Seeking a Crypto Consensus in the Caribbean.
BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT
Across the Caribbean the financial sector plays a pivotal role in day-to-day business for many nations. Just as the industry is experiencing rapid change, thanks to the ‘push and pull’ factors of digitisation and globalisation in our national economies, so too is it forever facing the challenge of emerging tech.
Few new forms of tech have the potential to transform our world like cryptocurrency. Yet while those advocates for this form of digital financial payment cite its potential to be revolutionary, it also unquestionably comes with some new risks. That’s why striking the right balance between encouraging innovation and proper regulation is critical, but also very difficult, especially given that the borderless potential of cryptocurrency means policy partnership between nations can be crucial.
So, what are the issues that confront regional cryptocurrency regulation? And what are the prospects for a crypto consensus emerging in the Caribbean? Let’s look in-depth now.
How to regulate and incorporate
Crypto regulation is a difficult issue for so many nations. It not only touches on deciding how to define something of value—whether cryptos should be classified as a currency, a piece of property, or something else—but also how to treat the broader relationships it has to other areas of business and life.
While each nation is different, certain questions commonly arise. How do you regulate its use as a financial instrument where it’s used as something of value for consideration and the forming of a contract between two parties? How do you define its value from one day to the next when it’s a 24/7 market with a potential for incredibly volatile moves that deliver huge highs and low lows?
CAPTION: While Puerto Rico is leading the cryptocurrency charge, it is not alone. There are eight other Caribbean Island economies which make up the Eastern Caribbean Central Bank (ECCB) who are exploring digital currency opportunities. They have considered issuing their own cryptocurrency called the Digital Eastern Caribbean dollar (DXCD).
Furthermore, how do you deal with security matters surrounding the verification of someone’s identity and the prevention of raids on exchanges located in a nation, thereby protecting its citizens who use the exchange? Even if the government can’t or won’t guarantee that an investment is a wise one, it can reasonably look to guarantee that the platforms on which an investment is traded are secure, and not prone to theft or breach.
Looking for regional leadership
While there are governments that have pioneered cryptocurrency, this is, without doubt, a field where business must play a leadership role. Within the capital cities of the region there are advocates and critics alike of cryptocurrency. On an even-handed domestic issue, this may not frustrate progress but, as cryptocurrency is a global phenomenon, the fallout of a leadership vacuum can be immense and severe.
Local businesses like Bitt and financial houses like the Eastern Caribbean Central Bank have featured prominently in this space. Both have served as vivid examples of the contemporary and practical opportunities forging greater ties between emerging tech and existing businesses in the region.
Yet it’s also true that the cryptocurrency sector seeks to develop in our region during a time when great tensions exist in the local financial sector surrounding the ongoing controversies ebbing from the Panama and Paradise Paper leaks.
The relationship between emerging financial houses and the ‘traditional’ finance industry is not always clear-cut, nor reflective of any one trend over the industry as a whole. Yet undoubtedly the blurring of the traditional and emerging financial industry could represent ‘the worst of both worlds’, as many critics hold that the existing industry by itself lacks sufficient regulation around the region. This is why business could play such a vital role in progressing this debate and policy development.
For better or worse, governments are often too slow to react to public discord, or too fast, via a knee jerk reaction. In this environment, the strong and proactive role of businesses in launching and maintaining crypto ventures not only serves as proof positive of crypto’s viability and potential, but also ensures strong voices are on hand to engage with government.
The Crypto Consensus
Across the Caribbean there is the recognition that achieving a regional consensus is wholly unlikely, and likely unnecessary. Each nation can pursue its own financial affairs, and do so with the knowledge that robust security in its financial sector domestically can serve not only as a foundation that benefits the people within its borders, but also the region as a whole.
Nonetheless, as we have detailed in recent weeks, even if regional consensus isn’t achieved, regional discord can be especially dangerous. The growing tension between the European nation of Malta as an aspiring crypto capital that has liberally issued Citizenship by Investment Programme (CIP) passports, and the European Union government in Brussels, shows the risks here.
As with CIPs, even if all other Caribbean nations adopted very strong cryptocurrency regulation, just one nation taking a lackadaisical approach to good regulation could be a security threat to the region.
This debate will continue to develop and progress into the future. Any fair consideration, therefore, of today’s landscape and its shortcomings must consider that the future may yet yield stronger shared regulation in this space, if not at a regional level, then potentially a bilateral one, as nations with close ties seek to adopt shared crypto policy, to make trade and business easier.
Coining a new policy
Ultimately, even the biggest critics would be wary of suggesting that the concepts of cryptos are totally an imminent bust and could never again become useful. Whatever the future holds in the long term, even in the short term there are blockchain applications being implemented locally and globally.
The shared space of cryptos and blockchain means the ongoing use of one would always keep the other in play, even if right now there are hurdles to clear before cryptocurrency stands on an equal footing with a fiat currency, if indeed it ever does, or instead drives forward a new financial format that sees cryptos ultimately co-exist peacefully. Whatever the case, the debate around the right regulation for cryptos in our region, and beyond, will endure.