The ECB's Christine Lagarde is one of the key voices calling for action to protect investors
As the value of bitcoin hovers around US$28K, there are growing calls for the flag-bearer of cryptocurrencies and its lesser-known peers to be regulated.
Following a warning from the UK’s financial regulator this week that investors should be prepared to “lose all their money” if they invest in cryptos, the president of the European Central Bank (ECB) is one of the prominent voices calling for action.
Christine Lagarde said that bitcoin has facilitated “funny business” including money laundering and should be regulated at a global level.
She told the Bloomberg Next conference that a consolidated approach was essential because “if there is an escape that escape will be used.”
Nigel Green, CEO of global financial advisory deVere Group, is a long-time advocate of cryptocurrencies but agrees that global regulation is required.
“Such regulation will help protect investors, tackle cryptocurrency criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries which introduce it,” he said, suggesting that the forthcoming G20 summit could provide an opportunity.
Green says that investors are applying standard investment practices to cryptos, such as sometimes profit-taking, sometimes reinvesting, using the volatility to their advantage, and using these alternatives to help with all-important diversification.
Because of this, he believes that regulation of cryptos should mirror that of other parts of the financial system and that exchanges would be the best option for a regulatory framework.
“Nearly all foreign exchange transactions go through banks or currency houses and this is what needs to happen with cryptocurrencies. When flows run through regulated exchanges, it will be much easier to tackle potential wrongdoing, such as money laundering, and make sure tax is paid,” he noted.
Canadian crypto growth
Canadians have embraced cryptocurrencies in recent years and CI Financial recently launched its CI Galaxy Bitcoin Fund on the TSX to simplify the investment process.
But while there has been a surge in the value of bitcoin and some other cryptos during the pandemic, reports that digital coins may surpass gold as a safe haven for investors is wide of the mark according to Nick Barisheff, the founder and CEO of Bullion Management Group.
“While Bitcoin is a single crypto, it’s still an artificial currency with nothing backing it,” he told WP. “The limitation on the creation of new cryptos is one benefit over the conventional fiat currencies but the trouble is there are hundreds of cryptocurrencies, so when you look at cryptos, you have to look at them all in combination. And when you look at them all in combination, they're expanding faster than the central banks are printing money.”
