In 2023, the crypto industry experienced a milestone, with major jurisdictions such as the EU and the UK tightening their regulatory frameworks. Duncan Ash, the head of strategy at blockchain protection firm Coincover, discussed the key trends expected to shape the crypto-regulatory landscape in 2024 and how they will affect the evolution of the industry in the long term.
“Crypto regulation” itself is somewhat of an oxymoron. Although built on the principle of peer-to-peer transmission, the market has gradually moved away from its purist origins as regulators seek greater oversight. Different jurisdictions are moving at different rates of reform. The EU is leading the charge, passing its landmark Markets in Crypto Assets (MiCA) regulation last summer.
The UK has taken a more phased approach and plans to publish a new regulatory regime this year following its consultation period, which ended in February 2024. Progress in the US has been much slower, where the SEC has largely ruled through enforcement action and is at odds with the CFTC .
While it remains to be seen exactly what new regulation might look like and how it will be enforced, it is inevitable that the future of crypto lies within much more regulated and supervised parameters. As industry players try to navigate this transition in 2024, here are three key trends that will play a central role in shaping the regulatory landscape:
Keep reading
Traditional and decentralized finance are becoming more intertwined. The approval of the Bitcoin ETF in the US recently highlighted this. As the gap narrows, we can expect increased hiring by crypto firms seeking financial regulatory experience to ensure they are ahead of the curve in compliance.
For example, USDC issuer Circle hired Heath Tarbet, the CFTC’s former chairman, as its chief legal officer last July to oversee its regulatory affairs. As regulators continue to increase market pressure, crypto firms are likely to prioritize hiring individuals from traditional finance (TradFi) and regulatory sectors to avoid fines and penalties due to non-compliance with new requirements.
The aggressive stance regulators are taking against the crypto market highlights the significant risks involved. For example, the SEC issued an estimated $5 billion in fines against crypto firms for a series of violations between October 2022 and September 2023 alone. These include violations of AML regulations and offering unregistered securities.
To navigate these challenges, crypto companies will increasingly seek expertise in TradFi and legal fields to ensure compliance
with changing regulatory demands.
New technology requires new regulation
Arguing over the definition of cryptocurrencies as “securities” or “commodities” is not sustainable and will not help make the crypto market safer in the long run. For regulation to be effective in fostering a sustainable future for crypto, regulators will need to understand the complexities of the crypto market and seek rigorous feedback from market participants on any new proposals.
While cryptocurrencies are all part of the same group, they behave differently. This means that regulating the entire ecosystem under a single framework will only create friction between regulators and market participants.
For example, Stablecoins and cryptocurrencies perform different functions within the crypto ecosystem and thus require different regulatory regimes. Despite being the most popular cryptocurrencies by market capitalization, Bitcoin and Ethereum have some fundamental differences. The latter provides a decentralized platform for creating and implementing smart contracts and DeFi applications (dApps).
Each cryptocurrency does not require its own regulation. Rather, any new regulations should be tailored to the unique characteristics of the crypto market and should consider their different use cases.
Electoral uncertainty to a slow pace of regulatory reform
2024 will be the biggest year in election history, with countries accounting for more than 60% of the world’s economic output holding elections. With elections comes uncertainty, and in times of uncertainty the pace of any regulatory or legislative reform slows.
Take the United Kingdom for example. Prime Minister Sunak has historically positioned the country as “open for business” and has been a vocal crypto and blockchain proponent. His government has been behind major stablecoin provisions such as those in the Financial Services and Markets Act, but with polls suggesting a change at Downing Street, regulators may choose to delay publishing any new framework until after the next general election.
The US finds itself in a similar situation. In July, the House Financial Services Committee passed a landmark bill aimed at developing a regulatory framework for crypto. However, its progress through Congress is likely to be delayed as increasing focus is diverted to the presidential election.
What next?
Regulation will be a force for good in the crypto market, providing greater trust, transparency and consumer protection. However, it will not be a panacea. The implementation of new rules and frameworks is a long process that will not happen in one “big bang” moment. Although this transition will continue into 2024, we should not expect sweeping reform.
