The beginning of 2024 marked a new page in the world of crypto – the SEC endorsed the launch of 11 Bitcoin ETFs in the regular stock market. This long-awaited decision opened the door to wider crypto adoption and gave many enthusiasts and startups hope for cryptocurrency’s recognition in the digital payment industry.
Yet, even these gains in the regulatory field of cryptocurrencies suggest that there’s still a long way to go for businesses and regulators to come to a consensus on crypto usage and its regulation. Most policies and regulatory frameworks are still in the works, with only a few crypto hubs across the globe giving startups relative certainty about the governing rules and operational guidelines.
Will 2024 be different? Can the global community expect significant regulatory changes and advancements? One thing is for sure – the process of regulatory framework development is actively accelerating. Here’s a quick overview of what we currently have in the field of crypto regulation and what 2024 has in store.
The Tightening Regulatory Landscape for Stablecoins
The main focus of 2024 regulatory efforts in the crypto industry is on the definition of status, regulation, and governing legislation. Stablecoins are the closest analogues of fiat national currencies circulating in the crypto world, as they are pegged to these currencies and don’t experience the volatility of other cryptocurrencies.
Stablecoins are in the spotlight of regulators’ work because of the risks and promises coming with the use of such digital analogues of widespread national currencies. As stablecoins are gaining wider spread and growing in significance in digital financial markets, their regulation becomes more pressing. The main points of concern include:
- The availability of reserve assets backing the stablecoin’s total supply of tokens in circulation.
- Asset holder protection measures.
- The project’s ability to safeguard and segregate assets.
- Transparency and accountability of stablecoin projects in regard to money laundering, sanctions evasion, and financing of terrorist activity.
These aspects define the scope of regulatory work in 2024, and the projects’ ability to prove they can adequately address all these issues may become their successful pathway to mainstream adoption.
Hubs with Robust Crypto Legislation Every Startup Should Consider
While crypto regulations are still underway in most parts of the world, several innovation-friendly hubs offer clear, comprehensive regulatory frameworks for the setup and functioning of crypto projects. Each of them has a distinct regulatory system, which gives crypto business founders a certain degree of flexibility in the jurisdiction selection.
Paris: Key Implementor of MiCA Regulations
The EU has already developed a rigorous regulatory framework for crypto assets that is expected to come into force in the middle of 2024. The regulation is called Markets in Crypto-Asset (MiCA); it is complemented by the Transfer of Funds Regulation, also known as the “Travel Rule.” These two legislative instruments will rule the conduct of crypto asset service providers (CASPs) and guarantee the provision of sender and recipient data along with CASP transactions.
While MiCA is still in the final round of preparations for taking action, Paris has become a frontline adoptee of this regulatory framework, setting itself as a major European crypto hub with clear, stable, and predictable terms for crypto businesses. The French government pledges to support MiCA’s passporting provisions, which can make Paris a preferable jurisdiction for European crypto startups.
The UAE Regulations
The UAE has been working on crypto regulation for a long time and has succeeded in many aspects. For instance, the Virtual Assets Regulatory Authority (VARA) in Dubai is the world’s pioneering crypto regulatory body. This regulatory move has made Dubai an attractive hub for crypto investors, startup owners, and entrepreneurs interested in the MENA region.
Abu Dhabi is another emirate in the UAE that has robust crypto regulations in place. The Abu Dhabi Global Market (ADGM) has been handling crypto regulation since 2018, with this free zone covering AML/CFT activities, KYC regulatory oversight, licensing, and continuous market surveillance.
Crypto Regulations in Hong Kong
Hong Kong is the crypto hub in the APAC region, with its own developed crypto regulation for Asian crypto businesses and projects. There is a highly regulated retail crypto trading service market in Hong Kong, and the focus of local legislation is on responsible innovation.
What Should We Expect from the SEC in 2024?
While the discussed crypto hubs offer the advantage of regulatory clarity to ambitious startups and business ideas in the crypto world, the USA is far behind other countries in this regard. There is still a lack of certainty about the legal status and regulation of crypto assets, with the SEC repeatedly attacking the crypto industry for the alleged violation of securities laws. The major problem with crypto in the USA is the dilemma of whether cryptocurrencies should be regarded as currencies (like USD) or commodities (like gold).
US politicians and financial regulators find themselves in a stalemate on the crypto question. Yet, certain progress is visible, with the following issues on the current agenda:
- Licensing.
- Fraud and financial crime prevention.
- Chartering.
- Consumer and investor protection.
At present, both the SEC and CFTC conduct active work in the field of crypto regulation.
DeFi Regulations
2024 will be a decisive year for DeFi regulation, with many legal drafts in the making. Decentralized finance is currently one of the most attractive spheres of cryptocurrency application and, at the same time, the highest-risk field with many hazards of money laundering, financing of terrorism, fraud, and financial crime. That’s why DeFi regulation is imperative on the international level, with the FATF and IOSCO conducting pioneering work on setting regulatory limitations in this area.
Regulation Progress Is Unavoidable
As it comes from our review, regulation of crypto is a matter of a not-that-distant future. And that’s good news because regulatory clarity is a solid foundation for business development, user confidence, and transactional transparency. All of these changes are sure to encourage cryptocurrency use and advancement into wide adoption, with 2024 promising many noticeable moves in this regard.
CEO & Founder at Clinq.Gold, Bank of Bullion | Keynote Speaker