Just when we were waiting for Theresa May to leave Downing Street and Donald Trump to come to Regents Park, J. Christopher Giancarlo has pulled stumps without fanfare or ceremony and left altogether, he just went. But who is this fellow and why should we be interested in him anyway? Well, taking those questions in order: he is (or rather was) the Chairman of the US Commodity Futures Trading Commission (“UFTC”), and we should be interested in him because he’s only been regulating our crypto and Blockchain markets for the last two and a half years.
This is the man who describes himself as being humbled at being called “Crypto Dad”; a regular chap who grew up amongst the exotic complexities of Blockchain, and a self-confessed “quantitative regulator” with an “exponential growth mindset” (whatever those might mean).
But the fact remains that although this Bitcoin ubermensch made it his mantra in office to “embrace market based solutions” in a period of digital revolution, he ultimately turned out to be a reactionary: the Flight Control Jeremiah with a divine mission to tell anyone who will listen that landing on the moon is impossible. In 2017 he told us (without a smile on his face) that fiat currencies and ICOs were too complicated for your average Joe, that they should be discouraged and it might be better to stick with paper stock and assets you can photocopy. So much for embracing our digital times…
But, as someone once said (Margaret Thatcher actually), you can’t buck the market and as e watch J. Christopher Giancarlo retreat from the world stage to spend more time with his money, the markets are already finding a new home where Blockchain can spread its wings and rise to its full potential: half a world away, in India.
In particular, the Reserve Bank of India now seems to be regretting its hasty decision to ride on Mr Giancarlo’s coat tails last year, by issuing a directive effectively banning crypto banking activities on the subcontinent. Counter intuitively, and as is often the way with that sort of precipitate, ill thought out action, the RBI Directive has actually signalled something of a renaissance in Blockchain technologies in India, stepping up to occupy the yawning regulatory gap left by the UFTC.
It did this first through an explosion in exchange escrowed peer-to-peer services, designed to allow cyber markets to thrive with little or no regulation. And secondly, because a lack of regulation is inherently a bad thing (ask Carillion), court proceedings were issued by the Internet and Mobile Association of India (hardly surprising given it is the fastest growing mobile and internet market in the world): the proceedings sought to overturn the Reserve Bank’s 2018 decision on the basis it was unlawful (commercial myopia not being a legal basis of challenge). And significantly, these proceedings have now reached the Supreme Court of India.
The Supreme Court last month heard submissions in the action on behalf of the Reserve Bank that its Committee, tasked with overseeing regulation of crypto markets, had reached “…the final stages of its deliberations, and these proceedings should be delayed until after its report is produced”. In other words, and in plain English: Dear Judges, delay your ruling because we and the Government are going to give in. Crypto markets, Bitcoin and Blockchain are about to step into the daylight on a new Indian stage after being consigned to the gloom by Mr Giancarlo.
The Court didn’t need telling twice: it quickly granted the Reserve Bank a four-week adjournment to allow an “opportunity for the Government to do the needful”.
And this, in short, is how international markets actually work. One leading regulator declines to accept the challenge posed by a new sector, so another steps forward to take its place. The United States gives way to India, because markets abhor a vacuum. And having called it so badly, last year it is greatly to the Reserve Bank and the Government’s credit that they have now shown themselves ready to take on the challenge. They are certainly unlikely to meet any lack of appetite for Crypto markets amongst its fellow citizens or across the wider commercial world. The torch has been passed to a new generation of regulators….as someone else might once have (almost) said.
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Executive Overview
I remember being surprised when I read the comments made by India’s Finance Minister in the Union Budget Debate last year, comments which caused the value of Bitcoin to soar on international exchanges and which seem directly to have precipitated the Reserve Bank’s intervention as described in the article. I remember too thinking that whatever the merits of Bitcoin and Blockchain might be, this was at least a powerful statement of the role that India might play in any future Blockchain driven market.
And now we seem to have come full circle.
The comments made in the Supreme Court on behalf of the Reserve Bank of India (and, at least by implication, on behalf of the Government as well) clearly signal a willingness to step into the regulatory void left by the United States and meet the challenges and opportunities posed by Blockchain on a concerted basis. And in a sector so obviously in need of regulation and so obviously lacking in effective oversight to date, that has to be a good thing.
So watch this space, it should get interesting!