UN Report on Digital Currencies Calls to Balance Regulation and Innovation
Last week, the UN Economic Commission for Latin America and the Caribean (ECLAC) released a report titled “Opportunities and risks associated with the advent of digital currency in the Caribbean” studying the issue of digital currencies, as well as their risks and opportunities they may possibly give to the Caribbean subregion.
The purpose of the report is to provide local decision makers a balanced assessment of advantages and risks inherent in digital currencies. The document also discusses application of the technology both in the Caribbean and on global scale considering increase of its use.
Outlining the lack of fintech infrastructure in the region and recognizing its unfortunate status as a commonly-recognized offshore haven, the report recalls its predcessors issued by the European Banking Authority and the Bank of England, as well as covers regulation and taxation issues present in New York BitLicense, US FinCEN, and Canadian regulations.
Cryptocurrency Opportunities to Be Examined
The report says:
“Given the deficiencies in subregional payment infrastructure, and the broader need to increase participation in the digital economy, it is incumbent upon Caribbean authorities â€¦ to examine the opportunities for innovation that digital currency offers.”
In addition, the paper recommends the authorities in Caribbean to “embark on an inclusive approach to the exploration of digital currency that provides sufficient opportunity for public input and policy review similar to the process adopted by the United Kingdom“.
Due to the pronounced leading role of cross-national collaboration within the Organization of Eastern Caribbean States, which had established a shared Central Bank, a common regulatory and institutional framework might be established in the subregion to face the issues related to digital currencies and implementation thereof, suggests the report.
Regulation Must Not Suppress the Innovation
Commonly with other reports on the topic, the ECLAC’s report pays much attention to money laundering. Specifically, as the subregion is a well-known hub for this kind of illicit activities, the report offers local authorities to give proper consideration to FATF recommendations to suppress using digital currencies for such purposes. However, the report stresses that such regulations shall not cause needless difficulty to local companies engaged in innovation businesses.
“To achieve this balance, they will need to engage proactively with the companies in the FinTech industry, which are positioned to the first line of protection in combating digital currency-based money laundering,” the report reads.
Local companies, as the report points out, have already voluntarily engaged services for AML/KYC compliance.
“Advent of digital currency technology represents an opportunity for Caribbean countries to revise this process and to demonstrate that innovation has an equal place at the table in the consideration of national priorities,” the report concludes.
Echoing The Commonwealth’s Report
The ECLAC report follows another one released by the Commonwealth of Nations. Findings of the organization’s working group on virtual currencies are generally in line with those provided in the UN ECLAC’s one. The report calls the member states to consider legalizing digital currencies.
“Financial regulators and central banks should consider making public statements on the legality of virtual currencies and the applicability of any existing legislative frameworks. Education and funding should be provided for training for law enforcement,” the Commonwealth’s report read.
Covering the hoary issue of money laundering and know-your-customer policies, the Commonwealth’s report reiterated the same mantra calling to find a balance between regulating and letting innovative companies develop.
“Any regulatory and legislative frameworks should focus on interactions with fiat currencies and avoid attempting to regulate the underlying decentralised ledger technology. Such frameworks should be technologically neutral and avoid stifling innovation,” it read.
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