Avoiding regulatory arbitrage for virtual currencies requires careful coordination, global regulators say

27 September 2018 6:30pm
Of the many challenges posed to monetary authorities by virtual currencies based on distributed-ledger technology, the near total absence of geographical borders in cyberspace heightens the risk of regulatory arbitrage and a race to the bottom, central bankers and financial supervisors warned at a conference* today.

In a discussion on cross-border blockchain regulations at a fintech conference in Tokyo, financial services regulators and central bankers discussed their varied approaches to regulating cryptocurrencies and initial coin offerings, or ICOs, highlighting the different and unique concerns that need to be addressed in their regions and economies.

Regulators agree on the need to protect against money laundering and cybersecurity threats. However, when authorities and central bankers have no consensus on whether these blockchain-based coins are money, assets, commodities or something altogether different, most regulatory actions target peripheral areas and not the cryptocurrencies themselves, said the Bank for International Settlement’s Morten L. Bech, who is the head secretariat of the BIS committee on payments and market infrastructures.

*“FinTech 2018 — Into the New Era,” FinTech Summit, Nikkei and Financial Services Agency. Tokyo. Sept. 27, 2018.