Crypto Regulation: How the World is Addressing the Issue?

• Every major jurisdiction is working to develop its own set of crypto regulations. 
• IOSCO called for a global crypto regulatory standard. 

Every major jurisdiction in the world is trying to regulate crypto; let’s try to comprehend what’s going on in the realm of crypto regulation. After events like the Terra Ecosystem collapse and the FTX-saga, the need to regulate crypto, blockchain, and underlying technology emerged. Authorities and lawmakers worldwide are trying to control the industry while allowing it to flourish. A tricky situation indeed. 

Crypto Regulations: How the World Is Dealing With it?

Blockchain technology and the digital asset industry are rapidly evolving. Also, the regulatory framework surrounding them is under development in nearly every major jurisdiction. The digital asset industry also needs uniformity in the regulatory framework and clarity in the regulations to follow. 

Experts believe that lawmakers must keep the technological advancement of the future in mind while creating a regulatory framework. In simple words, the regulatory framework should be future-ready and not be a mere solution for existing problems. New challenges will appear, and regulations should be ready to accommodate them without massive amendments. 

The bull run of 2021, when Bitcoin reached its all-time high, crossing $65,000, had certain events in the background that acted as catalysts. In 2016, Japan recognized crypto as a mode of payment, fueling market gains of 2016-2017. Letters from the Office of the Comptroller of the Currency (OCC) allowed primary U.S. financial institutes to engage in crypto in 2020. 

But the crypto winter of 2022, and significant events like the Terra ecosystem collapse, FTX implosion, etc., pulled the cryptocurrency prices down to record lows. It was causing every major country to speed up creating a regulatory framework. 

How Major Jurisdictions Addressing Crypto Regulation?

In an attempt to become a crypto hub, Hong Kong created a licensing regime in June 2023. The Securities and Futures Commission (SFC) started providing licenses to crypto companies wishing to operate in Hong Kong. Businesses have to register themselves with the authority to gain a license for operation. 

According to its strict discipline, Japan already has some systems, like keeping customers and exchanging assets separately. This system caused the Japanese to face minimal losses during the FTX collapse. The Land of the rising sun also published a Web3 White Paper in April 2023, creating a friendlier environment for crypto. 

European Union’s Market in Crypto Assets (MiCA) is believed to be a pioneering comprehensive regulatory framework surrounding digital assets. It was publish in the Official Journal of the European Union (OJEU) on June 9, 2023. MiCA should be fully applicable from December 30, 2024. 

The United States arrived late to the party as its proposed Responsible Financial Innovation Act (RFIA)  was recently presented in the House of Representatives. It requires the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) to work together in regulating crypto. 

In May 2023, the International Organization for Securities Commission (IOSCO) proposed 18 measures required for global crypto regulation. If applied, these pointers can be roped in to form a global regulatory standard, plus a body or an agency to oversee the implementation. Also, this would help countries with limited means to have regulatory benefits. 

The technology is relatively new and lawmakers are still trying to find the best way to regulate cryptocurrency. Nonetheless, the recent development is commendable and the future for a secure cryptocurrency environment seems promising.

Pratik Chadhokar