2019 to 2020: Insiders, Outsiders and Experimenters in Crypto Regulation: Part 1

In 2019, we witnessed crypto regulations leave the domain of stuffy legal pontification and enter the realm of geopolitics.

We saw President Trump tweet about crypto regulations, as well as powerful international organizations express their agenda on how crypto should be regulated.

The "Insiders" - the U.S. and nations of Western Europe and the Pacific Rim - remain at the center of financial and trade systems, and are visibly curious about the developments surrounding crypto.

The Outsiders face different threats; they are threatened by crypto's near-term effect on their capital controls and currencies, yet are visibly intrigued by its longer-term disruptive capabilities.

Lastly, we have the "Experimenters" - clever countries like Singapore and Switzerland that have found niches and hacks playing the rulebook set by the Insiders to their own national advantages, and perhaps to the advancement of technology and decentralized systems writ large.

The Organization for Economic Co-operation and Development was formed in 1948 and immediately handed over $1 trillion from the U.S. and Canadian governments to rebuild war-ravaged Europe so it may compete in a newly free-trade-oriented and U.S. dollar-dominated world.

Decentralization around crypto threatens to disrupt the inherent banking hierarchy.

Thus, Insiders face two related threats from crypto: 1) competing institutions and networks acting outside of the existing international banking system, and 2) cryptocurrencies undermining the value of the fiat-currency undergirding the entire system.

The sheer quantity of transactions shifting from the established players to the smaller, recently founded exchanges - wash trades notwithstanding - also speaks volumes about how crypto traders might react to the increased user friction that comes with mandatory heightened KYC requirements.

If you haven't been following crypto regulations and like to go off vague national stereotypes, you will not be surprised to find that Japan is years ahead of the others.