Last week in Japan as part of the V20 summit, six digital asset trade associations signed a Memorandum of Understanding to serve as a unified global voice for the crypto industry. This will include engaging with governments and regulators, exchanging information, developing policies and procedures, promoting the industry, and facilitating compliance. The group included the national crypto associations from Australia, Singapore, Japan, South Korea, Hong Kong, and Taiwan.
As our customers know, BitOoda since our establishment has focused on creating a compliance and regulatory foundation that has enabled us to be a leader in the institutionalization of the crypto market place. From that perspective, we welcome this multinational initiative to the extent that it will advance the development of fair and orderly digital asset markets around the world.
However, we could not help but note the absence of representation from the U.S. or U.K., despite the existence of crypto-focused associations in both countries (ADAM and CryptoUK), which naturally made us wonder: are the U.S. and some of its like-minded economic partners being left behind on the international stage?
Of course, we have previously addressed the U.S.’s global competitiveness (see our published White Paper) and we have seen some U.S. firms move overseas in search of more crypto-friendly regulatory regimes. But the list of signatories of the V20 MOU does make us question whether the regulatory environments in the U.S. and the U.K. are causing further shifts in crypto’s global center of gravity.
When we look at the V20 MOU from that perspective, it’s not hard to find examples of the different approaches taken by Eastern and Western financial authorities toward governance of their national crypto markets (China aside). South Korean exchanges are responding to new requirements to safeguard their customers from losses, and Japan amended several of its crypto laws to address similar concerns. On the other side of the world, the U.K.’s Financial Conduct Authority (FCA) is planning an outright ban on crypto-based derivatives for retail customers, emphasizing the lack of a reliable basis for valuation of the underlying assets, the prevalence of market abuse and financial crime, extreme price volatility, and inadequate consumer understanding. We of course recognize that these Asian examples are more about security risks than investment risks, and we don’t necessarily disagree that crypto derivatives are not suitable for retail clients — the point is that the approach taken by the South Korean and Japanese regulators is focused more on shifting risk away from consumers than imposing outright prohibitions on certain activities or assets.
Similarly, the U.S. government’s wait-and-see approach is a contrast to other countries that have gone further to roll up their sleeves and put together a dedicated set of laws and guidelines for digital assets. The SEC’s refusal to approve a Bitcoin ETF, the unwillingness of the U.S. Congress to provide a modern legal foundation for digital asset regulation, and the government’s inability to coordinate across the half dozen federal regulators with a piece of the crypto pie continue to diminish U.S. global competitiveness and attractiveness for market development. We hope our exclusion from the V20 MOU doesn’t indicate that the rest of the world wants to leave the U.S. behind as the industry comes together to forge new global standards, but we fear that might be exactly what’s happening.