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Bitcoin and other cryptocurrencies are unlikely to escape regulatory oversight as supervisory authorities respond to the sheer popularity of the phenomenon, according to the governor of Swedens central bank.
Though monetary policy officials have voiced near universal skepticism toward Bitcoin and its rivals, cryptocurrencies have continued to build an enthusiastic following. Thats prompted some of the biggest names in finance to move in, as Wall Street banks such as Goldman Sachs Group Inc. offer trading services tied to crypto.
Read More: Kuroda Joins Chorus of Central Bankers Casting Doubt on Bitcoin
When something gets big enough, things like consumer interests and money laundering come into play, Riksbank Governor Stefan Ingves said on Monday. So theres good reason to believe that [regulation] will happen. Erik Thedeen, the head of Swedens financial regulator, said on Tuesday that its quite evident that some form of regulation is needed.
Photographer: Mikael Sjoberg/Bloomberg
Swedens financial markets minister, Asa Lindhagen, said the government is already in the process of tightening standards for crypto exchange platforms. But she called it a work in progress at the international level. She also said that addressing the risk of money laundering that cryptocurrencies represent is a very important issue that will require cross-border work.
Its far from clear how to regulate a product thats designed to evade the scrutiny of national authorities. But governments are already trying, with China in particular stepping up pressure on crypto loyalists. The Peoples Bank of China recently told financial institutions that theyre not allowed to accept cryptocurrencies for payment, which followed a crackdown on crypto mining. There are signs, though, that traders are still active, underscoring the scale of the challenge.
In the U.S., Federal Reserve officials are in the process of studying the various ways to address this issue, Randal Quarles, the Feds vice chairman of supervision said in May. But federal agencies need time to ponder the right regulatory approach before they can then create a framework for oversight, he added.
In the European Union, the commission has put the matter to a hearing as it tries to figure out how best to create a regulatory framework for crypto assets. In September, it proposed a pilot regime for market infrastructures interested in trading crypto assets. Thedeen said an EU regulatory framework for cryptocurrencies is now under way.
On Tuesday, Riksbank Deputy Governor Per Jansson underscored concerns that Bitcoin and its peers continue to fluctuate extremely, with nothing concrete or substantial underpinning their actual value.
Sweden, like China, is one of the more advanced countries in its efforts to develop a central bank digital currency. Thats as monetary authorities try to prepare for the disappearance of cash as a payment form, and try to ensure that cryptocurrencies dont fill the void. Ingves has previously estimated Sweden might have its own central bank e-krona in about five years.
Read More: Carpe Diem - Central Banks in a Digital Future
Regulation of cryptocurrencies will probably come at different times in different areas, Ingves said.
Fears of a digital dollarization with a gradual loss of control over monetary conditions is one reason for central banks to introduce digital currencies of their own (as an alternative to private cryptocurrencies). As central banks accelerate moves toward a public digital payments option, its also likely that they will step up efforts to keep the volatile cryptocurrencies in check.
--Johanna Jeansson, Nordic economist
With assistance by Rafaela Lindeberg, and Love Liman
(Adds comment from head of Swedens financial regulator)
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