The Napster Hours of a Pre-Regulated Crypto World
By JC Collins
The Financial Stability Board (FSB) just released a statement on the eve of the G20 meetings in Argentina. FSB Chair Mark Carney stated that the “FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”
The FSB coordinates financial regulation for the G20 member states and has been intimately involved in re-engineering the architecture of the international monetary framework over the past decade. This re-engineering is for the purpose of shifting the global system from the existing unipolar USD framework to a multilateral framework.
Statements from the FSB are purposeful and strategic. This one is no different. Carney is careful to point out that this is an “initial assessment” and that no risks are posed “at this time”.
These are two important parts of this seemingly simple statement, which leave the door open for further discussion and evaluation. It reminds me of the fading years and months of the music download bonanza that incrementally crumbled under the weight of iTunes and other music purchasing applications.
Official statements were released during that period which were often in contradiction. Some said free music downloading could never be stopped and would forever change the entertainment industry. Others said it needed to be stopped before it destroyed the careers of musicians. Each extreme end of the possibility spectrum were wrong.
New regulations were agreed upon between the music industry and the pioneers of the internet age. Music sharing sites such as Napster began to disappear and you could now purchase one song of an artist, or band, instead of a whole album. A similar scalability potential is emerging in the crypto world with the possibility of micro-payments.
There’s no doubt that massive change is about to hammer the financial services industry and global payments business. Everything is going to change. With this change will come an agreed upon level of regulation which will benefit both sides of the scales.
The statement by the FSB is fantastic, as it reduces the downward pressure that was building on the crypto market because of the expected regulation crackdown. This regulation will come, but in an incremental and non-dramatic fashion. It does no one any good to crash this new and developing market and asset class. Nor does it do that market any good to continue allowing scams to spread and investors to lose their lifesavings to shady ICOs and exchanges.
The FSB and G20 don’t have to take a lot of action on the crypto market right now. The ongoing banning of ICO advertising by Facebook, Google, and Twitter is doing enough to reduce the threat while hammering the market.
There are some cryptos, like XRP from Ripple, which are designed for regulation. Others, like Etheruem, can adjust quickly to any host of regulations. But there are some, because of their design and purpose, which will not do well with regulation. These are the so-called privacy coins.
The initial phase of regulations, when they come, will target ICOs and the privacy coins. The crypto-traditionalists will bemoan this statement, as to them the whole point of blockchain and crypto is privacy and the removal of government from our lives. They cannot understand that some level of regulation is required so that there isn’t complete anarchy.
A few of the top privacy coins may evolve to fit within a regulated world, but most, if not all, will crash as investors jump ship for the top 5 to 10 cryptos which fit within the regulated world.
The top 5 privacy coins which will not survive the first initial phases of regulations are:
Interestingly enough, it was announced this morning that the coins Dash, Monero, and ZCash will be removed from the Coincheck exchange. The statement mentions that the removal is because of a $500 million hack which occurred. But this is in fact more about preparing the way for the regulations which will address risk in the market.
Ripple CEO Brad Garlinghouse recently said that “Bitcoin is the Napster of crypto assets”. Whether that ends up to be true or not will have to be seen. Bitcoin could have a place in the future crypto world, but it will evolve to meet future regulations.
Like with digital music, the crypto markets will not be forced to fit within existing regulations. New regulations will be developed which will capitalize on the best aspects of the crypto assets, and their full potential.
The G20 meetings will be interesting, as will all the milestone dates for Ripple which will be coming throughout the year. This is only the beginning. – JC
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JC Collins can be contacted at email@example.com