Regulatory scrutiny increases as crypto becomes a financial stability risk – Report
There has been a sharp increase in crypto-targeted regulations, with regulators mainly in North America and Europe targeting everything from non-fungible tokens (NFTs) to stack coins and regular cryptocurrencies, a global RegTech (regulatory technology) company found CUBE.
In a new report on regulatory prospects for the crypto area, CUBE said that there has been an increase of 7.436% in crypto-related regulatory announcements in the last four years, compared to before 2018.
For 2021, the report found a large increase in new regulations using the terms “Virtual and cryptocurrencies.”
Regulations focused on other crypto-related topics such as “Bitcoin”, “Digital asset”, “Crypto” and “Non-fungible token (NFT)” also saw significant growth last year, but to a lesser extent than “Virtual & Cryptocurrencies.”
The change in the use of different terms shows that “a new iteration” in crypto tends to be developed just as regulators have “agreed with the latest developments,” the report states.
Furthermore, the report acknowledged that the crypto market has already grown to become a critical part of the global financial system, and that risks from crypto can spread to traditional markets.
“As investor participation increases for cryptocurrencies, so does the risk that cryptocurrency market volatility may have a contagious effect on the global economy. It is fast becoming a financial stability risk,” the report said.
CUBE added that most of the regulatory issues come from North America and Europe, and make up 51% and 32% of all new regulations in space, respectively.
In these regions, USA Security and Exchange Commission (SEC) and the United Kingdom Financial Conduct Authority (FCA) has been among the most active in issuing new regulations.
Among the problems that CUBE finds that regulators have missed is the sustainability aspect of crypto. According to CUBE chief Ben Richmond, global regulators must push for regulations that show that crypto can “thrive without undermining” efforts to curb climate change.
And although Richmond admitted that there are “aspects of the ESG [Environmental, Social, and Governance] and crypto working together, “he argued, the failure to deal with the environmental impact of crypto would lead to” an inevitable clash between two titans that could significantly set the course for the modern financial world back. “
Looking ahead, the report said regulators face a universal challenge in dealing with cryptocurrency risk at the global level. And while many national regulators currently appear to be focusing on stack coins as the most urgent area to regulate, there is “uncertainty as to whether a regulatory regime will hold” without increased global cooperation.
In conclusion, the report said that “time is running out before the volatility of crypto bleeds into global financial stability.” As a result, regulators – in an effort to get faster results – are likely to “stretch existing regimes to accommodate cryptocurrencies.”
The report added that
“For their part, they can use stack coins as a blueprint for new regulation to come. Undoubtedly, international bodies will work tirelessly to link centralized regulation with a decentralized currency.”
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Learn more:
– EU legislators want rules against money laundering to cover NFTs
– “More work to do” as the EU imposes new strict crypto regulations
– EU institutions reach agreement on controversial “wallet regulations without hosting”.
– Global watchdog against money laundering pushes land, crypto exchanges to implement key requirements faster
– Regulatory Fog Remains as SEC chief does not mention Ethereum as a commodity, does not say that Bitcoin is the only
– SECs Peirce says that Crypto’s lack of ‘rescue mechanism’ is a strength; FTX CEO as a “White Knight”
