Strict regulations are coming for the cryptocurrency sector

Difficult regulations are coming for the cryptocurrency sector

Strict regulation is to be expected in the cryptocurrency market as countries will restrict access to ensure the adoption and success of their own digital currencies.

The cryptocurrency market – currently valued at $1.7 trillion and having 106 million users worldwide, according to a report by Crypto.com – has been used by many investors for speculative investments that would supposedly give them a quick capital gain due to its high value. assets. changeable nature.

To execute their trades, investors rely on cryptocurrency exchange platforms such as Binance and Coinbase. However, these platforms have taken several hits in recent months.

A series of punches…

In May 2021, China banned all financial institutions from conducting cryptocurrency transactions. In turn, in the UK, retail banks suspended all transactions on exchange platforms for fear of financial crimes. These recent restrictions on cryptocurrency exchanges and the cryptocurrency market in general are a sign of tighter restrictions to be expected in the future.

Last month, British banks such as Barclays, Monzo and Starling Bank decided to temporarily suspend payments to cryptocurrency exchange platforms due to the increasing number of suspicious transactions. These restrictions are expected to be lifted as soon as banks introduce better controls and verification of payments on the cryptocurrency exchange.

With the popularity that the cryptocurrency sector has gained in recent years, banks have seen an increase in financial crime rates related to cryptocurrency transactions.

Despite an initiative by the Financial Conduct Authority (FCA) for all cryptocurrency firms to register by July 2021, only five firms are fully registered and the FCA has just announced that it will extend the registration process until March 2022.

This means that most UK cryptocurrency exchanges operate without FCA rules and therefore have no obligation to monitor or report any transactions that would breach anti-money laundering regulations.

Until these are fully regulated, it is up to banks and financial institutions to find solutions to reduce exposure to the risk of all forms of financial crime via cryptocurrency exchanges.

Cryptocurrency regulations

The cryptocurrency sector needs an international framework to regulate it. This could be introduced to restrict its use in all countries. Currently, countries have divergent approaches to regulating this sector – if they regulate it at all.

Some countries, such as Japan, have passed regulations in favor of cryptocurrencies, recognizing them as legal property, and the sector is completely under the supervision of the Financial Services Agency.

Other countries like India want to ban this sector; in March 2021, the Indian government introduced the Digital Currency Act, which would make cryptocurrencies illegal in the country. China is deepening its restrictions by prohibiting financial institutions from engaging in related transactions.

The decision to limit or ban the use of cryptocurrencies by countries is an attempt to limit the impact that the sector may have on the global economy, as they do not want to give control of their economy to a decentralized currency.

In the UK, the Bank of England has published a discussion paper explaining that stablecoins should be subject to the same regulations as fiat currencies.

The report also mentions that it is exploring the potential launch of its own digital currency, “Britcoin.” In China’s case, the country hopes to guarantee the success of its own digital currency, which is currently being tested in several cities.

The growing cryptocurrency sector needs to be regulated to protect users from online fraud and prevent it from being used for crimes such as money laundering.

In the UK, until the FCA is able to regulate cryptocurrency companies, traditional banks will have to find solutions to protect their customers from online fraud related to cryptocurrency transactions – or, more likely, deny cryptocurrency trading to retail customers.

The growing popularity of cryptocurrencies is seen as a threat to central banks as they are concerned about the impact an unstable decentralized currency could have on their economy. By limiting the adoption of cryptocurrency, central banks may try to move towards their own digital currencies – the regulations we see will likely be very restrictive to achieve this.

This was written by a GlobalData payments analyst Chris Dinga.

“Strong Regulations Are Coming for the Cryptocurrency Sector” was originally created and published by Electronic Payments International, a brand of GlobalData.

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