World Government Stances On BlockchainMiCamp Solutions
There is huge potential for digital currencies, also known as cryptocurrencies, to disrupt the payments industry. Digital currencies offer many benefits to the tech-savvy consumer and come with few drawbacks. Blockchain technology offers secure, fast payments at a low cost.
Digital Currency Around The World
As digital currency gains prominence, and as the benefits of blockchain become more well known, world governments are having to draw up policies on how to deal with it. These policies have direct implications for the banking and payments industry because, let’s face it, blockchain isn’t going anywhere. One feature of blockchain in particular, the smart contract, ensures that it will be adopted widely in the business sector.
World governments are reacting to digital currency and blockchain in different ways, leading to a lack of global coordination. For the time being, there is a wide range of opinions on how to react to this disruptive technology.
Japan leads the pack in embracing the technology, having introduced a licensing system for digital-asset exchanges in 2017. And in Singapore, though the deputy prime minister referred to cryptocurrency as an ‘experiment,’ on the whole, the country seems fairly open to the concept. Government officials have stated they see no reason to outright ban blockchain applications or cryptocurrencies.
Only a few years ago, China was a hotbed of cryptocurrency activity, but now the government seems to be cracking down. As of early 2018, China has outlawed digital-asset exchanges as well as Initial Coin Offerings. South Korea seems to be following China’s example, as they tighten their grip on free cryptocurrency exchanges, though they are allowing exchanges to continue operating.
In the United States, the legality of cryptocurrency trading remains hazy. Commodity Futures Trading Commission Chairman J. Christopher Giancarlo and Securities and Exchange Commission Chairman Jay Clayton testified to Congress in February 2018 that lawmakers on Capitol Hill may need to pass legislation that gives federal agencies jurisdiction over digital currencies. The U.S. Securities and Exchange Commission has a lot of sway, but how it plans to react to the emerging technology remains to be seen.
The Canadian government has said that cryptocurrencies should be considered high risk but that Initial Coin Offerings can, for the time being, be treated as securities. This means that the country’s stock exchanges host several crypto-related stocks.
Europe and Africa
The European Commission is still drawing up regulations for digital currencies, though the European Securities and Markets Authority is proposing restrictions on derivatives tied to virtual currencies. Already underway is a regulation that would force people exchanging digital currency for conventional money to not do so anonymously.
Looking at individual countries, Germany and France have taken the most aggressive stance thus far. Germany is cracking down on trading exchanges that operate despite not being authorized to offer brokerage services. France, meanwhile, is pushing for strict business conduct standards for platforms that facilitate the trade of digital currency. In January 2018, the Russian Federation revealed legislation that would outright ban cryptocurrency payments, but the ministry faces opposition from the country’s central bank, so it remains to be seen how effective this legislation will be.
In many African countries, digital currency is in a legal gray area. Digital currencies have been adopted enthusiastically by citizens of Zimbabwe, but the government has warned that the potential exists for “money laundering, terrorism financing, tax evasion and fraud.” Digital currency is not regulated in Nigeria, though this will likely change as the government considers digital currency trading to be a form of online gambling.
Potential For Disruption
Many governments have expressed concern that digital currencies – and the online payments they facilitate – cannot be easily structured, standardized, or traced. However, experts point to the underlying technology, blockchain, as evidence that the perceived problems can be overcome.
Think of the blockchain as a list of transactions. Those transactions are recorded in blocks, and each block forms a chain. And, it’s a distributed digital ledger, meaning no individual owns it, and no individual can make changes to it without the entire network knowing. Because the encrypted database is distributed between several computers, or nodes, a master copy of the database is maintained. Naturally, this makes it very difficult for a bad actor to alter the database. This means that blockchain has security baked right in.
Additionally, this tech can be abstracted away for the end consumer. Consider that most consumers don’t know how 4G works, they just know they love it. Blockchain applications will be much the same. As consumers realize just how fast cryptocurrency transactions are, more consumers will adopt it. Digital currency transactions occur in minutes, and in some cases can be nearly instantaneous. What’s more, these transactions cut out middlemen and thus offer lower transaction fees.
The idea of moving currency into the digital domain using a secure platform that allows lightning fast transactions appeals to many tech-savvy consumers. There is no doubt that the payments industry will have to adapt. Naturally, how quickly this happens, and how it happens, also depends on how world governments respond. At MiCamp Solutions, we’re always working to bring our merchants the latest in payments innovation. Whether it’s blockchain, digital currencies, EMV, or Apple Pay, we have you covered.