Strict regulations are looming for the cryptocurrency sector
Strict regulations are expected in the cryptocurrency market as countries will restrict entry to ensure the adoption and success of their own digital currencies.
The cryptocurrency market – which is currently valued at $1.7 trillion and has 106 million users worldwide, according to a report from Crypto.com – has been tapped by many investors for speculative investments that would supposedly give them quick capital gains due to the high value of the asset. volatile nature.
To execute their trades, investors rely on cryptocurrency exchange platforms such as Binance and Coinbase. But in recent months, these platforms have taken some hits.
A series of blows…
In May 2021, China banned all financial institutions from conducting cryptocurrency transactions. And in Britain, retail banks have suspended all transactions with exchange platforms amid fears of financial crimes. These recent restrictions on crypto exchanges and the cryptocurrency market in general are a sign of stricter restrictions to be expected in the future.
Last month, British banks such as Barclays, Monzo and Starling Bank decided to temporarily suspend payments to crypto exchange platforms due to a growing number of suspicious transactions. These restrictions are planned to be lifted once banks implement better controls and verifications on crypto exchange payments.
Along with the popularity that the cryptocurrency sector has gained in recent years, banks reported increasing rates of financial crime related to cryptocurrency transactions.
Despite the Financial Conduct Authority’s (FCA) initiative to have all crypto asset firms registered by July 2021, only five firms are fully registered, and the FCA has just announced that it will extend its registration process until March 2022.
This means that most crypto exchanges in the UK operate without FCA rules and therefore have no obligation to monitor or report transactions that would breach anti-money laundering rules.
Until they are fully regulated, it is up to banks and financial institutions to find solutions to reduce their risk exposure to any form of financial crime through crypto exchanges.
Cryptocurrency regulations
The cryptocurrency sector needs an international framework that regulates it. This could be introduced to restrict its use in all countries. Currently, countries take a inconsistent approach to regulating this sector – if they regulate it at all.
Some countries, such as Japan, have passed regulations in favor of cryptocurrencies and recognize them as legal property, and the sector is fully regulated by the Financial Services Agency.
Other countries such as India want to ban this sector; in March 2021, the Indian government introduced a digital currency bill that would have made cryptocurrencies illegal in the country. China is expanding its restrictions by banning financial institutions from engaging in related transactions.
The decision to limit or ban the use of cryptocurrencies by countries is an attempt to limit the impact the sector can have on the global economy as they do not want to hand over control of their economy to a decentralized currency.
In Britain, the Bank of England has released a discussion paper explaining that stablecoins should expect the same regulation as fiat currencies.
The report also states that it is exploring the possible introduction of its own digital currency, the ‘Britcoin’. And in the case of China, the country hopes to ensure the success of its own digital currency, which is currently being trialled in several of its cities.
The growing cryptocurrency sector needs to be regulated to protect users from online scams and prevent it from being used in crimes such as money laundering.
In Britain, until the FCA can regulate cryptocurrency companies, traditional banks will have to find solutions to protect their customers from online fraud related to cryptocurrency transactions – or, more likely, refuse to deal in cryptocurrency for retail customers.
The growing popularity of cryptocurrency is seen as a danger to central banks, as they worry about the impact a volatile decentralized currency could have on their economies. By limiting cryptocurrency adoption, central banks may attempt to transition to their own digital currencies. The regulations we see will likely be very restrictive to achieve this.
This was written by GlobalData’s payments analyst Chris Dinga.
“Strict Regulations Coming for the Cryptocurrency Sector” was originally created and published by Electronic Payments International, a brand owned by GlobalData.
The information on this site has been included in good faith for general information purposes only. It is not intended to amount to advice on which reliance should be placed and we make no representation, warranty or guarantee, express or implied, as to its accuracy or completeness. You must obtain professional or specialist advice before taking or refraining from any action on the basis of the content on our site.
