Crypto asset regulation, can the UK and the US keep up with the development of this emerging market?

During a virtual hearing of the House Financial Services Committee on Thursday, Gary Gensler, the new chairman of the U.S. Securities and Exchange Commission (SEC), said the cryptocurrency market could benefit from broader investor protections, saying: “I think this market, which is close to $2 trillion, could benefit from better investor protections.”

Bitcoin is a value storage tool that is not controlled by the government. Therefore, with the booming development of the crypto capital market, regulators and legislators in various countries have found that they must make great efforts to barely keep up with the development of the crypto market. The United States and the United Kingdom, as the hegemons of traditional capital, have been slow and sluggish in their involvement in new markets.

Gensler specifically addressed the issue of regulation of cryptocurrency trading platforms, claiming that Congress should consider implementing more investor protections around them and that the SEC would provide greater transparency around crypto custody. He said: “There is currently no regulatory framework for cryptocurrency trading platforms.. that framework would provide greater protection… There is currently no market regulator around cryptocurrency exchanges and no protection against fraud or market manipulation.”

In the United States, the regulation of cryptocurrencies is a bit strange, sometimes revered as a treasure, and sometimes pursued fiercely, because its entire regulatory system is established at the federal and state levels, divide and rule. In the UK, there is a more unified regulatory approach and charter for the crypto market.

Andrew Bailey, Governor of the Bank of England, once again expressed his opposition to cryptocurrencies in an online discussion held at the World Economic Forum in Davos at the beginning of the year. He stressed that digital innovation in the payment field will always exist, but cryptocurrencies will not.

Some states in the United States are passing favorable laws to attract investment, stimulate the economy or keep pace with modern technology, such as Wyoming (the state is often regarded as a pioneer in cryptocurrency regulation and has passed various related laws, including recognizing property rights and authorizing new types of chartered deposit institutions); Colorado (cryptocurrencies are exempted from the state's securities laws); and Ohio (the first state to allow the payment of some taxes in cryptocurrency);

Other states (particularly those with significant traditional financial industries, such as New York and California) have already passed restrictive legislation regarding crypto assets and investments, perhaps a sign of where they are headed in the future.

For example, New York has a comprehensive regulatory regime that requires companies to obtain "BitLicenses" to operate virtual currency businesses and publishes a "white list" of approved virtual currencies. Because of these different approaches, cryptocurrency companies are considering more carefully where to register and conduct business.

The U.S. Securities and Exchange Commission (SEC) is XRP's nightmare. The commission does not directly regulate cryptocurrencies, but has been advocating legislation to confirm its jurisdiction over initial coin offerings (ICOs), which are generally considered securities by the SEC, and broader cryptocurrency-related trading products, such as Bitcoin-related ETFs. The Commodities and Futures Trading Commission (CFTC), which has jurisdiction over cryptocurrency-related futures, options, and swaps, and has the power to prosecute fraud and manipulation in the cryptocurrency spot market. Various government agencies are overlapping, with overlapping regulatory powers, and they are vying for it. It's so lively.

In contrast, in the UK, the regulatory system appears more cohesive. Despite the UK's increasingly federalized domestic governance structure (Northern Ireland, Scotland, and Wales all have "devolved" parliaments with different jurisdictions), there is a unified approach to cryptocurrency regulation across the UK. In addition, now that the UK has left the EU and the "transition period" during which EU law still applied to the UK has ended, the UK has further room to carve out a unique cryptocurrency regulatory model that is not closely aligned with the EU's approach.

Regulation and legislation related to cryptocurrencies are constantly evolving, trying to keep up with the innovation of the cross-generational technology. Although cryptocurrencies are quintessentially global in nature, regulation is mainly at the national or sub-national level. We see a clear divergence in approaches at the national (or even sub-national) level, so cryptocurrency companies and users must remain vigilant to avoid legal risks that may come at any time.

Image source: Internet

AuthorChen Zou