Bank for International Settlements cast as digital currency regulator

Bank for International Settlements cast as digital currency regulator

Regulatory intervention in the digital currency marketplace would need to be co-ordinated by an international body such as the Basle-based Bank for International Settlements, according to the Reserve Bank of Australia.

Responding to a Senate Economics References Committee Inquiry into digital currencies, the Australian central bank notes: "Digital currencies represent an interesting development in the payments and financial system landscape. The concept of a decentralised ledger is an innovation with potentially broad applications for a modern economy."

However, given the very limited use and acceptance of digital currencies in Australia, the RBA judges that bitcoin and its ilk do not currently raise any issues in terms of monetary policy and financial stability mandates.

In the event that the use of a particular digital currency was to grow significantly and to raise public interest concerns, the Bank says that it would consider whether it would be desirable and feasible to ‘designate’ it as subject to regulation and to then impose standards on participants in that system.

Noting that "it is currently unlikely that any benefits of regulation would outweigh the potential costs", the RBA cautions about the unintended consequences of heavy-handed policing.

But given the international nature of the digital currency systems, the Bank is gloomy about the prospects for unilateral intervention, suggesting instead that it may be necessary for central banks to agree on a co-ordinated response.

"One vehicle for coordination would be through the Committee on Payments and Market Infrastructure (CPMI) at the Bank for International Settlements, of which the Bank is a member," the submission concludes.

Comments: (6)

Christopher Williams
Christopher Williams - RTpay - Winchester Uk 07 April, 2015, 17:25Be the first to give this comment the thumbs up 0 likes

The basis of the BIS being involved is an excellent idea and one that could hopefully fit well with the development of fiat-based digital currencies. While there is still much to do in this regard, there are many advantages in such a structure, not least within the EU where any break-up of the Euro will require some format of electronic payments to quicklly replace it.

Similarly, the creation of an Asian alternative to the dollar, whether solely RMB-based, or reflecting a blend of AIIB currencies, would be far better in a doigital structure.

The BIS is the obvious body to assist in the creation of such units.

 

A Finextra member
A Finextra member 08 April, 2015, 09:07Be the first to give this comment the thumbs up 0 likes

Definetely an excellent idea to have regulation of digital currencies by an international body.

The current maturity of the digital currencies market reminds me of the early stages of internet use and adoption. It is possible that within the next few years we will see huge growth of adoption of digital currencies, however, this will not be possible without adequate regulation. Due to the nature of this product adequate regulation will only be possible by an International body.

A Finextra member
A Finextra member 09 April, 2015, 10:39Be the first to give this comment the thumbs up 0 likes

A more balanced view of what actually was said in the statement ....not just a single catchy tabloid headline 

https://www.cryptocoinsnews.com/australian-central-bank-rules-bitcoin-regulation-stance/

A Finextra member
A Finextra member 09 April, 2015, 14:01Be the first to give this comment the thumbs up 0 likes

@George_Katzourakis : I'm glad that you brought up the analogy of the "early internet".   An international standards body called the ITU(also based in Switzerland) defined a standard networking protocol called OSI that was supposed to become what we know call the internet.

The only people allowed to contribute to this standard were the incumbent network operators at the time..BIG Telecomms.

The rest of the world that was excluded decided to ignore this and adopt a much lighter open protocol called TCP/IP that was designed by the u.s. military to survive a nuclear attack by being distributed and having no place of central control that could be targeted(sound familiar).

Open source developers then started to build other protocols  on top of this such as the email and www etc that only work because we agree to use them by consensus.

The open-source tech world just did not "ask for permission" to build the connected world(loosly called the web/internet/Iot) that we now have. 

The bitcoin protocol(and other distributed crypto currencies) only work because a large group of people agree by consensus to adopt the current protocol(or not).  Any "protocol" dictated from "ahigh" will just be ignored same as last time around.

We are not asking for permission this time either.

I am not against financial regulation in principal but in the financial world it seems to be used more to protect the interests of the incumbents than for the general good.

Companies such as CoinJar have already moved from Australia to London because of unfairly restrictive regulation.

Looks like London is set to become the "safe harbour" for such fledgling disruptive technologies in the Fintech area thanks to the "right attitude" of the Government and the regulator in welcoming and encouraging competition in this area.

 

A Finextra member
A Finextra member 09 April, 2015, 14:25Be the first to give this comment the thumbs up 0 likes

@Paul: Thanks for the useful historical update and comparison with the bitcoin protocol. Totally agree that too much regulation can only kill such intiatives, this is why I carefully chose the term "adequate regulation".

As I am sure you are very much aware, in the financial world "trust" and "risk rating" are amonst the the main elements everyone considers. Therefore in my view there is the need for some form of "reasurance" by an International body that would encourage people to trust crypto-currencies and thus ensure exponencial growth of their use.

These days, almost everyone in the developed world, has a smartphone, therefore everyone can have a "bitcoin wallet" as long as they feel that it is safe to do so.

A Finextra member
A Finextra member 10 April, 2015, 08:38Be the first to give this comment the thumbs up 0 likes

PayPal in 2014, weighing in already on Bitcoin currency regulations, the company told the Australian Senate:

“While the currency itself should not be regulated, and transactions by individual users without the assistance of the intermediaries should not be regulated, companies that provide a financial service for digital currency transmission, for issuance or sale of digital currency, or for exchange with other currencies such as the Australian Dollar, should be regulated in a manner similar to the existing regulations that apply to other payment services… Those regulations, however, should be adapted to recognize the specific details of how different digital currencies work, particularly ‘decentralized’ digital currencies that are not controlled by a specific issuer.”

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