The USA and UK are two of the most important financial hubs in the world but it is only recently that the two countries have made significant strides in formulating a definitive crypto regulation position.
With global momentum gathering for more regulatory oversight of the market, how they develop their regimes going forward will likely have a large influence on how other jurisdictions respond.
In our recent Qredo Panel, Embracing Regulation: How the UK and US are warming up to crypto, Katie Fry-Paul from law firm Taylor Wessing, TRM Lab’s Head of Legal and Government Affairs Ari Redbord, and Qredo’s very own Ben Whitby took a look at the biggest developments in crypto regulation across the two nations.
Here are 5 key takeaways from the discussion:
WATCH PANEL RECORDING👇
Regulation is sometimes perceived as a negative, curtailing the ability of the crypto market to innovate and improve on existing financial frameworks.
But that isn’t the best way to think about regulation. Clear rules and lines can actively help the crypto industry develop and integrate more fully with mainstream financial services, reaching a broader audience whilst adding more legitimacy to the services on offer.
Being unregulated over the longer term could actually hinder the market’s growth, and – at this stage – crypto has a shining opportunity to help regulators develop the frameworks which will govern the market for years and decades to come.
Regulation isn’t a bad thing – it is one of the key drivers which will help take Web3 to the next level.
Ari Redbord, TRM Labs:
"Regulators have more visibility on this new financial system directly without intermediaries than they ever had before. And there are certainly new ways to think about regulation.
“There are tools that can allow regulators to have real time visibility on financial flows. That has never been true before."
Given the decentralized philosophy of the crypto industry, there are portions of the industry which contend that regulation goes against the fundamental promise of the technology.
However, as the market matures and becomes more integrated with the mainstream financial system, regulation is becoming more integral to its development and expanded usage for a broader audience.
For that to happen, it is in the best interests of the industry to actively work with regulators to ensure that the legislative framework which is currently being built maintains the potential of the technology.
Thankfully, there are many companies in the space which can help provide regulators with the tools they need to enhance their oversight and ensure that the most positive aspects of the industry are allowed to shine through.
Katie Fry-Paul, Taylor Wessing UK:
“There are loads of great firms, blockchain companies, which are developing tools that can be used by regulators, and that will really drive regulation.”
Occasionally regulators have held that decentralization is a barrier to effective regulation, preventing them from enforcing the type of oversight that they require of traditional financial firms.
But decentralization in many ways can actively aid effective regulation, removing the dependence on centralized parties to enforce individual policies.
That centralized position can be fraught with risks, relying as it does on individual persons and companies.
With blockchain-based platforms, all information is available equally and transparently to all parties, opening up the data to the market and all regulators
Ben Whitby, Qredo:
“The sanctions list, the OFAC lists – they are public lists. It's just we rely on the banks at the moment to implement those.
“And maybe in a peer-to-peer world, if we want this decentralized position, we shouldn't just rely on obliged, centralized entities to implement them.”
In the UK and US in particular, the lack of clear legislation and rules governing the cryptoasset industry has in many ways hindered the development of the market in these countries.
To some extent, that is down to the lack of tools the regulator has available — under pre-existing frameworks — to police the market.
With steps now being taken by the Financial Conduct Authority and the Treasury in the UK, and multiple agencies in the US, a more targeted approach is developing which will help the market.
Katie Fry-Paul, Taylor Wessing UK:
“People are skeptical about (regulation). And I think that's because until now, we've had quite a heavy handed approach from the regulator. But that's only because I think that's the tool that the regulator has available to them to supervise in this space.
“You have to give the regulator the tools that they need to properly supervise crypto activity. And I think the recent announcements from the UK Government are really positive.”
Despite all the activity and progress made in the UK, US and elsewhere, we are still in the infancy of crypto regulation.
It has become clearer over time that trying to fit crypto into current regulatory frameworks is insufficient, and the market and authorities are still figuring out what exactly the right approach is.
What is encouraging is that regulators want to work with the market to develop these rules.
And we can expect a lot more to come in the months and years ahead.
Want to learn more about how Qredo can help you with one of the most important regulatory issues in crypto?