Page 7 - NIBAF-Training Matters January-March 2021
P. 7
currencies. However, there were significant better security for crypto holders – regulations may
challenges for regulating these virtual assets given also reduce the price volatility of these assets.
their unique characteristics. Some challenges, he Advantages to the economies in general accrue
noted, are the FATF Guidelines and Travel Rules, since this will reduce their illegitimate use,
lack of regulators’ capacity regarding the transparency will improve which can lead to better
technology, Decentralized nature of block chains vs consumer/investor protection, and it will be included
centralized nature of regulations, the unorthodox in the tax base and not be in grey economy,
ownership and governance structure of block chain convenience and efficiency of crypto can be a game
companies where you don’t have beneficial owners changer for Financial Inclusion.
in the traditional sense. In his opinion, the solution lies
in the regulators and industry players to work Discussing some of the challenges of regulating
together and build agile regulations adapting to the crypto assets, Dr. Hussain cited the structure of
changing technology. One way of doing this is using these assets made it challenging to develop an
sandboxes which will allow regulators to better appropriate regulation and supervision. Adding to
understand the technology as well as regulators and this was a lack of harmony in terminology and
industry to collaborate in solving some of the classification among the global players, the quantity
problems and quality of data which is unreliable at the
moment. He further stated that it will become critical
Dr. Inayat Hussain, shared his thoughts on the topic to strike a balance in supervising the whole
agreeing with Mr. Basson that the regulators and ecosystem, AML/KYC will be difficult to address.
the industry will need to work together for this eco Further there is a possibility of regulatory arbitrage
system to evolve. Dr. Hussain briefly discussed the as cross border supervision for financial supervision
issue from a regulator and supervisors’ perspective is opaque. Hybrid tokens increase the complexity of
who conduct supervision to ensure that the industry regulating them. For developing countries, the issues
is safe and sound and are able to meet their are magnified due to resource constraints of
commitments to their customers. These are done by regulators, effectiveness of law enforcement
ensuring that the weak links are timely identified agencies and their capacity to take out unregulated
and issues in the weak links are addressed and by players. He also mentioned that on the part of SBP
having in place entry requirements, fit and proper an advisory was issued in 2018 which informed the
tests, prudential regulations, Risk Management public that if they deal with crypto currencies they
guidelines, public disclosures, frameworks for will be doing so at their own risk; there is no
various risks which are
complemented by reporting
requirements for off-site
supervision and on-site
inspections. Dr. Hussain
opined that there are
significant benefits of
regulating crypto-assets; it
gives legitimacy to these
assets removing grey areas,
giving them better
acceptability as a medium
exchange, curb speculative
tendencies and can provide
7
