There is growing evidence that crypto regulation looks set to be one of the big themes for 2023. Recently, policymakers around the globe have increasingly made noises about blockchain regulation, which may offer some clues as to where we may be headed.
Crypto regulation on the White House’s lips
Starting with the White House, its recently announced “The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks” said that its focus was on ensuring financial stability, protecting investors and holding “bad actors accountable”. Sounds good enough, but substantively, what is it saying? Not terribly much by some people’s accounts.
In any event, at face value it noted three things.
First, it said that the administration has spent the past year identifying the risks of crypto and acting to mitigate against them. It did this through continuing to develop the “first-ever” framework for a safe digital asset framework. The details remain scant but it is said to include issues such as requiring basic risk controls and consumer disclosures, as well as strong cybersecurity, noting the example of bad actors in the space such as North Korea.
Second, it pointed to ramped-up enforcement and public awareness campaigns to help consumers understand the risks of crypto. This approach, described as ‘regulation by enforcement’, has been the subject of much controversy in 2022 as crypto companies have called upon the Securities and Exchange Commission (SEC) to provide a cogent regulatory framework.
Third, it called upon US lawmakers to step up their efforts, as it pointed toward the need for greater transparency, disclosures, as well as financial and environmental risks.
Somewhat buried in the text was a reference to the risks of pension funds being exposed to crypto. No doubt, this was in response to the Canadian pension funds who saw their investments go to zero in the aftermath of the FTX fiasco.
The announcement ends with the usual: “we need to balance innovation with proper safeguards” spiel, but ultimately, there was little new information worth noting in the otherwise wordy yet substantively lacking announcement.
EU blockchain regulation requires disclosures for private sales
Crypto venture capitalists (VCs) often have an inside track to token deals and are able to buy them at a discount before they are released for sale to the general public. For the most part, the issues of who invested, how much and at what discount is most often not disclosed.
Well, according to the recently passed Markets in Crypto-Assets (MiCA) legislation applicable to the EU, it requires whitepapers to disclose all that information, as spotted by EU legislative crypto legal eagle, Patrick Hansen.
And it makes sense, doesn’t it? If you were investing in a token at $1, wouldn’t you want to know who got a discount?
South Korea will soon track all crypto
South Korea’s Ministry of Justice announced plans to introduce a crypto tracking system to tackle money laundering and help recover stolen crypto funds linked to criminal activities.
The so-called “Virtual Currency Tracking System” will monitor transaction history and check the source of funds, both before and after payment is made. The plan is to introduce it later this year, with the Ministry’s statement saying:
“In response to the sophistication of crime, we will improve the forensic infrastructure (infrastructure). We will build a criminal justice system that meets international standards (global standards).”
One wonders to what extent this initiative has been accelerated by the embarrassment that Terra’s Do Kwon has caused the South Korean government, particularly since an arrest warrant has been issued and the man appears to be nowhere in sight (except rather prominently, online).
Crypto regulation in Australia
It’s already well known that the Australian Securities and Investments Commission (ASIC) has included crypto regulation in its four-year roadmap, as well the matter being a priority for the Albanese government who continues with its so-called ‘token mapping exercise’.
However most recently, Stephen Jones the Australian Minister for Financial Services, said that most cryptocurrencies were likely a financial product and ought to be regulation as such, saying:
“I don’t want to pre-judge the outcomes of the consultation process we are about to embark on. But I start from the position that if it looks like a duck, walks like a duck and sounds like a duck then it should be treated like one.”
A quick read of the pulse of global crypto regulation suggests that this year may be a big one for all things regulation. While some may criticise and warn of an overly heavy-handed approach, there’s also scope to argue that increased regulatory clarity could bring on board more institutional investors who have been sitting on the sidelines.
Irrespective, 2023 appears destined to be an important one and we’ll keep you posted as more important regulatory updates come to light.