On 20th March, The Reg Associates Team caught up with Erik Wilgenhof Plante, Chief Compliance Officer at Bequant Crypto Currency Exchange, to discuss all things Crypto, Regulation and RegTech.
This is part 1 of a 2 part interview
How will the regulation impact the crypto world?
Actually, my very first presentation in the crypto world was about regulations and I was basically booed off stage. During that time the crypto world was only really about Bitcoin and the Bitcoin world was free and anarchistic, basically they were saying ‘we don’t need any regulation – go away!’
So, cryptocurrencies have already had a big impact even though there’s not a lot of regulation out at this moment. There are a few frameworks – Abu Dhabi has one, Malta came out with something, but the impact will be much larger at the moment when the large regulators starts rolling out frameworks and crypto starts being properly regulated.
Why does it need to be regulated ? Because there is a huge interest from the institutional worlds in crypto. But a lot of those [institutional] companies are either listed or very strictly regulated and therefore they can’t just jump into the crypto world because the crypto world itself is unregulated.
So that’s one side. The other side is purely practical for connecting into the traditional financial system. For companies that deal in crypto, a big challenge is opening a bank account and keeping it open with a proper bank. The moment they realise that you are in crypto they will look to close your account.
What are the advantages or disadvantages of crypto currencies being regulated?
I think the creation of trust. So crypto depends on implementation and users and the lack of regulation at the moment lets users easily speculate with the value in order to make profits. The value of crypto can be seen only when it is used, when people will be buying their morning coffee with it, shop online etc.
Now what seemed to happen at the beginning was that regulators stayed away and speculators jumped in the value went up, but the use cases became fewer and fewer. So regulation will hopefully bring back a little bit of balance. Where you can get more coins (not just Bitcoin alone, but coins in general) that can be used to pay for services, you will probably start to see a top 10 crypto assets (e.g. Bitcoin, Ethereum, XRP etc.)
Crypto itself is seen as an asset class, there will be two types of crypto challenges coming up and regulation will help both of them.
● Trust for individuals – To create trust for general purpose usage (e.g. as a payment method)
● Trust for institutions – Institutions need to have regulated counterparties, otherwise they can’t do business with them.
Solving these problems will definitely help the crypto world in general, so you will probably have coins that will become legitimate and more widespread and therefore successful.The rest will, I guess, either disappear or become marginalised. It will also have a big impact on the misuse of coins in crime, etc. Because when criminals start to realise that they can’t just get away with this because the institutions we deal with are doing proper KYC. They get audited and all that kind of stuff which will increase the trust.
In summary, I think the impact regulation will start to see increased Crypto usage for example as a normal way of payment. And for us [as an exchange] that is just another asset class. Like you had in the early days of the internet, everybody thought it was the Wild West and now nobody can do anything without the internet.
What do you think should be the response to privacy coins by the government?
Well, by themselves they’re not safe or dangerous, but also heavy guns are by themselves not safe or dangerous as well. It’s the people that use them.
Right, so the problem with privacy coins is that it’s very hard to track the origins of the money, which opens a whole lot of problems like terrorist financing and money laundering.
I do see a need from an institutional point of where you have B2B payments and you don’t want those transactions to be completely visible on the Internet. So, there might be a use case for payments between trusted banks or large companies when they need an added layer of privacy of the transaction. So peopleI won’t know what the transaction is between the B2B entities, but if I am the government or a law enforcement agency (or anything like that) I do need to know who are the ultimate senders or receivers of the transaction.