As the cryptocurrency landscape continues to evolve, regulatory agencies worldwide are making concerted efforts to establish some form of control over the largely elusive market. Despite the influx of substantial institutional investment, most regulators, including the Hong Kong’s Secretary for Financial Services and the Treasury, Christian Hui, still approach the trading, primarily the retail stablecoin trading, with cautious optimism as exemplified by their recent stance of not allowing it until there are official regulations.
Stablecoins have, hitherto, functioned as a significant trading asset due to their value stability through a peg to United States dollars or assets like gold. However, that stability is only as established as their reserve management allows. Issues have been raised around instances where stablecoins have faced serious volatility, or worse still, collapsed. In this sense, Hui has emphasized that reserve management of stablecoins highly affects the price stability of investors’ rights to redeem fiat currencies.
The case of the local crypto exchange- JPEX, that left users in a bit of stir is a clear indication of the potential risks and irregularities prevalent in the cryptocurrency market. The exchange faced legal action for allegedly promoting its services without a license, leading to severe fraud allegations. This episode forms part of the rationale behind Hui’s preference for higher supervision of the cryptocurrency market.
Meanwhile, the United Kingdom seems to be adopting a different regulatory approach, aiming to capitalize on Web3 firms leaving the United States due to regulatory uncertainty. The influential conservative think tank- Policy Exchange proposed actions to improve Web3 regulation, such as limiting the liabilities of individuals who hold tokens in a decentralized autonomous organization. The report also suggested that the U.K.’s financial regulator, the Financial Conduct Authority, refines its Know Your Customer (KYC) approach, allowing the use of innovative techniques such as digital identities and blockchain analytics tools.
Despite the proposed recommendations, U.K. regulators have taken a stricter approach towards the industry recently, considering a ban on cold calls promoting crypto investments and warning local crypto businesses about following certain marketing rules.
While one cannot downplay the irreversible transformation that cryptocurrencies promise to bring to the financial arena, it is essential to understand the implications that such a disruptive technology brings. Striking the balance between stimulating the promising industry and protecting the investors forms an ongoing struggle for the regulatory authorities. The implementations, even a tad bit, could swing the scales heavily, making it a riveting matter to observe how it pans out over time.
Source: Cointelegraph
