Can Cryptocurrencies ever be tamed?

Article by: Michael Mainelli |

Michael Mainelli

On 19 September 2018, the UK Parliament’s Treasury Select Committee published a unanimously-agreed report on crypto-assets for its Digital Currencies inquiry. Contributor Professor Michael Mainelli, Executive Chairman – Z/Yen Group.

The report concluded that “the UK Government and financial services regulators appear to be deciding whether they will allow the current ‘wild west’ situation to continue, or whether they are going to introduce regulation. The current ambiguity surrounding the Government’s and the regulators’ positions is clearly not sustainable.

Cryptocurrencies cannot be tamed until regulators can test their claims in advance.  Long Finance’s Eternal Coin project is working on a simulator that regulators and others can use to evaluate how cryptocurrencies would perform economically in challenging circumstances.

Eternal Coin’s “Economic Simulation And Control Of Cryptocurrencies” project has developed the technical framework for a simulator, ‘EZCalate’.  EZCalate, will let users set parameters for a hypothetical cryptocurrency or digital currency, its economic environment, and its control mechanisms.  Using agent-based simulation, EZCalate will, then, help users explore the problems of controlling the cryptocurrency over time.  For regulators and policy-makers, this will be an extremely valuable tool to test the claims of cryptocurrency entrepreneurs ahead of permitting them to publicly offer coins and tokens, or access to regulatory ‘sandboxes’.  The overall aim is to promote a longer-term view of the value of alternative monetary and token systems.

The groundwork for this project was a July 2018 publication, “Control Frameworks For Cryptocurrencies: An Initial Evaluation”, which was, in turn, supported by previous Long Finance work on governance, audit, and standards for smart ledger systems. The Eternal Coin project is sponsored by DasCoin, itself a cryptocurrency ‘ecosystem’.  The prototype simulator was unveiled and discussed at a Long Finance event at Gresham College on 19 September. The intention is to provide free online access to ESCalate by the end of the year.

Professor Michael Mainelli, Executive Chairman of Z/Yen Group who runs Long Finance, said, “We want to encourage the responsible development of digital currencies. Regulators will be able to use the tool to help develop an understanding of the factors that influence cryptocurrency performance and therefore develop a plan of action for evaluation and oversight.”

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