Crypto is undoubtedly getting all the hype it deserves, but the most significant limitation hindering its mass adoption is its regulations. Crypto is a decentralized asset, and thus, it cannot be controlled by a third party. Where this comes as an advantage for traders and investors, they also fear the security of their investments as crypto does not have a backup like other fiat currencies.
Different countries worldwide are working towards developing their own set of rules and regulations around crypto so that investments can be carried out without fearing for the responsible organizations.
Crypto Regulation In The EU
The EU has always come forward with the best and most valid regulations surrounding crypto. It takes care of the trader’s and investors’ interests and secures their investments from potential risks.
Since 2012, when the EU wrote about cryptocurrency as a growing trend, it has been recognized in the EU. Since then, the union has continued to issue trend analysis, guidance, and regulations about digital assets. Malta and Estonia were home to some of the first cryptocurrency exchanges in the EU.
Currently, crypto-assets and cryptocurrencies are categorized as qualified financial instruments in the EU (QFIs). As a result, EU legislation does not prohibit banks, investment firms, or credit institutions from acquiring, holding, or providing services in the crypto market.
Some EU member states, such as France’s Autorite des Marches Financiers (AMF), Italy’s Ministry of Finance, and Germany’s Financial Supervisory Authority (BaFin), have licensing requirements with their regulators.
When it comes to Liechtenstein, it has been regarded as the country with the most transparent legislation in crypto and blockchain. Its policies on digital assets and cryptocurrencies are more comprehensive than any other policies in the world. Liechtenstein enacted new legislation to govern cryptocurrencies and blockchain-based technologies in 2020. This primary law is known as the Token and Trusted Technology Service Provider Act (TVTG). Liechtenstein lawmakers formed new roles for the parties involved and requirements and responsibilities for everyone. The law outlines the criteria for tokenization services, the purpose and types of tokens, and the penalties for noncompliance. Tokenization service providers must obtain file reports and licenses and register with state registries for their activities.
LCX secured the approvals of 8 registrations by the FMA following the Token and Trusted Technology Service Provider Act (TVTG). With eight registrations, we received more support than any other company in Liechtenstein. This makes us one of the first cryptocurrency platforms to achieve these regulatory milestones in Liechtenstein, allowing us to offer the broadest scope of blockchain services.
Individual countries maintain the European regulatory environment, each with its own set of rules. However, recently, the European Union has gradually begun to demonstrate a growing interest in harmonizing European digital asset regulations. This is when MiCA comes into the picture.
One of the significant regulations that the EU plans to execute soon is MiCA. MiCA will protect consumers from many risks associated with an investment in crypto-assets and assist them in avoiding fraudulent schemes. Consumers currently have minimal rights to safeguard or recourse, mainly when transactions occur outside of the EU. With the commencement of the new rules, crypto-asset service providers will be required to meet stringent requirements in order to protect consumers’ wallets and become liable if they misplace investors’ crypto-assets. MiCA will also protect consumers from market abuse involving any transaction or service, particularly price manipulation and insider trading.
LCX is already compliant with all the MiCA regulations too.
Crypto Regulations In The USA
An Executive Order on Ensuring Responsible Development of Digital Assets was issued in the United States. This order is expected to serve as a core component of US policy regulating the digital asset market. This is a “whole-of-government strategy for dealing with the risks and leveraging the prospective advantages of digital assets and their underlying mechanism,” according to the document.
According to Jeremy Allaire, a Steering Committee Member of the World Economic Forum’s Digital Currency Governance Consortium, “the Executive Order sets out initiatives to explore and engage in constructive problem solving around known risks with the legacy financial system and the new Web 3 world.”
The country has been in desperate need of this framework to end the conflict of interest between various governments. Before this order, there were the following regulations:
- Securities and Exchange Commission
- Federal Reserve Board (FRB)
- Treasury FinCEN
- Commodity Futures Trading Commission (CFTC)
- Internal Revenue Service (IRS)
Crypto Regulations In The UK
In the UK, several government agencies are involved in dealing with crypto regulations.
- FCA- The Financial Conduct Authority (FCA) previously published Final Guidance to clarify the crypto asset activities it regulates. The primary objective was to include all aspects of crypto-asset AML, KYC, and CFT without limiting competition. It should be noted that the FCA has prohibited the buying and selling of cryptocurrency derivatives.
- The HM Treasury – The Chancellor of the Exchequer, Rishi Sunak, stated in a press release, “It is my ambition to make the UK a global hub for crypto asset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate, and scale up in this country.” To accomplish this, the government launched a counseling session on crypto assets and stablecoins in 2021.
- Bank of England – In March 2022, the Bank of England published a report on financial stability relating to DeFi and crypto assets.
Crypto Regulations In China
Moving on to the country that has stated a very firm distinction of regulation regarding crypto – China. All kinds of cryptocurrency transactions were prohibited in China in late September 2021.
According to the official release, the ban was enacted to prevent the disruption of financial and economic order, specifically ” illegal fund-raising, money laundering, pyramid schemes, fraud, and other illicit and criminal activities.”
Conclusion
As explained above, there are different crypto regulations worldwide. Still, they all are working towards the same goal of providing a safe and secure platform for investors to trade without worrying about other scams. The day is not far when crypto transactions will be carried out in a harmonized manner all over the world.