In 2023, the crypto industry experienced a milestone, with major jurisdictions such as the EU and the UK tightening their regulatory frameworks. Duncan Ash, the head of strategy at blockchain protection firm Coincover, discussed the key trends expected to shape the crypto-regulatory landscape in 2024 and how they will affect the evolution of the industry in the long term.
“Crypto regulation” itself is somewhat of an oxymoron. Although built on the principle of peer-to-peer transmission, the market has gradually moved away from its purist origins as regulators seek greater oversight. Different jurisdictions are moving at different rates of reform. The EU is leading the charge, passing its landmark Markets in Crypto Assets (MiCA) regulation last summer.
The UK has taken a more phased approach and plans to publish a new regulatory regime this year following its consultation period, which ended in February 2024. Progress in the US has been much slower, where the SEC has largely ruled through enforcement action and is at odds with the CFTC .
While it remains to be seen exactly what new regulation might look like and how it will be enforced, it is inevitable that the future of crypto lies within much more regulated and supervised parameters. As industry players try to navigate this transition in 2024, here are three key trends that will play a central role in shaping the regulatory landscape:
Keep reading
Traditional and decentralized finance are becoming more intertwined. The approval of the Bitcoin ETF in the US recently highlighted this. As the gap narrows, we can expect increased hiring by crypto firms seeking financial regulatory experience to ensure they are ahead of the curve in compliance.
For example, USDC issuer Circle hired Heath Tarbet, the CFTC’s former chairman, as its chief legal officer last July to oversee its regulatory affairs. As regulators continue to increase market pressure, crypto firms are likely to prioritize hiring individuals from traditional finance (TradFi) and regulatory sectors to avoid fines and penalties due to non-compliance with new requirements.
The aggressive stance regulators are taking against the crypto market highlights the significant risks involved. For example, the SEC issued an estimated $5 billion in fines against crypto firms for a series of violations between October 2022 and September 2023 alone. These include violations of AML regulations and offering unregistered securities.
To navigate these challenges, crypto companies will increasingly seek expertise in TradFi and legal fields to ensure compliance
with changing regulatory demands.
New technology requires new regulation
Arguing over the definition of cryptocurrencies as “securities” or “commodities” is not sustainable and will not help make the crypto market safer in the long run. For regulation to be effective in fostering a sustainable future for crypto, regulators will need to understand the complexities of the crypto market and seek rigorous feedback from market participants on any new proposals.
While cryptocurrencies are all part of the same group, they behave differently. This means that regulating the entire ecosystem under a single framework will only create friction between regulators and market participants.
For example, Stablecoins and cryptocurrencies perform different functions within the crypto ecosystem and thus require different regulatory regimes. Despite being the most popular cryptocurrencies by market capitalization, Bitcoin and Ethereum have some fundamental differences. The latter provides a decentralized platform for creating and implementing smart contracts and DeFi applications (dApps).
Each cryptocurrency does not require its own regulation. Rather, any new regulations should be tailored to the unique characteristics of the crypto market and should consider their different use cases.
Electoral uncertainty to a slow pace of regulatory reform
2024 will be the biggest year in election history, with countries accounting for more than 60% of the world’s economic output holding elections. With elections comes uncertainty, and in times of uncertainty the pace of any regulatory or legislative reform slows.
Take the United Kingdom for example. Prime Minister Sunak has historically positioned the country as “open for business” and has been a vocal crypto and blockchain proponent. His government has been behind major stablecoin provisions such as those in the Financial Services and Markets Act, but with polls suggesting a change at Downing Street, regulators may choose to delay publishing any new framework until after the next general election.
The US finds itself in a similar situation. In July, the House Financial Services Committee passed a landmark bill aimed at developing a regulatory framework for crypto. However, its progress through Congress is likely to be delayed as increasing focus is diverted to the presidential election.
What next?
Regulation will be a force for good in the crypto market, providing greater trust, transparency and consumer protection. However, it will not be a panacea. The implementation of new rules and frameworks is a long process that will not happen in one “big bang” moment. Although this transition will continue into 2024, we should not expect sweeping reform.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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