Regulate cryptocurrencies around the world

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The maturity of any new financial instrument is announced by the regulations. Some might argue that cryptocurrencies don’t need the help of the authorities, thank you very much. He doesn’t need any shackles either. A 2018 BIS study that examined the actual behavior of cryptocurrency markets in response to regulation showed that despite the borderless, peer-to-peer nature of cryptocurrencies, regulatory actions and news of Potential regulatory actions have a strong effect on the cryptocurrency markets. This included negative shocks for the strong AML / KYC news as well as a rise when legal certainty seemed around the corner. Regulation often prides itself on being technologically neutral, focusing only on the regulation of economic effects. In practice, technology is often used to take advantage of regulatory arbitrage as well as to evade the effects by crossing borders. A global borderless cryptocurrency, due to its technical and game theoretical capabilities, does this very well. The FATF recommendations, having a cross-border influence, were therefore considered to be more effective than ad hoc regulation by several countries. Many cryptocurrency influencers have also felt that it is better to have regulatory certainty than to have a sword of Damocles hanging over the entire industry. This is confirmed by the effects on net worth and transaction volumes in the BIS report.

The Markets in Crypto-Assets (MiCA) proposal is part of the European Union’s digital finance strategy, which is a project to create a single capital market in Europe called the Capital Markets Union. Strategically, this is part of the unification continuum, from physical, legal, identity (eIDAS) transport links, borderless travel, the right to visit and settle.

G7-2017 TAORMINE

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MiCA targets crypto-assets and puts in place regulation for assets such as stablecoins and crypto-asset service providers (CASP). In this, it is similar to the regulation of VASPs (Virtual Asset Service Providers) in the FATF proposal and to the harmonization of rules across national borders and between different asset classes. This focus on service providers is a way of seeing something concrete in a world that is not supposed to have any intermediary. In reality, without the Coindesks and Binances of the world, cryptocurrencies would not have grown as much as they have. This is where regulators focus their attention. Places of exchange, market making, analogous to banks are also present in the space of crypto-currencies. MiCA defines cryptoassets by absence, that is, digital assets that are currently outside the scope of financial regulation, especially stablecoins, are drawn into the financially regulated world.

The logic that propelled the additions to the infrastructure bill in the United States was aimed at middlemen, to eliminate transaction taxes to pay the bill. It is not known how the drafters of the bill obtained $ 28 billion as an estimate of tax evasion for crypto transactions. The definition of a Broker: any person who (for remuneration) is responsible for regularly providing any service carrying out transfers of digital assets on behalf of another person. This definition is close to that of a CASP. Crypto-asset service provider. What is deleted in less than 100 words in the US infrastructure bill takes up 168 pages in the MiCA proposal. That’s the difference, it’s a well thought-out proposal with provisions for commentary, not a last-minute 100-word tween in an unrelated bill. The StableAct, which was a much more thoughtful proposition, had no way forward in the United States.

The Chinese had previously banned renminbi-based stablecoins with a single sentence in Article 22 (Tokens). No unit or individual can produce or sell tokens, coupons and digital tokens to replace the RMB in circulation in the market. At the very least, it would ban any stable coin directly pegged to the RMB, as the RMB would have to be taken out of circulation in a reserve to issue such a stable coin. This plus all the moves against cryptoassets in China to consolidate their CBDC.

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