2023 has been a mixed bag for the crypto community. The leading cryptocurrencies– Bitcoin and Ether have nearly doubled in price and the crypto exchange Coinbase’s stock has grown by over four-fold.
Major financial institutions like Blackrock and Fidelity have launched crypto investment products, signaling an expanding mainstream acceptance of the asset class.
The same year also witnessed the former FTX CEO Sam Bankman-Fried being convicted for various charges of fraud and the crypto exchange Binance being slapped with a record $4 billion in compensation, putting its cofounder Changpeng Zhao on the hook for diverting customer funds.
The US regulators have been hyperactive since the bankruptcy of FTX. Apart from Binance, the SEC has filed major lawsuits against five other crypto firms, including Coinbase, in the passing year.
The US watchdogs including the SEC, the Commodity Futures Trading Commission, the Department of Justice, and Treasury’s Financial Crimes Enforcement Network (FinCEN), have emerged as the most punishing regulators of the crypto industry.
Notably, nearly half of the cases of CFTC in 2023 were regarding digital assets. The SEC was mostly after crypto-related fraud schemes, unregistered crypto entities, and ignorant celebrity touting.
While the SEC was busy enforcing legal action against crypto companies, regulators elsewhere, most notably the European Union, were slowly rolling out formal laws specifically for the industry.
What Is Markets in Crypto-Assets Regulation?
In April, the European Parliament approved the Markets in Crypto-Assets Regulation (MiCA), a comprehensive legal framework for the crypto industry.
The EU had initially proposed MiCA in 2019, as a response to Meta’s cryptocurrency Diem, the erstwhile Libra. The framework aims to prevent fraud and illicit financing and tackle the potential threat from stablecoins, and tokens that are pegged to sovereign currencies.
Crypto firms have also responded positively to the new guidelines, with Coinbase applying for a Universal MiCA status in Ireland.
If this is approved, it will pave the way for the company’s expansion into other European markets, including Germany and France. Developments of similar scale are in progress in Singapore, Hong Kong, and Dubai.
The Virtual Assets Regulatory Authority (VARA) has been launched in Dubai to systematize the crypto regulation in the Middle East and Africa.
Though the strict regulatory framework may increase consumer confidence in the long term, the hostile policies are also making crypto firms reconsider their presence in the US.
Coinbase CEO Brian Armstrong, for instance, has already hinted about his plans to move the company’s headquarters overseas.
Currently, the SEC, CFTC, and FinCEN provide informal regulatory guidelines for the crypto industry. The SEC has issued guidelines for launching and analyzing cryptocurrencies and digital assets.
However, these frameworks have faced serious criticism from industry experts for their reliance on outdated laws and regulations.
This New Year, the blockchain community hopes that, in light of the previous year’s drastic events, 2024 will bring more structure and clarity to the crypto regulation framework in the US.
The investors are also eagerly awaiting the approval of a Bitcoin ETF native to the country. However, Nelson Mullins Riley & Scarborough’s Levin told CNBC that not much should be expected in the backdrop of the new presidential election and a divided government policy.