Cryptocurrencies may be the way of the future but digital currencies like bitcoin and ether still have to shed their links to crime before becoming legit, says Bruce Croxon of Round 13 Capital, who argues that more regulation will help bring cryptos in from society’s darker corners.
Last week, it was reported that since the beginning of 2017, about US$1.2 billion in cryptocurrency has been stolen, with an estimated 20 per cent of which has so far been recovered. The stats come from the non-profit Anti-Phishing Working Group, whose chairman Dave Jevans has said, “One problem that we’re seeing in addition to the criminal activity like drug trafficking and money laundering using cryptocurrencies is the theft of these tokens by bad guys.”
But while the use of digital currencies by criminal groups has long been a hallmark of the medium, the fact that a person’s own bitcoin might itself get swiped is a different sort of problem for cryptos, says Croxon, since from day one they have been lauded for being a safer form of wealth exchange, less prone to corruption and theft.
“It’s supposed to be a tenet of blockchain, which was transparency, security and being able to trace where everything goes, ultimately,” says Coxon on BNN’s the Disruptors. “That’s really about the type of people who are on the fringe of using cryptocurrency. There’s a huge criminal element that’s making use of the fact that you can move these currencies anywhere, and I think the byproduct of that is that you’re going to have criminal activity and I think that’s why they’re rushing to get it legitimized and legislated and regulated so that we can expand the bonafide uses of blockchain and crypto.”
The road to legitimacy may be difficult, however, since in essence, cryptocurrencies came into existence as mediums for the decentralized (a.k.a. unregulated) form of transaction. But one step towards legitimacy will come in the form of more jurisdictions formulating regulations surrounding cryptocurrency exchanges, something that has been tackled in places like New York State and Australia.
In Canada, that’s the position being taken by the trading platform Coinsquare. “We want to be regulated because ultimately we want to be able to provide certainty to our customers that we’re not some fly-by-night trading platform, that they can trust us,” says Coinsquare chief executive Cole Diamond to the Globe and Mail.
Croxon says the exchanges themselves may not be the problem, since in today’s world, no store of value — not even the institutional banks — should be regarded as 100 per cent immune to hacking and criminal activity.
“Should we be cautious of the crypto-exchanges? There’s a couple of them that are established and that we’ve put our trust in,” says Croxon. “When you look at the amount that has been breached, it still is a relatively low percentage of the overall market activity, so, yes, just as I want to be cautious about all my data in all places, including the big banks, I have to be careful about the cryptocurrency exchanges, as well.”