London-based cryptocurrency exchange and wallet Luno is one of the leading players in the digital currency space, with a presence in 40 countries across Europe, Africa and Asia.
The Global Treasurer spoke to the company’s head of UK and Ireland, Maya Kumar, about how regulation is bringing changes to the cryptocurrency sector, the importance of education and the evolution of money in the twenty-first century.
What do you think are the key positive outcomes of the UK government’s recent cryptocurrency regulation report? Where do you think there is room for improvement?
Overall it’s great that the UK government is showing an interest in this space – it’s a practical, democratic approach to new technology and I think that’s fantastic.
It’s taking a lead on this; I do think that the UK, when the internet evolved 30 or so years ago, was a little bit slower than the US and lagged behind. Keeping ahead of innovation and interacting with the community is important. The FCA are aware that this ecosystem is growing – Luno participated in the FCA Sandbox programme in 2016.
They are taking a pro-active approach and this will help to speed that up. The educational aspects of the report are very relevant, and continued education will help to aid progress further so we can define regulation in a better way.
In what ways do you think regulation will benefit the cryptocurrency sector, and how do you think crypto regulation can benefit the financial services industry more widely?
Ultimately regulation, whether of the cryptocurrency sector or financial services as a whole, is there to protect the consumer and businesses.
We originated as a bitcoin exchange, so being self-regulating is very much a part of our culture and how we operate. A lot of businesses in this space do self-regulate.
It’s obviously very important to combat people trying to use cryptocurrencies for illicit use – just as with regulations around conventional fiat currencies. But industry reports indicate that rates of people trying to use cryptocurrencies for criminal purposes are actually very low – about 1% – whereas with global fiat currencies it’s more like 2-5%.
Innovation is moving faster than regulation in this space, but I think it’ll have a net positive impact. It builds a framework for the ‘traditional world’ to interact safely with this new world in a safe, regulated way.
Do you think increased regulation is likely to cause a stir in the ‘crypto community’, given the technology’s somewhat anti-authoritarian roots?
I would say there’s a misconception that it’s anti-authoritarian. The internet is de-centralized rather than anti-authoritarian; it’s a means of transmitting information. It’s not a negative, it’s just creating efficiencies. Cryptocurrency is similar.
We take a pragmatic approach – we’re not of an anti-authoritarian viewpoint, and a lot of the cryptocurrency community, especially the major players like ourselves, have that pragmatic approach in terms of self-regulation. We do think regulation will help to drive adoption and understanding.
Bitcoin technology originated from the financial crisis, where there was a massive impact on governments and banks, and it really is just about re-evaluating trust in society and how we gain access to, and ownership of, wealth and the financial system in an open and transparent way. It’s about the evolution of money – it’s not a way to cause anarchy or anything like that.
Treasurers tend to be very cautious around risk, including when it comes to the adoption of new technologies. What would you say to people working in treasury who are interested in the potential of cryptocurrency, but unsure of the actual benefits and the risks involved?
Whether they’re treasurers or private individuals, education needs to be channelled more formally into greater understanding – whether that’s through discussion, at conferences and events across different sectors with official bodies, or through the press, the key objective for us is to educate, inform and build trust.
It’s important to understand cultural values and get backing from legitimate, proper investors, and to understand how we can benefit our users as individuals and on a wider scale.
Do you think cryptocurrency and blockchain technology represent a challenge to traditional financial institutions such as banks, or do you think the present them with greater opportunities?
It has been overstated the extent to which we’re challenging or trying to replace traditional institutions. Again, it’s about the evolution of money – it’s a complement or an improvement to how the financial system works, how stakeholders or gatekeepers of finance function.
We need to work in a collaborative fashion – we’re not here to replace banks or threaten the structure of society, we’re here to work together and prove that cryptocurrency can have a net positive impact on society, on economics and driving efficiencies in the economy.
Where do you think the cryptocurrency sector is heading in, say five or 10 years’ time?
To reference the internet again and decentralization, it’s very similar to that. We didn’t know how much the internet would affect our lives, from machine learning to AI, to driving efficiencies in how we govern, how we communicate – it’s hard to predict that.
But part of that is the innovation exploration that’s going on at present; there’s a huge amount of capital flowing in to see where we can apply blockchain technology, whether that’s in finance, the supply chain or legal structures.
It’s an iterative process, the same with payments through the bitcoin network. It’s about technology, so it has to constantly move and adapt to solve problems.
Ultimately it will make our financial systems more efficient, more interoperable – we’re dealing a lot with online payments and international transactions, taking away that middle cost that is not needed any more, making the system better and more transparent for anyone, anywhere – not just in Europe, but in other parts of the world.