Crypto Regulation Is Finally Coming but Will It Provide the Clarity Complianper e Craves and in the Right Areas?
Categories: Crypto News US
The cryptocurrency market has continued to expand from the types of coins and use cases to the number of participants and the crazy volatility – crypto is crossing over and becoming a permanent consideration or feature in the mainstream. In April 2020, Bitcoin traded at $6,800. Today, it sits at over $30,000, having peaked in November 2021 at $64,400. Bitcoin is just one out of +18,000 cryptocurrencies, which are traded on 460 crypto exchanges. But as the development of crypto assets has escalated, regulation to protect consumers, support market standards of execution and mitigate fraud has been notably absent. Calls to regulate crypto with suggested frameworks from the global industry were made loud and clear by Binance, Coinbase and FTX in 2021, and the call for regulatory progress and clarity is industry driven in many cases today. The need to engage with industry by our regulators, with a focus on protecting customers, is becoming progressively clear. The UK’s FCA, EU regulators and US agencies are all “loudly” working on crypto market regulation. New consultations and legislation are expected imminently. Compliance officers in this space are going to be super busy just keeping up with regulatory change and arbitrage in the space. But is it simply a case of too little, too late and, more importantly, in the wrong place? Is crypto regulation going from one extreme to the other? Authorities are playing catch up to an industry that’s growing and morphing so fast, they have in many cases been caught off-guard with the pace of change and a skills drought. Regulation is at risk of becoming so onerous by trying to fit a crypto-shaped problem into a fiat-shaped solution, some jurisdictions could be regulated out of commercial viability unless they are prepared to pivot.While we doubt this is an inevitable path, the strictness or restrictions in any given regime is less important right now than the clarity that’s needed for those operating in the space. With areas like market abuse, conflicts of interest and financial promotions relying in most places on rulings instead of rules, anxiety rises. Compared to regimes afforded to other areas of traditional finance, the crypto industry rightly feels an unlevel playing field is being sought by some regulators who lack confidence in their crypto knowledge, disadvantaging VASPs with questionable benefits. There is a strong desire to see increased cross-border clarity. As tough as it may be, all crypto venues, and in particular those jurisdictions who are competing with each other to be attractive global crypto hubs would benefit from a timely, basic, standard set of principles VASPs can engage with and solution providers can accommodate, irrespective of jurisdiction. Compliance thought leaders and educators need to strive continuously for a strong grasp of their obligations as VASPs expand, pivot and mature to provide the necessary head room for further innovation into Web3.