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World Economic Forum offers guidance on global crypto regulations

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The WEF has released a comprehensive report suggesting global guidelines to regulate the complex and rapidly-evolving crypto industry, emphasizing the need for harmonized regulations to ensure market stability and investor protection.

The World Economic Forum (WEF) has released a significant study on the challenges and opportunities surrounding international cryptocurrency policy. The report, titled “Pathways to the Regulation of Crypto-Assets,” asserts that the present-day regulatory landscape is too disjointed to effectively safeguard markets and investors.

The WEF argues that crypto’s unique, decentralized structure means that traditional financial protections may not apply fully. By addressing this “borderless nature”, the gaps in protections could be bridged.

Despite crypto assets making up a relatively small fraction of the worldwide financial system, the WEF mirrors the concerns of Europe’s systemic risk board, suggesting that the unregulated nature of this market could potentially destabilize the global financial system.

World Economic Forum offers guidance on global crypto regulations - 1
Cover page of the approach whitepaper

The WEF’s recommendations target three primary stakeholder groups: international organizations, regional and national regulators, and the entire industry. For international organizations, the WEF suggests establishing best practices for crypto and standardizing terminology and definitions.

Regulators, on the other hand, should foster cross-sector coordination and work together to establish interoperable technical standards.

For the crypto industry, the Forum advises sharing best practices for managing operational and cybersecurity risks, and to innovate responsibly while maintaining engagement with policymakers and regulators.

The organization asserts that the lack of standardization in cryptocurrency regulations, policies, and definitions hampers progress towards effective supervision. It also raised concerns about regulatory arbitrage, a practice common in some jurisdictions, including crypto hubs like Singapore and Hong Kong.

Best known for its annual Davos conferences, the WEF is an international non-governmental organization where global and business leaders gather to shape worldwide conversations and agendas. This crypto policy report, the organization clarifies, was created with input from policymakers, regulators, and industry figures.

Dante Disparte, Chief Strategy Officer and Head of Global Policy at Circle, commended the WEF’s efforts. He stated that the rise of crypto-assets and blockchain-based financial services tends more towards the convergence than disruption of the traditional economy and finance, and should therefore be promoted.

The WEF’s report also touched on concentration risk within the crypto industry. Stablecoins and crypto exchanges were identified as areas of concern. Without clear regulatory frameworks to address potential market abuses, competition policies, and conflicts of interest, the entire crypto ecosystem could face threats.

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