Bold Regulation Needed to Regain Trust in Crypto
Rana Kortam, head of global public policy at Binance, has contributed an opinion piece to the annual report recently published by the Digital Monetary Institute of the Official Monetary and Financial Institutions Forum (OMFIF). In it, she argues that the rapid growth of cryptocurrency assets warrants significant attention to regulation. You can consult the original article here (page 15 of the report).
The year 2022 was historic for the cryptocurrency sector. Between macroeconomic setbacks, a bear market, and insolvencies of major exchanges and providers (such as FTX and BlockFi), preceded by the stunning collapse of the TerraUSD stablecoin, the global cryptocurrency market capitalization fell to $858 billion in early December from highs of $3 trillion.
After a year filled with so many challenges, it's easy to lose sight of the big picture. About 10% of people worldwide own digital assets. Cryptocurrency and blockchain technologies have proven their value in addressing real-world challenges for millions of people in financial services and beyond.
The growth of blockchain Ecuador Mobile Number List technology will also become a core differentiator for economies and a key measure of international competitiveness in the coming decade to attract foreign direct investment, cultivate innovation and create jobs. Investor appetite and opinion around the technology's potential clearly corroborate that vision. The top ten cryptocurrency and blockchain venture capital funds raised more than $12.5 billion in 2022, marking a record year for fundraising activity in the sector, despite seeing a notable decline in the second half of the year. The decline comes after a strong first half and reflects the more significant and persistent declines throughout the year in other sectors that were instigated by the broader macroeconomic and geopolitical environment.
Cryptocurrencies appear to be at a regulatory inflection point in many places around the world. Governance, consumer protection and security remain top concerns, understandably heightened by recent events or persistent misconceptions around the technology.
Financial stability and integrity are also a priority for regulators. Although cryptocurrency assets only represent a small portion of the assets in the global financial system, with a total market capitalization of less than $1 trillion as of June 2022, their rapid growth makes a compelling argument for regulation to be given a boost. significant attention.
At this important juncture, it is crucial to strike the right balance to enable responsible innovation and growth. A digital asset regulatory framework should:
Maximize user protection and successfully eliminate cybercriminals.
Favor simpler technologies that provide tangible solutions to the most pressing needs.
Provide clarity and avoid duplications or conflicts with other regulations.
Adopt a proportionate and risk-based approach as the sector and technology mature.
Create equitable conditions that allow innovation that changes the world.
The backdrop of challenges and rapid growth made 2022 arguably the busiest year yet for cryptocurrency policymaking, accelerating the need for regulatory clarity to protect consumers. The sector has witnessed a flurry of regulatory and legislative developments on a global scale, as well as regulatory activity and sector performance.
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In terms of regulations, the European Union published its Regulation on cryptocurrency asset markets, the first regulatory framework for digital assets and the most complete to date, although it will not come into force for another year. In the United States, the work that began following the White House's March executive order resulted in the first comprehensive framework in the country's history. The United Arab Emirates, Saudi Arabia, Bahrain and, more recently, Brazil have also introduced cryptocurrency regulations.
In addition, global regulators have issued numerous guidance in different areas, such as the Financial Stability Board framework, the International Organization of Securities Commissions roadmap, the Financial Action Task Force guidelines for virtual assets, and recommendations of the Basel Committee. In 2023, countries will move quickly to implement these proposals. In addition, much attention will be paid to areas that were left out of the scope of MiCA and other frameworks, such as decentralized finance, non-fungible tokens and others.
Exchanges around the world have also been proactive, rushing to launch their own voluntary initiatives to reassure consumers, increase transparency, and (re)build trust in the ecosystem. Examples include publishing wallet addresses, testing reserves, and launching recovery funds.
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