Bitcoin, cryptocurrencies and regulation

 
Investors are being drawn into digital currency trading by rocketing prices and the potential transformation to payments technology, but regulators are concerned about criminal activity and financial risks.
— Derek Parker

Regulating cryptocurrencies

In a previous post, we published "An adviser's guide to cryptocurrencies" and supplemented that with a LinkedIn post focusing more on the insurance implications. 

Consumers, advisers and compliance people are still showing enormous interest in cryptocurrencies (as an alternative or speculative investment) but the future regulation we anticipated now seems to be imminent.

For accessible views on this topic we'd direct your attention to "Should governments control bitcoin" and "What to Expect When CFTC, SEC Chiefs Talk Crypto With Congress". While the Australian position has yet to be clarified, in the US at least, there seems to be a rapidly emerging realisation that 

Overall, a rationalized federal framework may be more effective and efficient in ensuring the integrity of the underlying market
— Jay Clayton, Securities and Exchange Commission (SEC)

 

Disruption, digitisation and disjointed regulation

We're interested in cryptocurrencies, but we think it's important that compliance staff don't get so distracted by bitcoin volatility that they lose sight of the broader issues of disruption, digitalisation and disjointed regulation. We'd recommend anyone interested in remaining informed and relevant read Thomson Reuters' Special Report on the state of Regulatory Reform. 

Compliance officers and regulatory professionals everywhere are bracing to address these changes, and keep up with the unbridled development of digital technology as it affects their operations.
— Thomson Reuters' Regulatory Intelligence Team 2018
 
 

A retrospective view of required regulation

Cryptos are here to stay. Who and what will regulate these cryptos will depend largely upon how they come to be defined.
— Ed Howden, Emory International Law Review

For those of you who are historically minded, we'd recommend Ed Howden's 2015 article "The Crypto-Currency Conundrum: Regulating an Uncertain Future".

Don't let the title put you off (it was originally published in the Emory International Law Review) because it's a thorough, accessible and well-researched piece about Bitcoin and the 'need' for cryptocurrencies.

 

Tempering enthusiasm

The last word on cryptocurrencies should go, appropriately enough, to someone with more than a passing interest in the topic.

Reminder: cryptocurrencies are still a new and hyper-volatile asset class, and could drop to near-zero at any time.
Don’t put in more money than you can afford to lose. If you’re trying to figure out where to store your life savings, traditional assets are still your safest bet.
— Ethereum founder, Vitalik Buterin

Whatever his motivation, I think Buterin's warning should be formally acknowledged by anyone advised to invest in these assets. As a mandated disclosure, it would likely do little to dampen the popular interest in cryptocurrencies but it may, at least, prepare investors for the inevitable consequences of speculative investing.