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Strict regulations are coming to the cryptocurrency industry
Strict regulations coming to the cryptocurrency sector
Strict regulations are expected in the cryptocurrency market, as countries will limit access to ensure the adoption and success of their digital currencies.
The cryptocurrency market, which according to a report conducted by Crypto.com is currently valued at $1.7 trillion and has 106 million users worldwide, has been exploited by many investors for speculative investments that would supposedly earn them a profit. rapid capital gain due to high asset value. volatile nature.
To execute their trades, investors rely on cryptocurrency exchange platforms such as Binance and Coinbase. But these platforms have taken some hits in recent months.
A series of shots…
In May 2021, China banned any financial institutions from carrying out cryptocurrency transactions. And in the UK, retail banks have suspended all transactions to exchange platforms for fear of financial crime. These recent restrictions on cryptocurrency exchanges and the cryptocurrency market in general are a sign of more severe restrictions to expect in the future.
Last month, UK banks such as Barclays, Monzo and Starling Bank decided to temporarily suspend payments to cryptocurrency exchange platforms due to the growing number of suspicious transactions. These restrictions are expected to be removed as banks introduce better payment controls and verifications on cryptocurrency exchanges.
Along with the popularity that the cryptocurrency industry has gained in recent years, banks have reported increased rates of financial crime related to cryptocurrency transactions.
Despite the Financial Conduct Authority’s (FCA) initiative to register all cryptoasset companies by July 2021, only five companies are fully registered and the FCA has just announced that it will extend the registration process until March 2022.
This means that most cryptocurrency exchanges in the UK operate without FCA rules and therefore have no obligation to monitor or report any transactions that would breach anti-money laundering regulations.
Until they are fully regulated, it is up to banks and financial institutions to find solutions to reduce their exposure to the risk of any form of financial crime through cryptocurrency exchanges.
Cryptocurrency legislation
The cryptocurrency sector needs an international framework to regulate it. This could be introduced to limit its use in all countries. At the moment, countries have an uneven approach to regulating this sector – if they are even regulating it at all.
Some countries such as Japan have passed regulations in favor of cryptocurrencies, recognizing them as legal property, and the sector is under the full supervision of the Financial Services Agency.
The story continues
Other countries like India are trying to ban this industry; in March 2021, the Indian government introduced a digital currency law that would make cryptocurrencies illegal in the country. China is tightening its restrictions by banning financial institutions from carrying out related transactions.
The decision to limit or ban countries’ use of cryptocurrencies is an attempt to limit the influence the sector can have on the world economy, as they would not want to cede control of their economy to a decentralized currency.
In the UK, the Bank of England published a discussion paper explaining that stablecoins should expect the same regulations as fiat currencies.
The report also mentions that it is exploring the potential introduction of its own digital currency, “Britcoin”. And in the case of China, the country hopes to ensure the success of its own digital currency, currently being tested in many of its cities.
The growing cryptocurrency sector needs to be regulated to protect users from online scams and prevent its use in crimes such as money laundering.
In the UK, until the FCA is able to regulate cryptocurrency companies, traditional banks will have to find solutions to protect their customers from online fraud associated with cryptocurrency transactions – or, more likely, refuse to deal in cryptocurrency for retail customers.
The growing popularity of cryptocurrency is perceived as a danger for central banks, as they are concerned about the impact a volatile decentralized currency may have on their economy. By limiting cryptocurrency adoption, central banks can try to transition to their own digital currencies – the regulations we see will likely be highly restrictive to achieve this.
This was written by payments analyst GlobalData Chris Dinga.
“Strict Regulations Are Coming to the Cryptocurrency Industry” was originally created and published by International electronic paymentsa trademark owned by GlobalData.
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