s private key would have made all the difference. The Ukrainian government learned the lesson early and acted accordingly. Through cryptocurrency donations, we raise and raise more money that can be converted into food, commodities, or other useful things. These donations to Ukraine could have been made in the traditional way through the explanation of foreign institutions, but such processing would have been more costly and more time consuming. .. It would also have required significant trust by foreign organizations and all those involved in their abilities and loyalty-it will not be easy during war and distress.
As the war over Ukraine intensifies, EU and US governments and legislators have been very active in continuing communication and dialogue on the most relevant questions about crypto assets and technology. On March 14, the European Parliament’s Committee on Economic and Monetary Affairs issued a green light to MiCA. Draft EU regulations on crypto assets – Further negotiation is needed for more details. As a result, the EU is in the process of enforcing comprehensive regulations on assets created by cryptography.In the same context, the committee Expressed an opinion Controversial questions about energy consumption for specific verification mechanisms of crypto trading.Last week, US President Joe Biden Presidential directive Of the basic nature of the most relevant aspects of cryptography.Recently, Senator Warren and other US Senators Draft bill Target enforcement on people who use cryptography to avoid war-related sanctions. Scrutinizing any of these documents and communications is another opportunity. For now, I would like to emphasize the important role these new laws and regulations play. These are crafted laws and regulations issued with input from relevant stakeholders (industry players, regulatory agencies, law enforcement agencies, and the general public as a whole) to protect the blessings of cryptographic technology. It’s a powerful example in that it’s the only and most relevant tool in the world. Risks that may be posed in other cases. Simply put:
- Consumer protection: The crypto market has certain financial risks, but applying the same criteria as those used for other asset classes can be a useful starting point. The challenge is to draw lines in similar ways in different countries. This makes it clear which crypto assets can be issued and traded and under what conditions they can be traded. Estimating regulations in this area at the international level will be a particularly difficult task in the future.
- Financial stability: The arrival of Stablecoin was a major concern, especially for European legislators. Do they have the power to undermine the financial stability of the monetary system? Therefore, creating a digital version of the official currency (the so-called Central Bank Digital Currency) as a response has been at the top of the European agenda for some time. Since President Biden’s presidential directive, this topic has the potential to increase pace in the United States as well.
- Illegal activity: Another point where law enforcement at the international level is an important driving force. Having similar directions in both the EU and the US is already an important first step in this direction. Good international cooperation and, if necessary, diplomatic or financial encouragement are important. Strict regulation, oversight and enforcement in certain cases (including the areas of international arbitrage and offshore investment) will be required, but care must be taken to promote the benefits of the system.
- Financial inclusion: Providing easy access to safe and affordable financial services for all members of society is a major challenge. Current service delivery systems have some obvious drawbacks in this regard. Cryptographic-based decentralized finance has many opportunities and promises. It is not yet clear whether to simply replace existing access barriers with new access barriers such as digital literacy. Supporting the potential of blockchain to reduce costs and make it directly and easily accessible will be one of the more difficult tasks for government and industry members in the future.
- Climate impact: Undoubtedly, the method of verifying the block of Bitcoin transactions (“Proof of Work”) is very energy consuming. Whether it should lead to a ban like the one originally proposed by EU Parliament is another matter. Most new blockchains no longer use the energy-intensive proof of work. Enterprises are increasingly using energy-neutral methods to validate transactions. This seems to be a classic example of technological advances overcoming problems before regulations become effective.
