Big Cryptocurrency Players Are Afraid Of Working in Grey JurisdictionJuly 30, 2019
Blockchain technology is gaining momentum as it has been providing a solution to several issues. When it comes to setting up a shop, cryptocurrency companies are having to choose between two extremes.
The complexity of compliance and costs are major factors for cryptocurrency startups. Big institutions find it attractive to deal with the application of traditional financial rules. Market access is far easier for jurisdictions, which are lightly regulated. However, lighter rules can mean less protection for investors as there might be only looser checks on money laundering.
Major financial hubs are following a “wait-and-see” approach as in the current regulatory scenario there is no guarantee for success and cryptocurrencies are representing a rare chance for the states of being able to dominate a part of the emerging market. Operating in offshore jurisdictions that had low or no regulation is a common option for several startups. However, this deters major investors.
Big players are afraid of working in “grey jurisdiction.” Crypto regulations are different in different parts of the world.
“The biggest risks come from not taking any risks.” The most sophisticated “Bespoke” approaches come from smaller countries.
Australia currently seems to believe that the cryptocurrency needs some room to grow. The Department of Treasury of Australia recently published guidelines concerning cash-based currency payments. The draft stated that “transactions equal to, or in excess of this $10,000 would need to be made using the electronic payment system or by cheque.” However, cryptocurrency is in the exceptions list. It is interesting to see that cryptocurrency will not be listed as a payment method which requires additional restrictions and oversights. However, cryptocurrency has been looped into discussions and legislations, which exclusively focus on preventing money laundering, illicit activity, and terrorist funding.
Cryptocurrency provides a venue for the protection of funds from the government and governmental regulation.
China mostly ignores shadow economic transactions until it threatens the political and economic stability. When the cryptocurrency exchanges created too many financial risks, the Chinese government banned it in 2017. The inherent volatility in the price of the cryptocurrency also presented a lot of social risks. Plummeting asset prices also creates a lot of social risks. Several Ponzi Schemes and cryptocurrencies brought in a lot of trouble than what the regulators would choose to deal with.
Early this year, China blacklisted cryptocurrency activities as the mining sector drained the energy sector of the country. Alternative financial markets like cryptocurrencies are here to stay as they are already a part of developed economies.