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<p>Cryptocurrency which has become a new asset class has been transforming the global investment landscape. Though this asset is paving the way for innovation in future finance and payments, it is afflicted with risks and scams that leave investors with steep losses. There have been instances where the market suffered sudden crashes. Such incidents have led to financial regulators strictly monitoring the market and consumers.</p><p>So, regulations to an extent help promote the safety of cryptocurrencies and prevent fraudulent activities and manipulations.</p><p>This is why several countries across the world are looking for ways to regulate it and protect users. In the United States (US) and the United Kingdom (UK), governments have been paying much attention to cryptocurrencies.</p><p>Over the years, these countries have been forming regulatory frameworks for user protection, as well as, promoting positive changes and competition. In this article, let us go through the regulatory compliances in the US and UK and how they affect the safety of <a href="https://www.biztechafrica.com/article/top-50-cryptocurrencies/62535/" rel="noopener noreferrer nofollow">top cryptocurrencies</a>.</p><h2 id="header-0">Current Regulatory Landscape</h2><h3 id="uk-regulatory-framework">UK Regulatory Framework</h3><p>The UK is among the countries where the crypto sector witnessed exponential growth in the last few years. It was in 2022 that cryptocurrencies became acknowledged as regulated investment instruments. One of the most notable decisions by the authorities was regulating stablecoins. The regulations became all the more stringent in June 2023 once the Financial Services and Markets bill became an act.</p><p><strong>Financial Conduct Authority (FCA) Stance</strong></p><p>As such, there are no specific laws in the UK for managing cryptocurrency activities but, exchanges have to register with the <a href="https://www.fca.org.uk/firms/cryptoassets" rel="noopener noreferrer nofollow">Financial Conduct Authority (FCA)</a>, the financial services regulator in the country, and also comply with the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) policies and measures. The FCA emphasizes that exchanges involved in crypto activities should strictly adhere to Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). In 2020, the FCA came up with amendments, including the imposition on crypto businesses to regulate the way they handle AML and CFT risks.</p><p><strong>Key regulations affecting cryptocurrencies</strong></p><p>Regulations in the UK are such that all residents can buy and sell cryptocurrencies. We have already discussed a few regulations in the country above. Here, let us dive a bit deeper.</p><ul><li><a href="https://www.legislation.gov.uk/uksi/2017/692/contents/made" rel="noopener noreferrer nofollow">Money Laundering</a>, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) consist of policies and measures, including the AML and registration requirements that crypto companies or entities in the UK should follow.</li><li>The necessity to implement <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri&#61;CELEX%3A32018L0843" rel="noopener noreferrer nofollow">EU’s AMLD5</a> in 2019 and the Travel Rule in 2022 for exchanges and wallet operators who should carry out compliance obligations just as financial institutions.</li><li><a href="https://www.legislation.gov.uk/ukpga/2000/8/contents" rel="noopener noreferrer nofollow">Financial Services and Markets Act 2000 (FSMA)</a>, the Regulated Activities Order 2001 (RAO), and the Electronic Money Regulations 2011 (EMRs) must be followed as needed depending on the type of asset dealt with.</li></ul><h3 id="us-regulatory-environment">US Regulatory Environment</h3><p>The US is still evolving in terms of bringing in regulations on cryptocurrency activities in the country. Though the state and federal governments are involved in forming regulations, major developments are coming from the federal level. An all-new framework stressing important regulations came up in 2022. This included a call to federal regulators to evaluate the positives offered by cryptocurrencies and also the drawbacks. The 2022 framework gave regulatory power to the already existing financial regulators, Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Other bodies that regulate cryptocurrencies include the Office of the Comptroller of the Currency (OCC), the Federal Trade Commission (FTC), the Internal Revenue Service (IRS), the Treasury Department, and the Financial Crimes Enforcement Network (FinCEN).</p><p><strong>Securities and Exchange Commission (SEC) approach</strong></p><p>The federal government regulatory agency, Securities and Exchange Commission (SEC) plays a major role in managing crypto activities in the country. This body has stated that it considers cryptocurrencies as securities. This is why it enforces security laws for crypto exchanges and digital wallets. SEC adopts a strict approach and has in its listings several cases against entities dealing with crypto assets such as Binance (BNB), Ripple (XRP), Coinbase (COIN), etc.</p><p><strong>Commodity Futures Trading Commission (CFTC) role</strong></p><p>Just like the SEC, the Commodity Futures Trading Commission (CFTC) is a UK federal agency that regulates crypto assets. It differs from the SEC in its approach as it sees cryptocurrencies like Bitcoin as a commodity and permits the trade of crypto derivatives, including future contracts, options, and swaps. Its main role is to protect investors against manipulations and scams and support competitive markets.