The success of Switzerland in regulating blockchain is disputed and hardly overestimated. Earlier, we presented the reasons for it as well as the barriers the state regulators are facing right now. The information from ‘behind the scenes’ was kindly provided by Cecilia MUELLER CHEN, Member of Crypto Valley Regulatory Policy Working Group at the Blockchain Seoul Summit this September.
Reach Then Teach. Swiss Share Their Experience As It Seems To Be Demanded
Apart from the words about the success of Switzerland, the presentation also contained essential theme concerning the experience sharing. As it has been presented by Cecilia, in August and September, the Philippines SEC have drafted ICO and Exchange regulations and policy measures based upon standards adopted in Switzerland. As a result of collaboration with the representative of Swiss regulatory policy working group, the Philippines SEC has issued draft ICO regulations based upon the ones adopted by FINMA. Another document, concerning the regulations of exchanges, is on its way.
More than that, it also became known in the end of August that Daeje CHIN, president of the Korean Blockchain Association, paid a visit to Crypto Valley and shared his opinion on copying Zug’s approach on regulating ICOs and DLT.
So, the trend is obvious, as we asked Swiss experienced specialists to share their opinions. Is it an attempt to avoid yet another portion of wrong moves, for Korea became widely known as a turmoiled ground when it came to crypto regulations for the last year? Or a weighted move according to the proverb that “wise men study on other’s mistakes”? Daniel HAUDENSCHILD, CEO at Swisscom Blockchain AG from Zürich says it is healthy for regulators to compare notes as long as they understand the consequences of their decisions: “When the topic is global like in blockchain and cryptocurrency, then it is clear that there are grey zones and red zones. The grey zones will be explored by more bullish companies and ventures. The regulators having a common understanding of where the line is between red and grey is good for the global development. This is true even if there are discrepancies. As for the Philippines, the blockchain’s ability to strengthen the rights of the citizens is so important — that’s the reason why the regulators don’t lose time. It is a powerful tool against corruption.”
It would be more “benchmarking” than “copying” — Sophia YOOJIN CHOI, blockchain Influencer and ICO advisor from South Korea, is incredulous about the possible upcoming changes in the country: “If we observe the Korean crypto market for the past few years, there have not been any clear regulatory guidelines presented to the industry. In other words, it’s like the Wild West. Simply put, ‘lawless’. So it’s not going to be a ‘one size fits all’ solution by adopting the same policies such as the ones that Philippines have imposed. Each nation carries with it a different set of inclination and different levels of risk taking tolerance when it comes to finance. There has to be rules and regulations set in place as soon as possible in Korea. It can help the entire industry come one step closer to formulating globally standardized regulatory measures.”
Meanwhile, Olinga TAEED, a Swiss Visiting Professor in Blockchain at Birmingham City University, doesn’t see anything unusual in following the footprints, but agrees that the world won’t see some united approach in the near future: “Historically, regulators work together to establish principles that they all adhere to and then flavour peripheral rules appropriate for their particular territory. We can see in issues that require cross border transactions like financial markets including IPO’s, increasingly tax to limit avoidance and evasion, etc. At present, there is no consensus of approach on ICO’s and allied sectors, and some countries are looking to increase financial flow as they need to find new markets.”
Is There A Global Game Of ‘Cat-And-Mouse’ Going On?
Professor touches on quite a sensitive topic. Money laundering and tax evasions is in the spotlight for the last decades, sometimes turning to a trump card in the hands of regulators. Any new instrument appearing on financial markets is a tough nut which is to be cracked. “Tax havens are now looking for instruments such as ICOs as pressure is brought on them to abandon their financial treatment positions that threaten their core business eg. Malta, Gibraltar, Isle of Man, Switzerland, etc. Less threatened markets such as USA, China, UK are not looking to gain advantage but to maintain their leading positions as they are afraid of capital flight, chaos to their existing stable markets,” — Olinga TAEED continues his view on the topic, and admits that at this point, that any regulative move, whether it looks successful or not, still doesn’t bring any certainty yet: “The basic problem is that blockchain based instruments are decentralised and not only difficult to regulate but also not meant to be regulated! Blockchain is an anti-authority, decentralized, disruptive technology that is against central control but advocating self-control through the transparency. The most rapid adoption is going to come from countries with least to lose and minimal legacy products from banking for instance, and most to gain by becoming a beacon to a new kind of democracy. Countries like Estonia, Moldova, continents like Africa, even North Korea will adopt fastest as they are less hampered, have adopted new technologies like mobile phones more readily, and are positioned for bigger strides.”
Indeed, the countries mentioned by Olinga understand the opportunities, but they are not the only ones to come to such a conclusion. This game is not just a “cat-and-mouse’, it is also a ‘King of the hill’ to win the attention of capital. Daniel HAUDENSCHILD lists the ones who are closest to gaining the leadership: “Singapore, Switzerland, Liechtenstein, Malta, Gibraltar, UK, Berlin, and Palo Alto are the places we would look for the most advanced regulators and market makers. The framework should be clear, easy to adopt, and not burdened with many licenses. If not, the decentralization is like water, it will find a way. Trying to regulate is like trying to hold back the sea. You can set a breakwater, and you can adopt measures, you will struggle to change the flow. Regulation needs to present measures which can help serve this.”
Legal Frameworks For DLT Wouldn’t Be Something Immutable
Experience sharing fastens the processes of adoption. But who says that we are going the right way eventually? So, how often does the legal framework in the sphere of DLT, blockchain and crypto need to be revised and updated? Olinga TAEED answers the question with a forward-looking insight: “We are at the infancy of the market and probably none of the existing incumbents will last a decade. Over the next five years we will see rapid movement in the market before some kind of maturity begins. Presently, there is no killer application of blockchain, with the exception of bitcoin, that demonstrates unequivocally the reason for mainstream adoption. If we assume such ideas and their associated teams will take three years to emerge, and five further years to dominate their respective markets, then only around 2030 we will see less need to modify regulations to meet a dynamic market still in transition.”