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G20 right, the world must move as one on crypto
Author: Martin Orena. PHOTO/COURTESY
What you need to know:
- ‘‘Regulation invigorates competition by addressing information asymmetries”
The Group of 20 (G20) economies are rightly focused on cryptocurrencies. As the wave of the future, cryptocurrencies cannot be dismissed or ignored.
This is precisely why the G20 is exploring the wherewithal of jointly regulating cryptocurrencies, India’s Finance Minister Nirmala Sitharaman, said recently.
To be sure, the crypto market comprises sophisticated technologies that engender virtual assets which make their regulation deserving of more than a silver bullet.
Sitharaman, whose country is this year’s G20 president, believes a range of policies must be brought to bear in order to guide crypto dealings.
Her view was made known in the context of India Prime Minister Narendra Modi’s government pondering with the idea of drafting a law to regulate, or even ban cryptocurrencies.
“We are talking to all nations, that if it requires regulation, then one country alone cannot do anything,” Sitharaman said.
“We are talking with all nations, if we can make some standard operating procedure which is followed by everyone to make a regulatory framework, and if it can be effective,” she added.
India hosted G20 finance ministers and central bank governors last week for a grand meeting and cryptocurrencies was a top issue on the agenda.
Agreed, regulation of cryptocurrencies is of vital importance as it protects investors and preserves financial stability.
As it does so, it allows for innovation while enhancing the crypto asset sector by ensuring that technical standards utilise faster economies of scale.
On top of this, regulation invigorates competition by addressing information asymmetries.
These benefits presuppose that regulation must be done in all countries, which implies that cryptocurrencies must be legalised everywhere.
Not because they are a futuristic innovation, but because they are a social, cultural and technological form of progress.
That’s because they are accessible to all and thus can positively impact every segment of society and every sector of an economy.
This is why some countries have already legalised trade in cryptocurrencies. To bring you up to speed on Uganda’s crypto market, some companies already use crypto.
While the cross-border payments app, Chipper Cash, ensures that more than three million people send and receive money in and between Nigeria, South Africa, Ghana, Uganda, Rwanda, Tanzania, and the United Kingdom by the use of crypto.
Similarly, the Bank of Uganda (BU) said it supported the idea of cryptocurrency businesses participating in its regulatory sandbox, inviting members of the Blockchain Association of Uganda to share their knowledge with the Central Bank.
A crypto regulatory sandbox is a testing live-like environment used to ensure regulatory compliance and security checks for financial operations.
The next step for Uganda is legalising cryptocurrencies so they are not trammelled by unnecessary laws which do not foster cryptocurrency regulation.
We stand on the cusp of a new age, an age which beckons us to make the right financial choices or deny those choices at the altar ignorance.
This is where cryptocurrencies find themselves, enshrouded by ignorance.
But the beauty with regulation is that such ignorance is brought to the light of understanding through laws which bring undesirable activities under control for the benefit of all.
Mr Orena is the CEO of DM Exchange, a Fintech company. @martinorena
