The media is buzzing surrounding a Reuters report that states that Allianz Global Investors CEO, Andreas Utermann, made a statement calling for regulators to outlaw crypto. Utermann’s statement was made in London this week and was directed at the head of Britain’s Financial Conduct Authority, Andrew Bailey.
“You should outlaw it [crypto]. I am personally surprised that regulators haven’t stepped in harder.”
Regulations surrounding cryptocurrency have been slow to come about and very few countries have completely outlawed them? Why is that? Cryptocurrency has long been associated with crime, fraud, and money laundering, so why keep it around? Because the government can gain from it.
Regulation over Illegalization
While China remains the only country where cryptocurrency trading is completely illegal, many other countries have chosen to heavily regulate them instead. But why are the US, EU, and other countries going through all the trouble of installing regulatory laws instead of outlawing their existence?
The following is the official reason as released and stated by the G20,
“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF [Financial Action Task Force] standards and we will consider other responses as needed.”
The G20 is a collection of government representatives from the 20 largest economies in the world. By regulating cryptocurrency exchanges and other crypto service providers with know your customer (KYC) and anti money laundering (AML) systems, the government can track and cut down on illegal crypto activity. With KYC and AML systems required by law, the government can then tax traders and investors on their profits.
If a government decides to completely ban crypto, all trading would move to dark net and underground P2P platforms that are hard to regulate, govern and track.
Another disadvantage of completely outlawing cryptocurrencies, is that government who did so would remain in the dark and fall behind the curve while other institutions and governments continue to use cryptocurrency.
While come governments, banks and regulators continue to long for the outlaw of cryptocurrency, doing so would ultimately leave them in a global economic disadvantage. South Korea which has the world’s 3rd largest cryptocurrency economy, has made blockchain technology a pivotal part of their countries development plan as they are encouraging their youth to enter the field. Other small countries including Malta, Estonia and Switzerland are making grand efforts to claim their stake in the crypto market by incentivizing startup and established billion dollar companies to head their operations in their countries.
If any government chooses to outlaw cryptocurrency, they would be gaining no benefits.
Institutions and Crypto
Governments are not the only institutions looking to gain from this growing market. Bakkt, Fidelity, ICE, Nasdaq and Goldman Sachs are all major financial institutions lookings to gain from the crypto market. Many of the above stated companies are looking to offer crypto custodial services, exchanges and futures markets to their customers.
While money laundering and criminal activity are the two aspects to cryptocurrency that raise the most alarm for institutions, KYC and AML procedures are only becoming more effective as time goes on. Scandals surface every month about faulty ICO’s and crypto money laundering, all of them combined do not amount to the amount of money found in the 2018 Danske and Deutsche Bank scandal.