Regulation of Cryptocurrencies: Evidence from Asia and the Pacific

Jose Antonio Pedrosa-Garcia () and Yasmin Winther De Araujo Consolino Almeida ()
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Jose Antonio Pedrosa-Garcia: United Nations ESCAP
Yasmin Winther De Araujo Consolino Almeida: Macroeconomic Policy and Financing for Development Division, ESCAP
Authors registered in the RePEc Author Service: Jose Antonio Pedrosa Garcia ()

No WP/18/03, MPDD Working Paper Series from United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)

Abstract: This paper reviews the key features of cryptocurrencies and their underlying technology, blockchain. It becomes clear that cryptocurrencies do not fulfill the three functions of money, at least for the moment, but should instead be understood as high-risk, high-profitability securities. While there are great opportunities such as increased remittances, their potential disruption of economic activity, and particularly of monetary policy is mind-blowing. Under this premise, and keeping in mind hackers’ heists suffered by cryptocurrency exchanges, it is important to regulate cryptocurrencies. Four core questions countries should decide on are: whether they consider cryptocurrencies’ legal tender, whether they allow cryptocurrency exchanges to operate (and if so, how); whether Initial Coin Offerings (ICOs) should be allowed (and if so, how); and whether they allow mining. Several policy options are presented, both from a theoretical perspective, and as they have been implemented by countries in Asia-Pacific. While countries such as China have decided to be restrictive, others such as Japan have chosen to regulate to let the sector thrive. Such diversity may be understandable, given that is such a novel technology that still poorly understood – especially its evolution. This diversity of standards offers great room for regulatory arbitrage, and highlights a great need for global coordination on cryptocurrency regulation and supervision.

Keywords: Cryptocurrencies; Blockchain; Bitcoin; Regulation (search for similar items in EconPapers)
JEL-codes: E51 G11 G18 G28 K24 O16 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
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