Crypto regulation from 2022 to 2023

Crypto regulation from 2022 to today has changed a lot.

What happened in 2022, and what continues to happen in this early part of 2023, is convincing many regulators to try to intervene.

However, concrete interventions are still few, because there is still a lot of confusion

The confusion of crypto regulation in 2022

The great regulatory confusion in crypto is mainly due to the lack of clear and specific laws.

However, there still seems to be a lot of it even among those who are supposed to write such laws.

Taking the US regulations as a reference, given that the US is the world’s largest market for cryptocurrencies, there still does not seem to be any agreement either in Congress or in the government on how to proceed.

There is actually a bill in Congress, but after several months it has not yet managed to be finalized and passed. In fact, after an initial approval, changes have already been introduced that are not always entirely in line with the original intention.

Moreover, there are also very different positions among the parliamentarians themselves, reinforced by the even conflicting positions of the different states.

For example, Texas appears to want to exploit cheap energy to encourage mining, while New York state has virtually banned mining using polluting energy sources.

In such a confusing picture, it is no wonder that precise rules do not yet exist and that we struggle to find any that enjoy majority support.

In addition to this, it is worth adding that around the world the situation is not so different, with a few and generally small exceptions.

The most crypto-friendly states

Despite this, there are some nations that are trying to become crypto-friendly, that is, to have crypto-friendly regulation of the sector.

Perhaps the most advanced in this regard is Switzerland, with Lugano aiming to become the most important crypto hub in Europe.

Regulation in Switzerland is now clear enough that the crypto regulations to date appear to be among the most advanced in the world.

But Switzerland is, as is often the case, something of a small exception, which operates differently even from neighboring countries.

For example, within the EU, the countries most advanced in cryptocurrency regulation are probably Estonia, in some ways, and Portugal, in others. To tell the truth, it also seems that Germany wants to have a favorable regulation.

In Europe, the second country pushing hard in this regard is Ukraine, but for obvious problems to date it is somewhat cut off from the global market.

Russia also seems to want to take some steps forward, but there is no clear shared political intent in Russia in favor of developing the crypto sector. In fact, it is one of the states in the world that has been most confused and disorganized about cryptocurrencies in recent years, along with India.

The situation in the UK also appears complicated, as it would like to become a crypto hub, but at the same time does not seem to be succeeding for the time being.

In addition to the aforementioned India, where there is indeed enormous confusion about it, and China, which has some of the most restrictive crypto regulations in the world, Dubai in Asia is emerging as an important crypto hub, thanks to favorable regulation from the United Arab Emirates, which is a part of.

The other country to mention is of course El Salvador, which wants to become Latin America’s crypto hub.

The main problems

The main issue countries face when it comes to cryptocurrencies is consumer protection.

This means, on the one hand, trying to prevent them from being defrauded, and on the other hand, imposing rules and procedures on crypto operators that limit their risks.

In truth, no state in the world seems to be succeeding in the fight against crypto fraudsters. However, in several cases, after the fraud has taken place, the fraudsters have been arrested, jailed and subsequently convicted. But those who are still at large are probably the majority.

This point should not be ignored at all, to think that it is enough to change the laws to reduce crypto fraud, or to catch the fraudsters, is nothing more than a utopian dream.

Intervening effectively in this regard will first require better financial education for potential victims, and then faster and more effective law enforcement capabilities.

To do this will also require international, if not global, coordination, and the lack of this makes the fight against fraud an unequal battle that will often end in failure.

Unfortunately, however, politics from this point of view seems to prefer to turn a deaf ear, preferring the proliferation of laws whose effectiveness has yet to be proven.

Instead, imposing stricter rules on crypto operators to force them to be more robust and honest seems like a perfectly viable path.

Incidentally, this is exactly what the SEC chairman, Gary Gensler, is calling for these days, according to which crypto intermediaries must at least provide the same guarantees as traditional financial intermediaries.

This will not eliminate problems or eliminate fraud, but it will reduce the number of frauds and especially the negative consequences for consumers.

New crypto regulation for exchanges: 2022 to 2023

It is therefore no coincidence that it is precisely on exchanges, and other providers of crypto services such as lending platforms, that the attention of many regulators is directed.

For example, one regulation that isn’t there yet—and it’s not clear why it wouldn’t be—would be one that requires exchanges to keep their own funds completely separate from their customers’. This is a rule that underlies the financial system of international exchanges, and it would be good if it was also introduced in the crypto world.

For example, how is it possible that FTX, which was a registered and regulated exchange, was allowed to use billions of dollars in funds that belonged to their clients?

Another regulation that is not well understood, why it has not yet been introduced, is the requirement to insure against theft or possible loss of client funds.

In traditional finance, funds held on behalf of third parties are insured, so that in the event of theft or loss, it is not the customers who bear the cost, but the custodians. In contrast, in crypto it continues to be largely the customers who bear the costs.

These two are the main regulations that are expected to be introduced in the crypto world in 2023, or in the coming years, although it would be better if they were introduced as soon as possible.

It is worth mentioning that holders of cryptocurrency are in no way obliged to trust intermediaries. One of the characteristics of this new technology is precisely disintermediation, so there will always be an alternative system that does not force them to have to rely on intermediaries.

Because of this, there is no reason not to impose safeguards on these intermediaries that will prevent their customers from always being the ones to pay the price if something goes wrong.

Now AML (Anti-Money Laundering) regulations are imposed on crypto intermediaries in almost all advanced countries, so it is now possible to move on to the next step.

While it is increasingly unlikely that new bans will be imposed, especially in liberal countries, it is not at all unlikely that new rules will be imposed on crypto intermediaries that will strengthen their security and increasingly protect their users.