Cryptocurrency regulatory frameworks could take decades to implement, Binance chief says

A lack of awareness regarding the advantages of digital assets could hinder their adoption by governments

Changpeng Zhao, chief executive of Binance, Gabriel Abed, Barbados' Ambassador to the UAE, during the AI Everything summit  at Gitex Global in Dubai on Monday. Leslie Pableo/The National
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The implementation of full-fledged regulatory frameworks for cryptocurrencies could take decades to realise, but the rapid pace of adoption could prompt governments to accelerate the process, according to the chief executive of the world's largest cryptocurrency exchange, Binance.

Countries that will adopt cryptocurrencies at the soonest would be able to tap into its advantage and understanding their benefits would allow nations to future-proof their financial structures.

"Regulations cannot be changed overnight, but most regulators are taking the first step, and the channels of communications are really important," Changpeng Zhao said at a conference held during Gitex Global in Dubai on Monday.

Interest in cryptocurrencies has mushroomed in the past few months, with the market cap of Bitcoin – the world's largest cryptocurrency – exceeding $1 trillion. Bitcoin early on Monday was flirting near $63,000 and is a stone's throw from its all-time high of $64,895 as users flock to it.

But cryptocurrencies have come under sharp criticism from economists and regulators. "Dr Doom" economist Nouriel Roubini questioned crytpocurrency's security, terming them as a "misnomer" and are "not a basis for payment system". Meanwhile, the International Monetary Fund urged regulators last week to enact global standards to keep the risks in check.

Central banks around the world have been reluctant to endorse cryptocurrencies because of their speculative nature and regulatory oversight but many are dabbling with the concept of central bank digital currencies. These are digital versions of their fiat currencies and an alternative to cryptocurrencies.

China piloted its digital yuan programme and the European Central Bank's digital euro project is currently under development.

Advocates of digital currencies have long touted the secure nature of these assets, which are built on blockchain, a type of database that makes it difficult or impossible to hack and on which Bitcoin was built.

Mr Zhao warned that a lack of awareness regarding the advantages of digital assets would create a chain reaction that would consequently be a setback for progress. This is particularly applicable now that more users are adopting digital means of payments as a more convenient and secure alternative compared with traditional hard currency.

"It is a lack of understanding that stokes fear, and that's not the right approach," he said. "Any innovation that can disrupt, we should invest in that."

Last week, Binance Smart Chain, a unit of the company, launched a $1 billion fund to help fast-track the adoption of digital assets and blockchain technology.

Its move comes as regulators around the world crack down on crypto exchanges to safeguard their financial systems and better protect consumers.

Earlier this year, Binance said it is winding down its futures and derivatives products offerings across Europe. It also said its users in Germany, Italy and the Netherlands would not be able to open new futures or derivatives products accounts.

Updated: October 18, 2021, 1:44 PM