Global Crypto Policy & Regulation Update – March ’23

Europe continues to lead the way in crypto regulation, with the EU’s Markets in Crypto-Assets (MiCA) regulation set to govern cryptocurrency and its providers within the EU. MiCA was originally scheduled for a final vote this month, but was delayed until April due to technical difficulties. The sweeping regulations include oversight of crypto asset service providers (CASPs), who will be required to register with the EU and share their whitepaper in order to receive a license to operate. They also include capital requirements and other safeguards placed on digital ledger technology (DLT) companies. The regulations are not expected to extend to Central Bank Digital Currencies (CBDCs) or Non-Fungible Tokens (NFTs). Experts expect that Europe’s quick implementation of MiCA will magnify its control over the industry, similar to the way EU antitrust laws have granted Europe outsized influence over big tech.

In Asia, many were surprised to find China warming to the idea of cryptocurrency after largely damning the concept in 2016. Hong Kong revealed its upcoming licensing regime for crypto services providers, which could open the door to retail trading. The move appears to have the support of mainland China and optimists see Hong Kong as an important first step in crypto returning to the region.

In the US, the regulatory landscape has been less clearly defined as the SEC continues its policy of regulation by enforcement. The SEC reached a $30M settlement with Kraken for failing to register its staking as a service program as a security, and the implications promptly lurched other staking providers into disarray. Executives at Coinbase were forced to defend their own staking as a service, their Chief Legal Officer claiming their offerings are “fundamentally different” from Kraken’s. 

The SEC also sent waves around the industry when it ordered Paxos, the firm behind Binance’s BUSD stablecoin, to halt minting the token. Coinbase delisted BUSD out of caution, citing liquidity concerns. The move comes amid a broader SEC stablecoin crackdown which seems aimed at stablecoins linked to a larger service – usually offering interest, yield, or some other form of profit. Some experts worry that a lack of clarity will force stablecoin providers to pack up and leave the US for a friendlier regulatory environment. 

There is a trend emerging around stablecoins and their increased importance in times of chaos. In particular, getting regulation “right” around stablecoins across different regions and political jurisdictions may set the stage for competition between sovereign states, creating a race to crypto adoption and friendly policies.