It has been 12 years since the launch of Bitcoin. Though regulators around the world are still struggling to properly regulate the growing industry, it has become a priority. Many supervisory bodies are studying the sector to tame the wild decentralized sector.
Talks for crypto regulations are now going on at the top levels among the governments in many countries. While smaller jurisdictions like Gibraltar, Malta, the UAE, Estonia, and Lithuania are promoting their crypto-friendliness, China became the first major economy to impose a blanket ban on all crypto-related activities in the country.
But in 2022, the eyes will be on the United States as it remained one of the largest crypto markets.
“I expect 2022 to be the year where US policy around crypto is bound to become clearer,” said Tradier Chief Executive Office, Dan Raju. “There is bipartisan alignment on the need for overall crypto
regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term.”
However, regulations in the country might face some roadblocks due to the overlapping areas between state and federal frameworks. Though there is no clarity around crypto regulations in the country at a federal level, states like Wyoming have passed crypto-friendly laws.
The Need for Regulations
“Regulators have already expressed that their focus would be to create rules based on the same retail investor-centric approach and structures that are in place to manage traditional listed securities. The volatile nature of crypto will force policymakers to stay focused on the issue in 2022,” Raju added.
Another factor that is pushing regulators towards bringing crypto regulations is the growing involvement of institutional players in the sector. Several hedge funds are taking big positions with
cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term.
“Early signs for how regulators will approach crypto regulations point to positive,” Adam Grealish, Altruist’s Head of Investments, told Finance Magnates.
“The SEC appears to want to work with crypto assets, not regulate them out of existence, and we have seen more institutional investors bolster protocol adoption. But these risks are always evolving, and there’s certainly interest.”
Governments are also concerned about the losses in their tax revenue that could have been collected if crypto were regulated. However, tax agencies are already compelling locally regulated crypto exchanges and citizens to disclose all crypto transactions. But the main focus of regulations will be to protect the interest of retail investors.
Raju added: “There is also pressure from popular retail trading platforms, particularly equity broker-dealers who are contemplating larger crypto offerings, but are waiting for compliance guidelines before they broadly offer crypto products.”
Utility or Security
The largest question ahead of the regulators will be defined if cryptocurrencies fall under the category of utility tokens or security tokens. In the United States, Bitcoin and Ethereum are categorized as commodities, but other cryptocurrencies do not fall under this category.
This also allows the Securities and Exchange Commission to the g against some of the largest crypto projects: it is currently fighting a legal battle with Ripple over the status of the XRP token. The verdict of that case will further clarify the status of a broader range of cryptocurrencies in the country.
Ban in Line?
While we have the example of China, we also have El Salvador that became the first country to name Bitcoin a legal tender. However, many major countries do not want to be liberal with cryptocurrencies. India and Russia showed signs to follow China’s path as the first has reportedly drafted a bill to ban crypto completely, while the second wants to curb crypto investments.
Such moves have the potential to bring short-term havoc in the market, but in the long run, the market stabilized and continued its upward movement. For instance, China, which was the largest crypto market before the 2017 ban, failed to cripple the market despite the ban.
Justin Giudici, Head of Product at Telos Foundation, said: “India and Russia banning cryptocurrencies should not be cause for much alarm, as China took the same course of action this past Fall. The bans are being done preemptively to protect the stability of their financial institutions. The banning of cryptocurrencies in Russia is particularly interesting because it makes it more difficult for cybercriminals in the area to receive payment.”
Countries like the United Kingdom, however, are focusing to tighten local control and anti-money laundering rules on crypto platforms. This will allow the circulation of cryptocurrencies but will break the anonymity of the industry.
“While some jurisdictions may seek to ban crypto outright, it is unlikely to become a standard regulatory approach,” said Chris DePow, Senior Advisor, Financial Institution Regulation & Compliance at Elliptic. “Crypto activity cannot be effectively stopped, merely criminalized. Such criminalization is counterproductive to those who would seek to reduce instances of blockchain-based financial crime, as it eliminates all of the good actors and leaves only those who will willingly break the law.
“A more suitable approach is the implementation of strong regulatory compliance controls and the establishment of industry groups and self-regulatory organizations that may promote best practices among crypto businesses and associated persons. Bans also stifle technological innovation and do a disservice to the global underbanked, who benefit from the intermediate nature of crypto. Only through public-private engagement and good-faith debate can the innovative promises of crypto come to fruition without posing a significant risk of facilitating the illicit activity.
