The UK’s Crypto and Digital Assets Group will be welcomed, but it needs to reach out to the industry

by Jennifer Clarke of regtech CUBE

 

The advent of the Crypto and Digital Assets Group will be welcomed with open arms by the financial services industry, many of whom have been crying out for regulatory action in this space for some time.

Cryptocurrency and the innovation surrounding it marks an exciting step for the future of finance, but it is prone to gamification, turbulence, and financial crime which, at present, is difficult to contend with from a regulatory perspective. Many regulators have been getting creative with existing regulations or stretching their regulatory parameters in an attempt to tackle non-compliance.

However, in many instances this is a case of ‘square peg, round hole’, which is becoming untenable as crypto and digital assets evolve. The establishment of this new group marks a step in the right direction for future regulation, which will protect consumers and hopefully level out the market.

The newly formed group should first reach out to their counterparts in other jurisdictions to understand the move to crypto on a global scale, with a view to implementing a standardised regulatory framework for crypto, not a framework that exists solely in the context of the UK. Other countries are looking to regulate crypto, and this marks the perfect opportunity to create collaborative regulation, rather than regulating now and collaborating later.

We are long-term advocates for regulatory standards, and crypto seems like the perfect test ground for such a project. The cross border nature of cryptocurrencies and digital assets are both what make them so appealing, and what make them so challenging for regulators to manage.

Of course we welcome a regulatory framework for cryptocurrency, especially if it moves to combat financial crime. But it’s important that such a framework makes things easier to manage – not more complicated. Managing regulatory change is hugely challenging in today’s climate. Not only is regulatory change enacted at a pace and scale that is becoming humanly impossible to oversee, but the divergence between regulations – both in what they say and what they look like – means that global banks who do not utilise RegTech are expending huge amounts of time and resource to standardise regulations and implement them across borders.

As it stands, every jurisdiction is in the inception phase of regulating for crypto. It would be remiss of global regulators to create such regulations in silos, which would cause irregularity and difficulty down the line. Collaboration is key.

 

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