Govcoins and crypto to coexist

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GOVERNMENT-backed coins and private cryptocurrencies will coexist for some time, despite increasing regulatory barriers set by the government to counter virtual coins, experts said Thursday at a global webinar session. .

Noting that cryptocurrencies and government digital currencies are two different animals, they will coexist for the time being in part because current cryptocurrencies do not actually solve payment problems.

How many of them (cryptocurrencies) solve the real payment problem? Most of them are speculative and used as a means of storage, said Nelson Chow, chief financial officer of the Fintech Facilitation Office of the Hong Kong Monetary Authority.

Chow said some central bank digital currency, or CBDC, projects, such as the Multiple CBDC Bridge, have the potential to solve decades-old problems for cross-border transactions. Multiple CBDC Bridge is a wholesale CBDC co-creation project between the Hong Kong Monetary Authority, the Bank of Thailand, the People’s Bank of China and the Central Bank of the United Arab Emirates.

In the current regulatory environment, John Kiffmeiste, a former senior financial sector expert at the International Monetary Fund, said the emergence of CBDC projects, numbering nearly 60 according to Kiffmeistes data, is unlikely to make obsolete crypto assets.

The CBDC must operate within the limits of tax regulations, anti-money laundering, KYC (know your customer) and so many other regulations as cryptocurrencies do not work in this environment, has added the economist.

Speakers at the webinar co-hosted by The Investor, a technology medium managed by The Korea Herald, Malaysias The Star and Asia News Network.

But, Kiffmeiste pointed out that as regulatory and legislative walls close in on crypto assets, they will be subject to the same rules as those under which other types of conventional currencies operate. In this case, it levels the playing field. Maybe in this new world, CBDCs and cryptocurrencies coexist, but crypto assets become redundant as a means of payment at least.

Andrew Sheng, one of Asia’s top economists, stressed that authorities should understand the complex contextual contexts that have sparked growing interest in CBDCs and cryptocurrencies.

Noting that the cryptocurrency market has reached US $ 1.2 trillion, half the value of official gold reserves, Sheng said cryptocurrencies have grown outside of public control. That was the big lesson from Covid-19, private cyber currencies will be with us whether you like it or not, Sheng said.

The standoff between regulators and cryptocurrencies is most noticeable in the United States in the realm of stablecoins like USD Coin, a digital equivalent of the US dollar.

The United States’ proposed Stable Act will bring issuers of USD stablecoins within conventional regulatory perimeters.

Kevin Werbach, professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania, said the cryptocurrency industry doesn’t have to be allergic to regulations.

There is always the idea that we have to choose either innovation or regulation. And I think it’s a false dichotomy. For the new technological markets to mature and develop, they must be trusted. They have to get to the point where ordinary people around the world are ready to participate in these large-scale activities, and regulations are an important part of that, Werbach said.

On growing public controls over crypto assets, speakers called for regulations compatible with the emerging cryptocurrency industry. They shared a similar view that cryptocurrency companies and regulators need to work together to bring the industry into the system.

As innovation is always ahead of regulation, it is inevitable that regulators will rely on us when making policy. It’s crucial to reshape their inherited mindset and make them understand the nature and dynamics of cryptocurrency, said Marcus Lim, CEO and co-founder of Zipmex.

They were speaking at a webinar co-hosted by The Investor, a tech medium run by The Korea Herald, Malaysias The Star and Asia News Network titled The rise of Govcoins & Whats next for crypto. Speakers at the July 22 virtual seminar included a panel of experts in the United States, Europe and Asia who are navigating the current situation surrounding the development of central bank digital currencies and the challenges posed by and to cryptocurrencies.

Experts said central bank digital currencies have enormous potential to solve many problems, ranging from decades-old problems involving cross-border transactions to digital transformation.

Kiffmeiste noted that nearly 60 jurisdictions are currently exploring retail CBDCs, with countries like the Bahamas and China leading the way, but they are divided in their motivations for issuing CBDCs. For example, emerging economies view CBDCs as a way to boost financial digitization, while advanced economy views digital currency as part of financial stability and to improve monetary policies. The Korea Herald / Asia News Network

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