What if Crypto Becomes the Universal Financial Asset Worldwide? The reforms needed to make it effective

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It is possible to classify the existing regulatory base into two broad categories, namely the status of cryptocurrencies and the publications of regulatory documents. The United States does not consider cryptocurrencies to be legal tender. At the same time, cryptocurrency exchanges have legal status, with their regulations varying by state. Canada also does not recognize cryptocurrencies as legal tender. Cryptocurrency exchanges must register with FinTRAC. Similarly, Singapore does not recognize cryptocurrencies and requires registration of exchanges with its monetary authority.

Australia and Japan recognize the legal status of cryptocurrencies by treating them as property. The EU granted legal status to cryptocurrencies but banned the introduction of new ones by member states. China has the strictest regulatory base, essentially banning cryptocurrencies and exchanges. Differences in regulatory approaches between countries complicate the use of cryptography and limit its development.

When reviewing recent regulatory advancements, it is essential to focus on the Framework for International Engagement on Digital Assets (FIEDA) in the United States and the Interim Agreement on Crypto-Asset Markets (MiCA) in the United States. European Union. The main objectives of FIEDA were to protect investors, consumers and businesses, to strengthen financial stability and to mitigate the risks associated with fraud. These objectives aligned with the MiCA agreement, which emphasized stability support and risk regulation. The unification of regulatory changes is a common theme in existing regulatory documents.

Future regulatory reforms

The current differences in the status of cryptocurrencies and the existing regulatory base show that reforms are essential for future development. It is possible to project three basic trends associated with potential regulatory changes. The first concerns the unification of regulations. Universal asset or ledger status requires consistency in regulatory approach. The rules must be similar or identical in all jurisdictions to allow the global transfer of funds and their security.

Risk analysis and transparency represent the second area of ​​reform. Know Your Customer (KYC) and Anti Money Laundering (AML) protocols are already required of exchanges. Given the decentralized nature of crypto, one can expect a similar form of due diligence from all network participants. Reform may require substantial changes to core protocols focused on transaction transparency and source verification. These should appear at the general ledger level, not at the user level.

The third reform should focus on centralized governance mechanisms. Although central banks no longer hold a monopoly on currency issuance, they may have the ability to limit the amount of crypto in circulation. Such measures would be essential to promote economic growth and ensure recovery in times of crisis. Centralization reform is the most complex as it contradicts the nature of the crypto market prized for decentralization.

Possible scenarios

It is already evident that crypto faces a wide range of regulatory hurdles around the world. These range from outright bans on cryptocurrencies and exchanges to limitations on their use and issuance. The base case scenario implies that crypto will overcome these challenges as it becomes more accepted in larger economies. Such acceptance will include universal regulatory reforms and risk mitigation frameworks. Other countries will follow the leaders in adopting the proposed reforms.

The alternative scenario suggests that cryptocurrencies and crypto-assets will continue to face opposition. Central banks do not want to lose their regulatory tools in the financial markets. At the same time, commercial banks want to continue to profit from their role as intermediaries. Thus, the crypto may continue to grow at a moderate pace until another surge in popularity.

The global economy, technological advancements, and the efforts of crypto market players will share the reforms. The rate of innovation may decline due to major economic shocks or crises. The usefulness of crypto assets and their value will also define the potential scenario. For now, the positive trends outweigh the negative ones.

At Kyrrex, we are actively engaging in the process of making cryptocurrencies the universal financial asset. Our financial ecosystem received VFA class 4 license ensuring full compliance with EU regulations. Thus, we are able to provide the Virtual Financial Assets (VFA) services to both expert and novice investors. The future belongs to cryptocurrencies, and it is already here.

Viktor Kochetov, founder of the global financial ecosystem Kyrrex.

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