Announcement of recommendations for virtual currency regulations
The World Economic Forum (WEF) today released a white paper on the theme of a global regulatory approach to crypto-assets (virtual currencies). Proposed a series of policy directions for global regulatory bodies and others.
The WEF says that as the potential for connectivity between the cryptocurrency sector and the broader traditional financial system emerges, there is an increasing need for a collaborative international approach.
As for the problems of the current situation, he pointed out that the definition and classification of virtual currency differ in each country and region of the world, so the understanding of the risks inherent in virtual currency is vague.
He also pointed out that having different regulatory frameworks in different regions, such as when some regions are less stringent than others, makes it impossible to effectively monitor the cryptocurrency ecosystem.
With this in mind, the WEF has released its white paper on regulatory recommendations for three parties: international organizations, national and regional regulators, and companies in the cryptocurrency industry. is.
The WEF also consulted with policy makers, regulators and industry stakeholders to develop its recommendations.
What is the World Economic Forum (WEF)?
A non-profit international organization that aims to address global and regional economic issues and promotes exchanges among leaders in political, economic, and academic fields. Founded in 1971 by Swiss economist Klaus Schwab.
The WEF has made the following recommendations to international organizations.
- Classification of cryptocurrencies and cryptocurrency-related activities
- Setting best practices and regulatory standards
- Introduction of passport system for virtual currency companies
It should be noted that the passport system is to grant something like an internationally accepted passport to registered/approved businesses. He proposed that this would enable global harmonization of regulatory standards and the handling of cross-border risks.
Recommendations for regulatory authorities in each country/region are mainly as follows.
- Coordination of institutions in various fields such as financial and law enforcement authorities
- Developing robust regulatory guidelines and frameworks
- Use technology for things like real-time monitoring and analytics
He also made the following recommendations to the industry, including cryptocurrency companies:
- Strive to develop interoperable technologies
- Building best practices to deal with various risks such as operational risks and cyber security risks
- Responsible technological innovation, taking into account social and economic risks
Also mentions Ethereum’s dominance risk
Besides, the WEF also cited the dominance of Ethereum (ETH) as one of the potential risks in the cryptocurrency sector.
Ethereum is overwhelmingly the foundation of decentralized applications (dApps), pointing out that there is a concentration risk. WEF continued:
There is a growing number of EVM compatible chains that do not rely on Ethereum for their consensus algorithms, like Avalanche (AVAX). Going forward, it is possible that more networks will emerge that compete with Ethereum-based ones while offering similar functionality to developers.
What is EVM
Abbreviation for Ethereum Virtual Machine. Acts as a “translator” for executing smart contracts.