It has been 12 years since the launch of Bitcoin. Though regulators around the world are still struggling to properly regulate the growing industry, it has become a priority. Many supervisory bodies are studying the sector to tame the wild decentralized sector.
Talks for crypto regulations are now going on at the top levels among the governments in many countries. While smaller jurisdictions like Gibraltar, Malta, the UAE, Estonia, and Lithuania are promoting their crypto-friendliness, China became the first major economy to impose a blanket ban on all crypto-related activities in the country.
But in 2022, the eyes will be on the United States as it remained one of the largest crypto markets.
“I expect 2022 to be the year where US policy around crypto is bound to become clearer,” said Tradier Chief Executive Office, Dan Raju. “There is bipartisan alignment on the need for overall crypto
regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term.”
However, regulations in the country might face some roadblocks due to the overlapping areas between state and federal frameworks. Though there is no clarity around crypto regulations in the country at a federal level, states like Wyoming have passed crypto-friendly laws.
The Need for Regulations
“Regulators have already expressed that their focus would be to create rules based on the same retail investor-centric approach and structures that are in place to manage traditional listed securities. The volatile nature of crypto will force policymakers to stay focused on the issue in 2022,” Raju added.
Another factor that is pushing regulators towards bringing crypto regulations is the growing involvement of institutional players in the sector. Several hedge funds are taking big positions with
cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term.
“Early signs for how regulators will approach crypto regulations point to positive,” Adam Grealish, Altruist’s Head of Investments, told Finance Magnates.
“The SEC appears to want to work with crypto assets, not regulate them out of existence, and we have seen more institutional investors bolster protocol adoption. But these risks are always evolving, and there’s certainly interest.”
Governments are also concerned about the losses in their tax revenue that could have been collected if crypto were regulated. However, tax agencies are already compelling locally regulated crypto exchanges and citizens to disclose all crypto transactions. But the main focus of regulations will be to protect the interest of retail investors.
Raju added: “There is also pressure from popular retail trading platforms, particularly equity broker-dealers who are contemplating larger crypto offerings, but are waiting for compliance guidelines before they broadly offer crypto products.”
Utility or Security
The largest question ahead of the regulators will be defined if cryptocurrencies fall under the category of utility tokens or security tokens. In the United States, Bitcoin and Ethereum are categorized as commodities, but other cryptocurrencies do not fall under this category.
This also allows the Securities and Exchange Commission to the g against some of the largest crypto projects: it is currently fighting a legal battle with Ripple over the status of the XRP token. The verdict of that case will further clarify the status of a broader range of cryptocurrencies in the country.
Ban in Line?
While we have the example of China, we also have El Salvador that became the first country to name Bitcoin a legal tender. However, many major countries do not want to be liberal with cryptocurrencies. India and Russia showed signs to follow China’s path as the first has reportedly drafted a bill to ban crypto completely, while the second wants to curb crypto investments.
Such moves have the potential to bring short-term havoc in the market, but in the long run, the market stabilized and continued its upward movement. For instance, China, which was the largest crypto market before the 2017 ban, failed to cripple the market despite the ban.
Justin Giudici, Head of Product at Telos Foundation, said: “India and Russia banning cryptocurrencies should not be cause for much alarm, as China took the same course of action this past Fall. The bans are being done preemptively to protect the stability of their financial institutions. The banning of cryptocurrencies in Russia is particularly interesting because it makes it more difficult for cybercriminals in the area to receive payment.”
Countries like the United Kingdom, however, are focusing to tighten local control and anti-money laundering rules on crypto platforms. This will allow the circulation of cryptocurrencies but will break the anonymity of the industry.
“While some jurisdictions may seek to ban crypto outright, it is unlikely to become a standard regulatory approach,” said Chris DePow, Senior Advisor, Financial Institution Regulation & Compliance at Elliptic. “Crypto activity cannot be effectively stopped, merely criminalized. Such criminalization is counterproductive to those who would seek to reduce instances of blockchain-based financial crime, as it eliminates all of the good actors and leaves only those who will willingly break the law.
“A more suitable approach is the implementation of strong regulatory compliance controls and the establishment of industry groups and self-regulatory organizations that may promote best practices among crypto businesses and associated persons. Bans also stifle technological innovation and do a disservice to the global underbanked, who benefit from the intermediate nature of crypto. Only through public-private engagement and good-faith debate can the innovative promises of crypto come to fruition without posing a significant risk of facilitating the illicit activity.
By: Arnab Shome
www.financemagnates.com
