Ideas vs Actions: How Are Regulators Working Together on Crypto?


Cryptocurrency regulation around the world is a constant battle for investors in a rapidly expanding and ever-changing ecosystem.

Various regulators around the world view digital assets from significantly different perspectives.

Recently, Fabio Panetta, director of the European Central Bank (ECB). talking In a written statement to Columbia University, regulators should follow a globally coordinated approach while regulating digital assets. He said the world should hold digital assets regulated by the Financial Action Task Force’s anti-money laundering (AML) and counter-terrorism financing (CFT) rules.

Panetta also spoke of strengthening public disclosure, reporting industry compliance, and setting certain “transparency requirements” and “standards of conduct”. He said:

“Bring crypto assets into regulatory scope requires a coordinated effort at a global level. And you need to make sure you meet the standards that apply to your financial system. We need to go faster to ensure that crypto assets don’t trigger lawless risk taking.”

The practicality of the global regulation in question

It is another matter for the ECB to apply these rules to the entire European Union and to apply the same rules to all countries in the world. This is because the ECB can act as a regulator in the EU. However, there is no clear understanding of which regulatory body has the authority to undertake such coordinated regulatory activities.

More recently, Ashley Alder, Chairman of the International Organization of Securities Commissions, a market regulator, fat An online conference hosted by the Official Monetary and Financial Institutions Forum discusses this aspect. He detailed the need for a joint body to be tasked with coordinating digital asset regulation around the world, which could be realized within this year.

On 16 May the Basel Institute of Governance and the International Academy of Financial Crime Litigators announced: paper It also called for further adjustments to the illegal crypto market. The paper proposes that cryptocurrency-related investigators should invest in learning approaches and skills to keep pace with the evolving technology of criminal organizations and organizations.

Cointelegraph spoke with Bianca Veleva, head of legal and compliance at cryptocurrency lending platform Nexo, about the benefits of a global regulatory approach. She said:

“The adoption of a unified legal framework and/or principle for cryptocurrency-related activities may prove beneficial in terms of accelerating legislative efforts in countries that have not yet recognized the benefits that the cryptocurrency industry brings. has already been adopted and implemented.”

As the digital asset landscape expands and regulations become clearer, a new paradigm may be underway that incorporates international regulatory agreements. Mass adoption and increasing use cases of digital assets and blockchain technology should provide a solid basis for consensus among regulators and countries.

However, there are many countries that have completely banned their citizens from indulging in cryptocurrencies and services. A prime example is China, which announced a total ban on digital assets in September last year. In addition to China, there are nine countries that have banned cryptocurrencies, including Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia. according to Submitted to Parliamentary Law Library Report in November 2021

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These differences in how different countries view digital assets could be the biggest obstacle to a globally coordinated regulatory framework. Bybit policy advocate Igneus Terrenus told Cointelegraph that while a global regulatory system makes sense for tracking money flows and reducing regulatory arbitrage, the reality is that there is no universal regulator capable of imposing this on sovereign states. Realistically, it will have a greater impact on citizens and residents of countries that respond positively than countries that choose not to participate.

“Even with existing financial regulations, it seems difficult to achieve a global framework, given the gaps between countries,” said Terenus. A feasible model would be to facilitate the exchange of information between legal entities and jurisdictions, which tax authorities are already doing through the banking system, to deploy zero-knowledge proof technologies to prevent fraud, and to focus on improving regulatory clarity and consistency. will.”

Another aspect to consider in the hypothetical consequences of globally accepted regulations for cryptocurrencies is that agreements between countries at different stages of adoption can stifle innovation and lead to stagnant adoption rates. Belleva said:

“A joint effort to integrate the pending EU regime with the US legislative framework could be a double-edged sword. In fact, it could hinder the pace of innovation and crypto adoption at the EU level and create greater regulatory challenges for crypto companies.”

harmony like never before

Despite the associated difficulties and challenges, some participants in the digital asset ecosystem are positive about the move towards a globally unified crypto regulation.

Justin Choo, head of compliance group at cryptocurrency trading and passive income platform Cabital, told Cointelegraph that the country’s current approach couldn’t be more diverse when compared to traditional asset classes such as stocks, bonds and managed investment plans. into a regulated framework.

Compared to crypto forward countries, Chu said, “I imagine a globally coordinated regulatory system will not be as advanced as El Salvador and Argentina are doing. It’s simply because the governments of developed countries, whose currency is the key currency, are not like that,” he said. We are prepared to give up our economic ability to favor cryptocurrencies, which are already often used to influence international diplomacy.”

Global coordination of cryptocurrency regulation requires collaboration from industry and regulators around the world in a way never seen before. Terenus said:

“Paternalistic protections based on decades-old laws may not be the most useful approach. A truly sensible, meaningful and influential regulation should encourage transparency regarding terms, ownership analysis, vesting schedules, and accurate representation of the crypto project’s annual return. This will improve overall information symmetry and reward investors for doing their own research.”

In particular, after a notable failure with the recent Terra blockchain and its stablecoin, TerraUSD (UST), regulators have also begun to take a closer look at the feasibility and viability of the stablecoin. The European Commission also exposed The intention is to completely ban large-scale stablecoins in light of the huge economic and investor impacts triggered by the collision of UST and Terra (LUNA) on the Terra blockchain.

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As adoption of digital assets increases and moves from one adoption and innovation cycle to another, the evolving regulatory landscape will be the most important part of the transformation of digital assets to penetrate the public. A global regulatory framework seems like an ideal solution for the transition, but the barriers to implementing such a framework lengthen the transition process and are unlikely to happen within a year.

Andreessen Horowitz, a cryptocurrency-friendly venture capital firm, recently released a report titled “The State of Crypto in 2022”. highlight The growth of the decentralized market has been pegged at over $100 billion in the two years since the concept was first introduced. The report estimates that decentralized finance (DeFi) will become the 31st largest US bank by assets under management.

In this rapidly expanding industry, it is natural for regulators and central banks to innovate and evolve at the same rate. Investor protection has always been a major concern for regulators around the world, even if a very tough globally coordinated regulatory framework may stifle innovation a bit.

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