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Macroscope | Don’t let regulators’ fear of cryptocurrency choke off fintech’s potential
- Highly visible crashes such as those by FTX, Terra and Luna and Celsius have worried regulators and led to efforts to increase oversight of digital currencies. But getting ahead of the Web3 game takes resisting the urge to clamp down on as yet unknown tech
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Why you can trust SCMP
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Many people have hyped up decentralised financial technology, or fintech, in recent months, and for good reason. What if Yung Kee could have printed its own tokens which work like a stock, bond, currency, passkey, derivative, commodity, ID card and smart contract – all at the same time?
These tokens squeeze many transactions into one and can live outside any single organisation. They even can have their own democratic voting mechanism built right into them. The whole world would probably be eating roast duck instead of hamburgers.
Academics like me are conservative by nature. We loathe boosters’ talk of paradigm shifts and new ages. Yet, even the British have seen the revolutionary potential of the Web’s third age, known as Web3. Peer-to-peer Web3 apps work more like Kazaa and Napster and less like Facebook.
Like their predecessors, these technologies have raised concerns among regulators. The Bank for International Settlements, International Monetary Fund, Group of 20, European Union and the Financial Stability Board have all advocated for increased regulation on fintech.
Hong Kong’s regulators are no exception, with the Securities and Futures Commission (SFC) making clear its intent to better regulate virtual assets and trading platforms.
The past three years have seen a boom and bust in cryptocurrency markets. After growing rapidly between 2019 and 2022, bitcoin and Ethereum have crashed to about 40 per cent of their 2022 highs. Highly visible crashes such as those by FTX, Terra and Luna and Celsius have clearly worried regulators. Possible “rug pull” scams such as SafeMoon and the proliferation of “Ponzi coin” schemes have led to a “crypto winter”.
Dr Bryane Michael is currently a senior fellow at the University of Hong Kong and advises the UN and EU.
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