Cryptocurrencies exploded into global headlines all throughout 2017, with Bitcoin leading the way with a 1,500% upsurge in value and 47% of global market shares.
The aggressive growth of cryptocurrencies has caught the attention of thousands of investors across the globe, so much such that by mid-December last year, the cryptocurrency market was estimated by Markets Insider to have a global volume of $50 billion. This is equivalent to the size of the average turnover on the New York Stock Exchange.
A polarizing issue
This meteoric rise in both volume and value of cryptocurrencies has gotten the world’s leaders and central banks looking into how best to adapt blockchain technology into the existing financial markets.
The borderless nature of cryptocurrencies, along with the fact that they largely operate outside the regular financial systems, poses a unique challenge to foreign exchange markets and regulation.
Industry specialist J. Dax Hansen told Market Watch, “As the technology underpinning these developments disrupts products and services in nearly every industry, lawmakers, regulators, and law enforcement are scrambling to keep up.”
Many regulating bodies, such as that of the European Union, India, New Zealand, and the United States have all issued warnings to the public about risks associated with virtual currencies.
Most are also currently looking into proposals regarding how best to monitor and regulate cryptocurrency, with major concerns regarding fraud, tax evasion, money laundering, and terrorist financing.
Other governments have been quicker to embrace the use of cryptocurrencies. For instance, Japan is home to a large population of Bit-curious traders, who make up about 40 percent of the daily trading activity worldwide last year. The Financial Times reports that the Japanese government had previously approved a law regulating virtual currencies back in 2016.
Similar moves have been made in Australia, while Bermuda is looking into passing laws regarding cryptocurrency regulation this year.
Malaysia and Russia have previously not considered cryptocurrencies as legal tender, but national positions on the matter are expected to change soon.
South Korea, whose population has been halved by differing opinions on the benefits and disadvantages of cryptocurrencies, is set to pass a legislation to prohibit foreigners and minors from trading in the market, as well as to ban anonymous trading.
Still other regulators have been quick to outlaw the use of digital currencies. Arguably the largest cryptocurrency naysayer, the government of China, sent markets reeling after banning the use of virtual currencies last year.
Others, like Bolivia, Colombia, Ecuador, Bangladesh, and Morocco have also banned the trade and use of cryptocurrencies in their respective territories.
Further integration
Currently, there are three ways foreign exchange markets have integrated cryptocurrencies. First, they can allow traders to become direct holders of the digital asset through purchasing via private key.
Money Inc. explains that this method allows a high level of versatility for traders, who can keep, transfer, sell, or exchange cryptocurrencies after purchasing, albeit with some security concerns. Other exchange markets can opt to trade cryptocurrencies as derivatives.
Lastly, foreign exchange markets can also turn to Bitcoin- or cryptocurrency-related securities, including ETFs and ETPs, among others.
Despite these advancements in integration, there is still much more that regulators, developers, entrepreneurs, and legislators need to figure out when it comes to cryptocurrency and its place in foreign exchange markets.
One major upcoming initiative for the development of cryptocurrency integration is in the international conference dedicated to these topics.
Coinwire reports that the conference set to be held on March 6 2018 in Thailand, will cover urgent topics on legal regulation of Initial Coin Offerings, cryptocurrencies, and the blockchain, as well as the application of blockchains in Fintech and government.
As many as 2,500 attendees are expected to gather in Thailand next month for the landmark conference.
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