Regulation is an increasingly recurring theme in the world of cryptocurrencies. It’s logical. The world of cryptocurrencies is a volatile, unstable one, but with the influx of institutions, the topic of regulation is one that has to be explored and avenues sought. Is 2022 the year of regulation yet? Let’s take a closer look.
You may remember the crypto-transaction ban that came from China last September. Now, China is promoting its CDBC, the digital yuan, pushing crypto companies and investors out of the country. So based on this ban, other countries have taken a different position to offer an alternative. Even miners who were taking refuge in the country have left.
Thanks to China’s ban on cryptocurrencies, Singapore acts as a crypto hub for Southeast Asia. Some Chinese crypto exchanges (e.g. Bybit or Huobi) have started to operate fully from Singapore. In 2020, cryptocurrency-related legislation was enforced in Singapore. It regulates the crypto industry under the Payment Services Act. In this way, regulation can mainly protect users. Thus, crypto exchanges need a license to operate.
In the US, several institutions act under their own authority in regulation – the Securities and Exchange Commission (SEC), the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), the Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC). There is an increasing trend in regulating cryptocurrencies in the USA.
In Europe, MiCA, the main legislative frame for cryptocurrencies, is in process of approval. MiCA, or Markets in Crypto-Assets regulation, was even considering a ban on proof-of-work cryptocurrencies, such as Bitcoin or Ethereum, which was not included in the 168-page proposal. However there are concerns about the influence of mining on the environment and also the head of ECB, Christina Lagarde, is known for her rather strict stance towards regulating cryptocurrencies.
Switzerland, Great Britain
In addition to MiCA in the European Union, several regulatory frameworks are also being developed within other European countries. Switzerland, for example, is working to create a cryptocurrency-friendly environment, and is known as one the most crypto-welcoming countries in the region, while the UK is relatively behind on regulation. As a result, firms must register with the local authority, FCA and undergo relatively opaque requirements.
It is clear enough now that stricter regulation is heading towards cryptocurrencies. In some countries, legislation will be stricter and in others more welcoming. However, it can be said that this year we can expect to see tightening regulatory grip on cryptocurrencies both locally and globally. Year 2022 is thus sometimes already called the year of crypto regulation.