South Korea Moves to Regulate Crypto While India Turns 180 on “Crypto-Ban”
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Last week, South Korea passed a law to regulate cryptocurrencies that will likely come into effect in 2021. The law, which requires all cryptocurrency businesses to conduct Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, lights the way for financial institutions and exchanges to safely setup shop in the country.
This development comes as great news for long-term speculators. As more governments around the world begin to facilitate the development and use of cryptocurrencies, the greater the fundamental value of the network as a whole. However, it is not great news for the crypto-world’s contingent of libertarians, who’d argue that the tech’s single most important “killer app” – privacy – is being chipped away.
Yet regulation like this is surely net positive. Counter-intuitively, it is in the regulation of cryptocurrencies, that we may indeed find better ways to preserve privacy. At the ETHLondon hackathon last week, a number of the finalists had built on top of privacy-preserving technologies like the Aztec Protocol. These “zero-knowledge” (ZK) proofs are now being used and experimented with in a wide range of projects, allowing users to create a proof of data without the need for exposing the data itself. Famously, EY, has been working on their ZK implementation, Nightfall, for the Ethereum network.
Regulation that aims to facilitate rather than stifle would give confidence to large institutions that would otherwise not participate. While the regulatory landscape is – on the whole – unclear, the overall trend is moving in the right direction. On Wednesday, the Indian Supreme Court struck down the Reserve Bank of India’s ban against crypto, stating it “unconstitutional” and rolling back a policy that had been in place since April 2018.
With regulators green-lighting businesses to hold, trade and use cryptocurrencies, the opportunity for innovation increases dramatically. This applies most significantly to smart contract platforms like Ethereum, whose Turing-complete “world computer” can enable a limitless number of apps – particularly financial ones.
Despite innovation on Ethereum taking place with-or-without regulatory oversight, mainstream confidence in the system’s market-beating financial applications will struggle to gain traction without the rubber stamp of a traditional regulator.
Unfortunately this could take a long time. Industry regulators have barely scratched the surface of public blockchains let alone explored the depths of – for instance – decentralized finance. The thought that a regulator might have some say in the goings on in the transaction imaged below is laughable when you consider the lack of guidance given at the most basic levels of public cryptocurrencies.
1000x leverage trade, on-chain, without collateral, and everything earning interest instead of fees;
Using;@AaveAave @dydxprotocol @iearnfinance @CurveFinance
Time to scale it up pic.twitter.com/77qZXZmrkH
— Andre Cronje (@AndreCronjeTech) March 5, 2020
That said, for those interested purely in the price appreciation of Ethereum, the latest developments coming out of South Korea and India are cause for celebration. With regulation comes greater exchange liquidity, better price discovery and a safer environment for businesses to build. More importantly for the “hodlers” out there, regulated custodians will allow individuals and businesses to buy and hold these assets without the complexities and risks of managing private keys.
Nick, Owner EthereumPrice.org
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