Amid the daily price swings in bitcoin and some seven thousand other cryptocurrencies, as exchanges grapple with the ins and outs of data collection and know your customer (KYC) activities, it seems the only certainty is that the regulators are watching and on their way.
In just the past few months, U.S. Treasury Secretary Janet Yellen has said that cryptos, including stablecoins, need more regulation. The IRS wants more transparency about cryptocurrency transactions above $10,000. China has cracked down hard on bitcoin and its miners, and has declared that the digital offerings are off-limits in financial services.
Read more: Chinese Crackdown Leads To Crypto Slump
Eden Doniger, general counsel and chief compliance officer at BitPay, told PYMNTS that it’s all part of a natural evolution toward a more stable environment for cryptocurrencies — and at the end of the day, more regulation will actually help crypto become more firmly entrenched in retail and commercial settings.
Despite the legal issues, volumes in bitcoin, Dogecoin and other currencies are surging. BitPay, for example, has seen bitcoin recede as a percentage of transactions — from 90 percent just a few years ago to a bit more than 70 percent, which indicates a rising familiarity with, and embrace of, other cryptos. Indeed, PYMNTS research demonstrates that more consumers than ever want to transact with crypto for their everyday purchases, from groceries to gas.
“For BitPay, this is what we’ve been waiting for and hoping for,” said Doniger of the volume surges and the movement toward more regulation. She posited that cryptos are increasingly on the radar for the public at large, and any number of government agencies.
In a nutshell, everyone wants to keep the bad actors out and help the markets continue to boom — negative comments from politicians notwithstanding.
Doniger noted that blockchain payments allow for more transparency in everyday commerce than do legacy rails. “We can have an incredible ecosystem that’s leveraging this technology across the board and have it be compliant and safe,” she said.
The companies that are not serious about compliance are going to have to get serious very quickly; otherwise, they will suffer the consequences, Doniger said. All stakeholders will have to make sure they are protecting their consumers — and that the consumers themselves know what they’re dealing with when they transact. Average people want to get involved with cryptos, but may not quite know how or where to start — and a bit of education can go a long way to spur confidence.
The regulatory frameworks, she said, have been lagging behind the demand — but as Doniger noted, the tools needed to build those frameworks are in place. “From a compliance perspective, a crypto company can build an anti-money laundering, counter-terrorist financing program that’s largely based on what any traditional financial institution would build,” she said.
But there are some unique aspects to a crypto company’s compliance framework that have not been truly defined — not yet, anyway. But those frameworks, whether through the OCC, FinCEN and other bodies — and with the input of the crypto companies, accounting firms and law firms, among others — can be collaboratively developed.
It may take a few more years before things start to really coalesce, she said — but as consumers want to use cryptos, merchants want to accept them as payment.
“Part of the appeal for a business is that you can attract a lot of new customers by adding cryptocurrency payments as an option, regardless of whether someone uses bitcoin or something else,” she said. Many of BitPay’s customers are doing as much as 5 percent of their sales in crypto, a percentage that is likely to blossom in the next few years.
“Things have really changed in a positive direction,” Doniger told PYMNTS. “Having a robust regulatory framework with an innovative mindset is the perfect combination for crypto payments to become ubiquitous.”