Crypto regulation from 2022 to the present has changed a lot.
What happened in 2022, and what is continuing to happen in this early part of 2023, is convincing many regulators to try to intervene.
However, concrete interventions are still few, because there is still a lot of confusion
The confusion of crypto regulation in 2022
The major regulatory confusion in crypto is mainly due to the lack of clear and specific laws.
However, there still seems to be a lot of it even among those who are supposed to write such laws.
Taking the US regulatory framework as a reference, given that the US is the world’s largest market for cryptocurrencies, there still seems to be no agreement either within Congress or within the government on how to proceed.
There is actually a bill in Congress, but after several months it has not yet managed to be finalized and passed. Indeed, after an initial approval, changes have already been introduced that are not always perfectly in line with the original intent.
Moreover, there are also very different positions among the parliamentarians themselves, compounded by the even conflicting positions of the various states.
For example, Texas seems to want to take advantage of cheap energy to encourage mining, while New York State has virtually banned mining using polluting energy sources.
In such a confusing picture, it is no wonder that precise rules do not yet exist, and that we are struggling to find some that enjoy majority support.
In addition to this, it is worth adding that around the world the situation is not so different, with a few and generally small exceptions.
The most crypto-friendly states
Despite this, there are some nations that are trying to become crypto-friendly, that is, to have crypto-friendly regulation of the sector.
Perhaps the one furthest along in this regard is Switzerland, with Lugano aiming to become the main crypto hub in Europe.
Regulation in Switzerland is now clear enough that its crypto regulations to date appear to be among the most advanced in the world.
But Switzerland, as is often the case, is something of a small exception, operating differently even from its neighboring countries.
For example within the EU, the countries furthest along in regulating cryptocurrencies are probably Estonia, in some ways, and Portugal, in others. Truth be told, Germany also seems to want to have favorable regulation.
In Europe the other country that is pushing hard in this respect is Ukraine, but for obvious problems to date it is somewhat cut off from the global market.
Russia also seems to want to take some steps forward, but there is no clear shared political intent in Russia in favor of developing the crypto sector. In fact, it is one of the states in the world that has been most confused and disorganized about cryptocurrencies in recent years, along with India.
The situation in Great Britain also appears complicated, as it would like to become a crypto hub but at the same time does not seem to be succeeding for now.
In addition to the aforementioned India, where there really is enormous confusion about it, and China, which has some of the most restrictive crypto regulation in the world, Dubai is emerging in Asia as a major crypto hub, thanks to favorable regulation by the United Arab Emirates, of which it is a part.
The other country to mention is of course El Salvador, which wants to become Latin America’s crypto hub.
The main problems
By far, the main problem facing countries when it comes to cryptocurrencies is consumer protection.
This on the one hand means trying to prevent them from being scammed, and on the other hand imposing rules and procedures on crypto operators that limit their risks.
In truth, it does not seem at all like any state in the world is succeeding in the fight against crypto scammers. However, in several cases, after the scam has taken place, the scammers have been arrested, jailed and then convicted. But those still at large are probably the majority.
This point should not be ignored at all, because to think that it is enough to change the laws to reduce crypto scams, or to catch the scammers, is nothing but a utopian dream.
To intervene effectively in this regard would first require better financial education for potential victims, and then faster and more effective law enforcement capabilities.
To do this would also require international, if not global, coordination, and the lack of this makes the battle against scams an unequal fight that is bound to end very often in failure.
Unfortunately, however, from this point of view it seems that politics prefers to turn a deaf ear, preferring the proliferation of laws whose effectiveness is yet to be proven.
Instead, imposing stricter rules on crypto operators to force them to be more robust and honest seems a perfectly viable path.
This by the way is precisely what the chairman of the SEC, Gary Gensler, is calling for these days, according to which crypto intermediaries should at least give the same guarantees as traditional financial intermediaries.
This will not zero out problems or eliminate scams, but it will reduce the number of scams and especially the negative impacts on consumers.
New crypto regulation for exchanges: 2022 to 2023
It is therefore no coincidence that it is precisely on exchanges, and other crypto service providers such as lending platforms, that the attention of many regulators is being focused.
For example, one regulation that is not yet there – and it is not clear why there should not be – would be one requiring exchanges to keep their own funds completely separate from those of their clients. This is a rule that underlies the financial system of international exchanges, and it would be good if it were introduced in the crypto world as well.
How is it possible, for example, that FTX, which was a registered and regulated exchange, was allowed to spend billions of dollars of funds belonging to their clients?
Another regulation that is not well understood why it has not yet been introduced is the requirement to insure against theft or possible loss of client funds.
In traditional finance, funds held on behalf of third parties are insured, so that in the event of theft or loss, it is not the clients who bear the cost, but the custodians. In contrast, in crypto it continues to be mostly the clients who bear the costs.
These two are the main regulations that are expected to be introduced in the crypto world in 2023, or in the years to come, though it would be better if they were introduced as soon as possible.
It is worth mentioning that cryptocurrency holders are by no means obliged to rely on intermediaries. One of the characteristics of this new technology is precisely disintermediation, so there will always exist an alternative system that does not force them to have to rely on intermediaries.
Because of this, there is no reason not to impose security measures on these intermediaries that will prevent their customers from always being the ones to pay the price if something goes wrong.
By now AML (Anti-Money Laundering) regulations have been imposed on crypto intermediaries in almost all advanced countries, so it is now possible to move to the next step.
While it is increasingly unlikely that new bans will be introduced, especially in liberal countries, it is not at all unlikely that new regulations will be imposed on crypto intermediaries that will strengthen their security and increasingly protect their users.
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