Regulators cannot foresee the future, so they must be mindful of the space they leave for new processes and products. In other words, regulations must allow crypto to grow and develop, not constrain it. As the crypto market becomes more popular, regulators will need to consider how quickly cryptocurrencies can crash, and how quickly they can recover from that crash. Regulatory agencies and legislators must be aware of this when developing new policies.
One section of the framework for crypto regulation focuses on cracking down on illegal activities. The administration is considering amending the Bank Secrecy Act, anti-tip-off laws, and laws against illegal money transmission. It also plans to extend existing laws on digital assets to include exchanges and digital asset service providers.
Cryptos have the potential to transform traditional finance, but they may also pose threats to vulnerable customers. As such, they require a comprehensive and international approach to protect the financial system. Regulators need to ensure the protection of consumers from financial instability and protect markets from systemic risks. They also need to address issues such as lending and payment risks.
The US Treasury has also stressed the need for crypto regulation, in part to combat illicit activities and protect domestic and global investors. As part of this effort, FINCEN recently proposed a new regulation imposing data collection requirements on crypto exchanges and wallets. The proposed rule is expected to be implemented by fall 2022. The rule would require wallet owners to identify themselves when they send more than $3,000 in a single transaction.
Crypto assets have long been around, but recent efforts to regulate them have increased their visibility as a mainstream financial product. They’re now widely used as speculative investments, hedges against weak currencies, and even potential payment instruments. The recent decline in their valuations has added to the calls for regulatory action. The future of crypto regulation remains uncertain.
Regulators must also consider the environmental impact of mining crypto assets, especially if the mining process uses vast amounts of energy. In addition, national authorities may have to consider competing public policy goals in order to decide how to regulate them. While the bill is an important step, it’s likely to face some challenges if it is adopted.
Gibraltar’s government has also taken steps towards further regulation of the crypto-economy. Its GFSC issued a statement expressing concern over the unregulated use of ICOs and suggested monitoring them. Additionally, the government has established an Innovate and Create team to promote new products and services in the crypto-economy. Additionally, a market integrity working group will be formed to determine appropriate market standards for cryptocurrency exchanges. The group will work with other jurisdictions to develop a comprehensive regulatory framework for the crypto market.
Australia has also taken steps to regulate the crypto industry. The Australian Securities and Investments Commission recently approved a new licensing framework for cryptocurrency exchanges in December 2021, with a consultation period scheduled for the following year. This new framework will allow consumers to purchase crypto assets in a regulated environment, and position the country at the forefront of the global effort to keep tech companies in check. Japan is also becoming increasingly progressive with its crypto regulation. The government recently ruled that gains from cryptocurrencies should be taxed as miscellaneous income, according to the Financial Services Act.