Over the last few years, cryptocurrency has become one of the world’s largest trading platforms. The whole cryptocurrency trading space is currently worth just over $2 trillion. Due to the expansion and consistent growth of the space, governments are now trying to regulate it. The government of the United Kingdom have recently come forth with the proposition to implement a new set of regulations to ensure the “financial safety” of investors involved.
In this article, we will review the impact of implemented regulations by the United Kingdom and other countries around the globe and what effects they might have on the Cryptocurrency space.
Introduction to new regulations and their implementation
The basic aim of the new regulations is to strengthen rules related around cryptocurrency advertisements. Government officials say that there has been a spike in scams and misleading advertisements. Hence, the government’s hands were forced to take some strict steps to ensure the safety of citizens when dealing with cryptocurrency, and related adverts.
Newer laws legislate these misleading cryptocurrency advertisements. This new legislation will bring coherence between cryptocurrency and other financial advertisements ensuring that any cryptocurrency adverts are accurate and not misleading towards the public. Governmental rules are aimed to enhance consumer safety. Despite the new regulations being put into place, the government has cleared the speculation that the regulations are put in place to hinder actual cryptocurrency trading. Chancellor of the Exchequer, Rishi Sunak said: “Crypto assets can provide exciting new opportunities, offering people new ways to invest and transact – but it’s important that consumers are not being sold products with misleading claims.”
“We are ensuring that customers are protected, while also supporting the innovation of the crypto asset market.” HM Treasury
Benefits of the new laws
These laws are related to regulating and monitoring “qualifying crypto assets.” The FCA will formulate and implement the rules the same way as it does for other financial promotions, such as stocks, shares, and insurance products. Regulating crypto-related advertisement is one of the main goals of these new rules.
Crypto-related ads often minimize the potential risks and show unrealistic and overstated benefits of crypto trading. Thus, to make the citizens aware and protect them from falling into the trap, the government will check on crypto-related ads, to keep retail investors safer and make more educated steps into the space. Rules are created to ensure the protection of less aware citizens who may be trying to get involved. Most people fall prey to misleading cryptocurrency advertisements. They are not aware of the high risk factor that is associated with crypto-trading. Thus, these rules are meant to enhance financial safety of citizens and make sure that are aware of all the risks before they invest their money.
The businesses around the crypto trading space will have to be more transparent and forthcoming about their policies. Firms must be more careful about making unrealistic claims in their ads to attract people to crypto trading. This means that crypto businesses with all the correct regulations and legislations in place will be positioned better than those who are not, as the new regulations may cause complications for the businesses who do not have the correct practices in place later down the line.
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Worldwide trends about cryptocurrency regulations
As cryptocurrency becomes increasingly popular every day, governments worldwide are adapting and learning more about them and how they can take control of these digital assets to benefit them.
Although crypto is becoming more popular by the day, mainstream adoption is still yet to fully take charge. Many governmental bodies across the world do not fully understand it. Hence the solid standpoint on implementing, their own regulatory measures on the asset class. Countries such as the USA, Canada and China have all put or began to put regulations in place so that they can try and control the class and gain a grip over it.
Here is a summary of the cryptocurrency regulatory state in different countries as of now.
The US remains one of the more crypto-friendly jurisdictions in the world and has generally maintained a progressive disposition to its regulation.
There has been recent development at state level. Some states like Iowa and Maryland have issued cautions to the public in dealing with cryptocurrencies. They have also prohibited state agencies from accepting cryptocurrency as a form of payment. However, states like Colorado and Wyoming have acknowledged crypto as an instrument of monetary value. Ohio recently started accepting payment of taxes in cryptocurrency.
Different agencies have taken different approach to the definition of cryptocurrencies and its regulation. The Securities and Exchange Commission (SEC) views cryptocurrency as a security. While the Commodity Futures Trading Commission (CFTC) calls Bitcoin a commodity. The Treasury department calls it a currency. IRS treats cryptocurrency as “assets” for taxation purposes.
The White House is reportedly preparing an executive action that will instruct federal agencies with regulating cryptocurrencies ‘as a matter of national security.’ The order would assign agencies to analyse the various forms of digital assets and create a framework for regulation, The idea is to create a set of policies that are in line with the government’s plan for the space.
Canada has a proactive stance towards crypto trading. In 2021, Canada became the first to allow Bitcoin Exchange-Traded Funds (ETF). Moreover, Canada’s Investment Industry Regulatory Organization (IIROC) has clarified that crypto trading dealers and platforms must register with provincial regulators.
China is one of the greatest economies in the world. However, The People’s Bank of China (PBOC) has banned crypto exchanges from operating in the country. They say that crypto trading facilitates public financing without approval. China has also placed a ban on Bitcoin mining. However, they remain the nation with the largest cryptocurrency mining output. The world’s top Bitcoin mining pools all came from China with five pools being responsible for over half of the cryptocurrency’s total hash.