Greg Medcraft, Director of the Directorate for Financial and Enterprise Affairs of the OECD, recently revealed that he believes we need an “international discussion on cryptocurrencies,” and that blockchain technology will propel the “next revolution.”
During an interview on the sidelines of G20 with Brazilian news outlet Criptomoedas Fácil, Medcraft revealed that there are several issues in the cryptocurrency space that need to be addressed. One of these issues, presumably referring to initial coin offerings (ICOs) is the lack of certainty when it comes to regulations in place, for both token issuers and investors. Since cryptocurrencies are global, he argued, global coordination is needed to tackle regulations in the crypto sphere.
Another issue is risk. The OECD director mentioned money laundering, which he says needs to be addressed through coordination. He also noted that investor and consumer protection needs to be addressed, as fraudsters keep tricking potential investors, and projects often don’t disclose basic information.
Per his words, the OECD is specifically interested in market integrity, and in cases in which cryptocurrency exchanges get hacked, as the organization sees investor protection principles as one of its key instruments, according to Medcraft, who previously served as the chairman of the Australian Securities and Investments Commission (ASIC).
Medcraft underlined the need for governments and regulators to come together to discuss the best possible way to protect consumers in this area.
Blockchain technology is “the next revolution”
Criptomoedas Fácil then asked Medcraft about his thoughts on blockchain technology. He replied that he sees the technology as “the next revolution,” and that combining what we have with distributed ledgers makes for exciting possibilities. He said:
“Well, I think that distributed ledger is the next revolution (…) If you’ll actually enable this intermediation in many parts of the value chain, which should result from my point of view in cheaper, faster, better products for consumers and investors. That transparency, I think that the peer-to-peer that is enabled through distributed ledger will help financial inclusion.”
The biggest beneficiaries of this type of technology, he said, will be governments, financial services providers, and global supply chains. Governments, for example, will be able to use blockchain technology to improve voting systems, and review their services.
In his answers, the OECD director noted blockchain technology has three key advantages: it allows for the secure exchange of value, the secure of exchange of data, and for better cybersecurity. The latter, he believes, isn’t yet being properly explored. Per his words, the technology will “reshape” the world’s economy.
The conversation then drifted on to the use of private and public blockchains. Per Medcraft, in the future we’ll have a combination of both, as when we’re exchanging value we need to have traceability in order to hinder money laundering and terrorism financing. He noted, however, that traceability doesn’t mean anonymity needs to be sacrificed, it means that “there’s got to be an ability for law enforcement to identify the flow of money.”
Using bitcoin as an example, he stated:
“With bitcoin, for example, you can trace at the moment IP addresses, you can trace computer to computer, but what you’ve got to do is trace form person to person, and that’s the missing point of the moment with Bitcoin. I can trace it to your computer, and I can’t actually trace it to you.”
When asked about Venezuela’s oil-backed cryptocurrency, the Petro (PTR), Medcraft said he believes that, in the future, we’ll have different types of cryptocurrencies. Among them are cryptocurrencies issued by central banks, which he says will reshape banking, and asset-backed payment tokens like the Petro.
These asset-backed tokens could be promising depending on where the custody of the reserves is. Ideally, it would be possible to convert the token to the asset backing it if needed. Cryptocurrencies like Bitcoin and Ethereum are, according to him, backed by nothing and only based on a “supply and demand algorithm,” that may not be popular in the future.
The scalability problem
Criptomoedas Facil’s interviewer then went on to ask Medcraft about his thoughts on bitcoin’s Lightning Network. Per the OECD director, bitcoin brought the world the ability to transfer money in real time, but these transactions need to be done quickly and at virtually no cost, he added. According to him, bitcoin has scalability problems and consumes vast amounts of energy. One of potentially many solutions could be the Lightning Network, but bitcoin’s “lack of transparency problems” aren’t solved with its implementation.
Instead, he noted, Stellar may be the way to go. He claimed the cryptocurrency’s technology could even surpass Visa’s transactions per second, which had him closely look at it. Medcraft concluded, however, that it’s exciting to see how cryptocurrency entrepreneurs develop solutions to solve the scalability problems, and claimed that what happened in the crypto space so far is amazing.