The Acting Comptroller of the Currency of the United States, Keith Noreika, has stated that he is considering imposing a nationwide licensing program for cryptocurrency exchanges, similar to the licensing program recently enacted in Japan. This hypothetical licensing program could put into place a nation-wide, unified regulatory framework for cryptocurrency exchange platforms.
Last week, Japan’s Financial Services Agency approved the rights of 11 companies within its borders, including bitFlyer, to operate cryptocurrency exchanges.
The move is regarded by many as a more fintech-and investor-friendly approach to minimizing the risk of fraud in local cryptocurrency exchange markets — as compared with neighboring China’s out-right ban of local bitcoin exchanges.
The Office of the Comptroller of the Currency is a bureau of the United States Department of the Treasury that serves to regulate and supervise both national and foreign commercial banks operating in the U.S. Noreika’s proclaimed consideration of licensing cryptocurrency exchanges signals an official government interest in the measure.
At the moment, licenses for cryptocurrency exchanges in the United States are issued at the state level, with only a handful of states, including New York, actively seeking to regulate the market with programs such as BitLicense.
Though placing regulations on cryptocurrency exchanges at the national level would be done in the name of protecting investor interests in the “Wild West” market of crypto exchanges, some businesses have expressed concern that placing a nation-wide regulatory framework over the industry may add to their compliance costs.
Furthermore, many crypto enthusiasts insist that part of the draw of cryptocurrency is its historic ability to bypass banks and regulatory agencies and, supposedly, make transactions cheaper. Erecting regulatory structure in this market, therefore, may eliminate some of the advantages that cryptocurrencies are thought to possess.
Though there are varying opinions on how to deal with it, very few people doubt that the cryptocurrency market is wrought with unfair practices and predatory practitioners. The Star reports that, since 2011, there have been at least three dozen heists of cryptocurrency exchanges worldwide, which have caused many of them to shut down, and more than 980,000 bitcoins have been stolen.
Despite skepticism from certain parts of the business community in the United States regarding the regulation of crypto exchanges, instituting regulations has yet to quell the Japanese market’s thirst for cryptocurrency and the blockchain technology that makes it possible. Japanese financial services group SBI Holdings, for example, is reportedly planning to launch its own digital currency based on blockchain technology, with testing commencing as soon as next year.
The proposed currency will help Japanese retailers bypass the expensive onboarding process that renders the cost of installation for credit card payment terminals ¥100,000 (about $900) as well as the monthly lease fees they require. Additionally, it will maintain a stable exchange rate with the Japanese yen.
SBI has already invested a great deal in blockchain technology and cryptocurrencies, having led a ¥3 billion ($27 million) funding round for bitFlyer in April of 2016. It also launched Japan’s first bank-backed digital currency exchange last year.
Back in the United States, Acting Comptroller of the Currency Noreika has also mentioned that he would not be averse to cryptocurrency exchanges applying for bank status in the United States, though he admitted that the road to authentication when applying for said status is a rough one. He reportedly stated, “that is a long process they’d have to go through, and just because you get your foot in the door doesn’t mean you’re going to get out the door on the other side.”2 - Readers Like This Post