Mass crowd in World Economic Forum

world economic forum to break down barriers with digital currency consortium

Since the birth of cryptocurrency over a decade ago the sector has been waiting patiently for regulation at a supra-national level.

24 January 2020 took us one step closer to this vision becoming a reality with the announcement that the world’s most powerful financial NGO, the World Economic Forum, is forming a cross-border governance group to set crypto standards across the globe.

It is called the Global Consortium for Digital Currency Governance (GCDGS). This is perhaps the single most important piece of regulatory news in the history of cryptocurrency.

The key messages speak for themselves. The consortium “will focus on solutions for a fragmented regulatory system”, the announcement said.

fragments become whole

The main issue that industry players find when they begin to operate, whether in offering trading platforms, insurance, custody, futures or any other cryptoasset-based financial service is that they have to abide by a myriad web of complex country-level regulations that often contradict one another.

One state may allow a certain element of your offering while its neighbour does not. One portion of your business is viable in Thailand but outlawed in China, or legal in the UK but banned in North America.

For businesses necessarily working with clients and audiences who think far beyond simple land and sea borders, the lack of clarity is incredibly frustrating.

And it’s not a controversial statement to say that the kinds of legal headaches these regulatory inconsistencies produce have stunted the growth of the cryptocurrency industry.

That’s all about to change.

what’s new?

Over the past 10 years, some of the more forward-thinking cross-border bodies, for example at the Bank for International Settlements, have put out discussion papers and policy exchange ideas for how cryptocurrency could be regulated worldwide.

However to their detriment, they are often couched in language that expresses fear of the impact that cryptocurrencies will have on monetary sovereignty, or are outright dismissive of the potential power that cryptocurrency wields.

A shift is underway.

The consortium is made up of some of the financial world’s most recognised and celebrated figures, from central bankers to policy trailblazers.

It’s clear the consortium believes that cryptocurrency — or digital currency in their terminology — has the potential to improve financial inclusion worldwide.

Their main policy outcomes are that they “will aim to increase access to the financial system through innovative solutions that are inclusive and interoperable”, while noting that “opportunities for financial inclusion will only be unlocked if the space is regulated properly,” and include “public-private co-operation across developed and high-growth markets.”

who’s in?

Leading the consortium is Professor Klaus Schwab, a German economist and engineer who founded the World Economic Forum in 1971. More recently he became widely-recognised for his book ‘The Fourth Industrial Revolution’, published in 2016. It describes the rapid technological advancements we are seeing as more significant than any prior point in human history.

“Blockchains are at the heart of the Fourth Industrial Revolution,” Schwab later wrote, adding “the evidence of dramatic change is all around us and it is happening at exponential speed.”

Also named in the press release announcing the consortium are the outgoing head of the Bank of England and previous head of the global Financial Stability Board, Mark Carney, the heads of the South African and Kenyan reserve banks, Lesetja Kganyago and Patrick Ngugi Njoroge, and crucially, David Marcus, who heads Facebook’s Calibra project and its controversial Libra stablecoin.

The rapid rise of stablecoins — which include highly controversial projects like BitFinex’s troubled Tether and Facebook’s as-yet-unreleased Libra — have provided mainstream economists with a more-easily understood mechanic to see the value in digital currencies. Certainly these cryptocoins, pegged one-to-one against traditional fiat currencies, or assets like precious metals, appear to open the door to bring millions of previously unbanked people into the global financial system.

what’s changed?

While Bitcoin and blockchain was not part of Klaus Schwab’s original ‘Fourth Indsutrial Revolution’ theory, like the rest of the financial mainstream it has taken a little time for this world leader to realise and recognise the market’s potential.

Schwab has now recognised what the industry has been saying for the past decade. That the reinvention of money in the form of cryptocurrency, upending thousands of years of prior policy, should sit alongside technological advancements like ubiquitous mobile supercomputing and artificial intelligence.

Just read the agenda and summary for the next major WEF DGS meeting, which takes place in San Francisco on 21 and 22 April 2020.

“The world is experiencing the Fourth Industrial Revolution, in which data has arguably become the world’s most valuable resource. In this context, technologies such as artificial intelligence, blockchain, drones, gene editing and the internet of things could lift communities out of poverty, cure diseases and restore balance to our oceans and natural ecosystems.” [our emphasis].

Cryptocurrency has spent the better part of 10 years largely shut out in the regulatory cold.

That it has now been added as one of the main pillars of discussion at a systemically-important technology conference is hugely bullish for the future.

While it would be lovely if this recognition of the power of cryptocurrency was based on the purely technical advantages that we can see, the truth is that there must be a massive financial incentive too.

Nothing ever happens quickly in the arena of shaping world policy. It is a shame it has taken this long for world leaders to recognise the potential in cryptocurrencies, but at last we have sight that their vision is starting to align with what we knew all along: that crypto would change the world for the better.