State of Crypto Regulation: This is what it looks like in the world of digital assets

• Still no clear regulation of the crypto world
• Europe, Asia & Co. are working on clear regulations
• USA relies on strict enforcement of punishments

Voices are constantly being raised calling for more regulation in the crypto world. In 2023, regulators around the world have increased their efforts to introduce formal cryptocurrency laws, as CNBC reports.

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USA as “top cop”

The USA, however, took the toughest approach, according to CNBC. The country is therefore also referred to as the “top cop” due to its approach in this area. In 2023, the United States was considered one of the most active enforcers of penalties and legal actions against crypto companies. There is still no law that is specifically tailored to the industry. “Other countries have a comprehensive regulatory framework. We don’t. As a result, matters are litigated that should be regulated by law or regulation,” CNBC quoted Renato Mariotti, a former prosecutor in the US Department of Justice’s Securities and Commodities Fraud Division, as saying. “To be clear, in some cases – like FTX – enforcement was necessary. But US enforcement actions against market participants, which are more compliance-oriented, are questionable and the result of the US ‘regulation through enforcement’ approach,” added Mariotti.

The SEC, the Commodity Futures Trading Commission, the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network (FinCen) have joined forces to monitor and regulate cryptocurrencies and digital assets, CNBC said. “These agencies have provided guidance to the industry on how digital assets and cryptocurrencies must be offered, sold, traded and held by custodians,” explains Richard Levin, partner at Nelson Mullins Riley & Scarborough. “However, much of their work has been to provide guidance to the industry through enforcement actions.”

As CNBC further reports, crypto companies have now begun to defend themselves against this harsh enforcement in the USA. More and more large crypto companies are therefore increasing their investments in international activities. Crypto market participants hoped for more clarity, including in the form of new regulations. “Clearer regulatory frameworks and the stance of regulators worldwide have provided a sense of legitimacy and security and encouraged broader participation in the Bitcoin market,” Alyse Killeen, managing partner of Stillmark Capital, emphasized to CNBC.

However, according to Levin, it is unlikely that much progress will be made in this area in 2024 – especially due to the upcoming presidential elections.

Europe is working on MiCA & Co.

In Europe, a law was proposed back in 2019 in response to Meta’s digital currency project Diem, formerly known as Libra, reminds CNBC. This aimed to combat fraud, money laundering and other illegal financing in the crypto space.

Experts now expect that the European Union will be able to fully apply its crypto legislation this year. Part of the EU framework aims to combat threats – particularly those that undermine the euro. The EU is also striving for a uniform regulatory framework for cryptocurrencies: Markets in Crypto-Assets Regulation (MiCA). The main aim is to protect investors, and MiCA is also intended to contribute to the functioning of the markets, as the Federal Financial Supervisory Authority (BaFin) explains. Full application of the MiCA Regulation is expected at the end of 2024 or beginning of 2025.

“The U.S.’s dominant role in global finance and its focus on consumer protection play a critical role in its leadership in crypto enforcement. However, the landscape is evolving and other jurisdictions are improving their crypto regulatory and enforcement frameworks. area steadily,” CNBC quoted Braden Perry, a former federal prosecutor and current partner at the law firm Kennyhertz Perry. Perry said that while the US remains one of the key law enforcement agencies for the crypto industry, its perception as a regulator may be diminishing. “This perception is due to the proactive measures taken by US regulators such as the SEC, CFTC and IRS, particularly in combating fraud and security issues in the crypto market. High-profile legal actions in the US further cement their image as tough enforcers,” said Perry. “However, other regions, including Singapore, Dubai, Hong Kong and the European Union, are also developing robust regulatory measures. Although these regions may not be as visible in the international media for enforcement action, they do have significant and sometimes rigorous regulatory mechanisms.”

Asia is working on regulations

There is also movement in this area in Asia. The Monetary Authority of Singapore, known for clear fintech and crypto regulations, became one of the first jurisdictions in the world to finalize rules for stablecoins early last year, CNBC reminds. Meanwhile, Hong Kong is aiming to introduce regulation this year. In addition, the Hong Kong Securities and Futures Commission (SFC) introduced a registration system for digital asset companies early last year, with clear regulations for crypto exchanges and funds.

Africa and the Middle East also rely on clarity

According to CNBC, the United Arab Emirates has also become a popular location for the fintech sector. The advantages are obvious: no income tax, flexible visa regulations and competitive incentives for international companies and workers.

In 2022, Dubai established VARA, the Virtual Asset Regulatory Authority, to take the lead in the virtual assets sector in the Middle East and Africa. In early 2023, the United Arab Emirates also passed additional federal crypto regulations to make it easier for regulators to oversee the industry. “Dubai and the United Arab Emirates have created favorable conditions for cryptocurrency businesses and offered special zones and policies for crypto trading,” highlights Perry.

Clear rules and regulations seem to be very important to the majority of crypto market participants. It remains to be seen whether the countries will comply with this wish in a timely manner and whether the USA in particular will strive for clear legislation.

Editorial team finanzen.net

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