Surfing on the Ocean of Crypto Regulation
Download a PDF of this articleThe digital asset industry has expanded across the world, revolutionizing global finance options for millions.
While the boundaries have expanded, the regulatory landscape remains fragmented. As well as evaluating economic incentives, companies now look at the regulatory and political sentiments when deciding on new business development opportunities.
Three Regulatory Powers
If we talk regulation, the EU, the UK, and the U.S. are the three powers controlling the space. The EU has been the first mover with its Markets in Crypto Assets Regulation (MiCA). While already marked as the global standard setter, it is far from being one. The UK has taken a different approach with its consultation and call for evidence on the future financial services’ regulatory regime for crypto assets, a move that can be considered as setting up for competition with the EU. Among the three jurisdictions, the U.S. is currently a watcher. It is yet to pass any comprehensive piece of legislation on crypto assets, with the Securities and Exchange Commission (SEC) taking the lead by “regulating through enforcement.” The ongoing lack of regulatory clarity or roadmaps has made many in the industry and Congress skeptical of the U.S.’s position in the space, with some raising concerns about the industry offshoring.
Comparing the Narratives
EU: Political rhetoric from EU capitals has always moved toward favoring a more risk-averse and protectionist approach regarding regulation of crypto assets. The market downturn just before MiCA was finalized further reinforced this trend, emphasizing a focus on security and sovereignty.
UK: The UK government initially adopted a welcoming stance to crypto assets, but economic pressures, a prolonged bear market, and criticism from the opposition have since dampened this enthusiasm. Consumer protection is a priority across all parties, and regulators are getting more power in this area.
US: Digital asset scrutiny in Washington is at an all-time high, with senior members of Congress and regulators ringing alarm bells over the industry. The recent volatility due to the fall of FTX and the collapse of three “procrypto” banks have raised the ante in Washington for greater regulatory clarity to address the impact on consumers and investors.
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