Crypto-currency regulation discussions to begin in 2021 – SEC

The Securities and Exchange Commission Ghana (SEC) has hinted that it is open to initiate discussions and consultations in 2021 to settle whether or not to recognise crypto assets as securities in Ghana.

The Director-General of SEC, Rev. Daniel Ogbarmey Tetteh, told theghanareport.com, it is working to start the process after sanitising the investment sector.

The processes towards regulation, he revealed, could start in 2021, barring any hitches.

The legalisation of trade in digital currencies is to ensure a safe environment for investors.

Cryptocurrencies, or virtual currencies, are digital means of exchange created and used by private individuals or groups.

Because most cryptocurrencies aren’t regulated by national governments, they’re considered alternative currencies – mediums of financial exchange that exist outside the bounds of state monetary policy.

Digital currencies are not recognised as legal tender in some jurisdictions, including Ghana.

But technology advancement and increasing global acceptance are compelling countries to have a second look.

Cryptocurrencies such as Bitcoin, Ethereum, Ripples, and Litecoin have gained global prominence since 2017.

In Ghana, the Securities and Exchange Commission says it is currently “focused and preoccupied with the financial sector clean-up exercise.”

After the revocation of the licenses of 53 Fund Management Companies, SEC is ensuring a resolution of the investment firms and payment of locked-up funds to depositors.

Rev. Tetteh, however, said SEC is keeping an eye on that space for future regulations.

But before then, SEC is creating a better foundation by sanitising the financial markets before the introduction of new policies, especially for the complexities of virtual transactions.

Rev. Tetteh is of the view that it would not be advisable “to introduce some product which obviously is not a simple product which can lend itself to fraud when you still have some cleaning to do”.

West African neighbour Nigeria has made a u-turn on crypto-currency after first shunning it. It says it would take steps to standardise its usage.

This would make the most populous country, the first in West Africa to issue a green light on digital currencies.

The ripple effect could be pressure on Ghanaian authorities to do the same.

In Ghana, SEC says it had started some work to get a professional understanding of a framework on crypto-currency, but this training had to be deferred.

A return to the drawing board is becoming likely.

In African, Mauritius, Angola, South Africa, Namibia, and Zimbabwe are some other African countries where cryptocurrencies are permissible. On the other hand, it is banned in Algeria, Egypt, and Morocco.

Globally, crypto-currencies are common in the US and also allowed within some countries within the European Union.

Japan, Hong Kong, and Korea are some countries in Asia where digital currencies are also legal.

History of crypto-currencies

In 1983, the American cryptographer David Chaum conceived an anonymous cryptographic electronic money called ecash.

Later, in 1995, he implemented it through Digicash, an early form of cryptographic electronic payments which required user software in order to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient.

This allowed the digital currency to be untraceable by the issuing bank, the government, or any third party.

In 1996, the National Security Agency published a paper entitled How to Make a Mint: the Cryptography of Anonymous Electronic Cash, describing a Cryptocurrency system, first publishing it in an MIT mailing list[9] and later in 1997, in The American Law Review (Vol. 46, Issue 4).

In 1998, Wei Dai published a description of “b-money”, characterized as an anonymous, distributed electronic cash system. Shortly thereafter, Nick Szabo described bit gold.

Like bitcoin and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange, BitGold) was described as an electronic currency system which required users to complete a proof of work function with solutions being cryptographically put together and published.

According to an article by Forbes published in 2017, a paper called Bitcoin – A Peer to Peer Electronic Cash System was posted to a mailing list discussion on cryptography in 2008.

It was posted by someone calling themselves Satoshi Nakamoto, whose real identity remains a mystery to this day.

2009 – Bitcoin begins

The Bitcoin software is made available to the public for the first time and mining – the process through which new Bitcoins are created and transactions are recorded and verified on the blockchain – begins.

2010 – Bitcoin is valued for the first time

As it had never been traded, only mined, it was impossible to assign a monetary value to the units of the emerging cryptocurrency. In 2010, someone decided to sell theirs for the first time – swapping 10,000 of them for two pizzas. If the buyer had hung onto those Bitcoins, at today’s prices they would be worth more than $100 million.

2011 – Rival cryptocurrencies emerge

As Bitcoin increases in popularity and the idea of decentralized and encrypted currencies catch on, the first alternative cryptocurrencies appear. These are sometimes known as altcoin and generally try to improve on the original Bitcoin design by offering greater speed, anonymity or some other advantage. Among the first to emerge were Namecoin and Litecoin. Currently there are over 1,000 cryptocurrencies in circulation with new ones frequently appearing.

2013 – Bitcoin price crashes.

Shortly after the price of one Bitcoin reaches $1,000 for the first time, the price quickly begins to decline. Many who invested money at this point will have suffered losses as the price plummeted to around $300 – it would be more than two years before it reached $1,000 again.

2014 – Scams and theft

Perhaps unsurprisingly for a currency designed with anonymity and lack of control in mind, Bitcoin has proven to be an attractive and lucrative target for criminals. In January 2014, the world’s largest Bitcoin exchange Mt.Gox went offline, and the owners of 850,000Bitcoins never saw them again. Investigations are still trying to get to the bottom of exactly what happened but whatever the story, someone dishonestly got their hands on a haul which at the time was valued at $450 million dollars. At today’s prices, those missing coins would be worth $4.4 billion.

2016 – Ethereum and ICOs.

One cryptocurrency came close to stealing Bitcoin’s thunder this year, as enthusiasm grew around the Ethereum platform. This platform uses cryptocurrency known as Ether to facilitate blockchain-based smart contracts and apps.  Ethereum’s arrival was marked by the emergence of Initial Coin Offerings (ICOs). These are fundraising platforms which offer investors the chance to trade what are often essentially stocks or shares in startup ventures, in the same manner that they can invest and trade cryptocurrencies. In the US the SEC warned investors that due to the lack of oversight ICOs could easily be scams or ponzi schemes disguised as legitimate investments. The Chinese government went one further, by banning them outright.

2017 –Bitcoin reaches $10,000 and continues to grow

A gradual increase in the places where Bitcoin could be spent contributed to its continued growth in popularity, during a period where it’s value remained below previous peaks. Gradually as more and more uses emerged, it became clear that more money was flowing into the Bitcoin and cryptocoin ecosystem. During this period the market cap of all cryptocoins rose from $11bn to its current height of over $300bn. Banks including Barclays, Citi Bank, Deutsche Bankand BNP Paribas have said they are investigating ways they might be able to work with Bitcoin. Meanwhile the technology behind Bitcoin – blockchain – has sparked a revolution in the fintech industry (and beyond) which is only just getting started.

Whatever your opinion on Bitcoin and cryptocurrency – and educated commenters have described them as everything from the future of money to an outright scam – it seems they are here to stay. Will it succeed in doing what many early adopters and evangelists claim it is destined to – replace government-controlled, centralised money with a distributed and decentralized alternative, controlled by nothing besides market forces? Well, 2018 may yield some clues but we are unlikely to know the answer for some time yet.