</p><p><strong>State-level regulations</strong></p><p>Several cryptocurrency regulations exist in the United States. The following are the laws that agencies involved in cryptocurrency activities should comply with:</p><ul><li>Cryptocurrency exchanges should strictly follow the Bank Secrecy Act (BSA) consisting of improvisations of laws by the US Patriot Act and AMLA. This act focuses on provisions against anti-money laundering in banks and financial institutions.</li><li>The Securities Exchange Act and the Commodity Exchange Act (CEA) should be followed by crypto agencies for the registration needs of securities and commodities</li><li>Financial Crimes Enforcement Network (FinCEN) has stated that exchanges should adhere to the Travel Rule guidelines to maintain transparency about the origins and destinations of crypto transactions.</li></ul><p>The above-mentioned are some major regulations in the US. When looking at state-level regulations, there seems to be no uniformity. For each of the 50 states, the cryptocurrency and blockchain regulations vary.</p><h2 id="header-1">How Regulations Enhance Cryptocurrency Safety?</h2><p>Regulations help enhance crypto safety and empower the crypto industry in different ways. Some of the major benefits that can be expected are as follows:</p><ul><li>High security and consumer safety</li></ul><p>Regulatory frameworks offer safety and security measures such as Know Your Customer (KYC) and Anti-Money Laundering (AML) that exchanges and other crypto entities should follow to guarantee transparency.</p><ul><li>Minimize risks and fraud</li></ul><p>The guidelines mentioned under various acts for crypto regulations help minimize market manipulation, scams, etc. Strict guidelines exist for data protection, cybersecurity, exchange and other crypto agencies&#39; operations, and so on.</p><ul><li>Sustainability</li></ul><p>As regulations help easily enhance consumer protection, market integrity, and other factors, a space for innovation and long-term investors comes up.</p><h2 id="header-2">Impact on Top Cryptocurrencies</h2><p>As we have seen, cryptocurrency regulations bring about many positive changes in the crypto industry. However, some other factors impact cryptocurrencies, which we will discuss in this section.</p><ul><li>Compliance costs and barriers to entry</li></ul><p>To meet the regulatory requirements, businesses in the crypto field have to invest huge amounts in technologies and other infrastructure to monitor activities, conduct regular audits, etc. The compliance and operational costs are major barriers to entry into crypto.</p><ul><li>Influence on institutional adoption</li></ul><p>As global regulatory frameworks emerge, they provide space for banks, asset management firms, and other institutional investors to be involved in crypto activities.</p><ul><li>Changes in market dynamics, liquidity, and trading volumes</li></ul><p>By letting institutional investors enter the crypto arena, more stability can be achieved. This also brings in liquidity and mainstream acceptance thereby changing the whole market dynamics.</p><h2 id="header-3">Future Regulatory Trends</h2><p>The regulatory bodies in the US and UK are still working out new ways to manage cryptocurrency use. The whole process of progress in the crypto industry regulations is slow but also promising.</p><h3 id="anticipated-regulatory-developments-in-the-uk">Anticipated regulatory developments in the UK</h3><p>The HM Treasury of the Government of the United Kingdom will be forming a new regulatory framework for cryptocurrencies and other digital assets. This framework will include aspects such as trading venues, lending platforms, market manipulation, etc.</p><h3 id="potential-changes-in-us-cryptocurrency-laws">Potential changes in US cryptocurrency laws</h3><p>A major regulation regarding stablecoins came up on January 10, 2024. The US Securities and Exchange Commission (SEC) announced that stablecoins were given the same status as Exchange-Traded Products (ETPs). This development will lead to positive changes in the US regulatory frameworks in the future. Yet another aspect is heated discussions going on about the introduction of a digital US dollar, the U.S. central bank digital currency (CBDC). So, the crypto regulations in the US are the result of the involvement of federal, state-level, and legislative efforts.</p><h2 id="header-4">Strategies for Identifying Safe Cryptocurrencies in a Regulated Environment</h2><p>Even in a regulated environment, there are a few important strategies that you have to follow to spot safe cryptocurrencies.</p><ul><li>Evaluating regulatory compliance- The main thing you can do is analyze in detail the regulatory compliance.  Make sure that the crypto exchanges or institutions you choose follow strict safety protocols listed in the specific regulatory framework.</li><li>Assessing adaptability to new regulations- Then, determine how well the cryptocurrencies adapt to new regulations.</li><li>Importance of transparency and governance structures- Finally, look at how transparent the exchanges are about the assets, transactions, and activities.</li></ul><h2 id="header-5">Conclusion</h2><p>So, we have seen that regulations impact the crypto industry largely in a positive way. Regulations help boost consumer safety, tackle market manipulations, improve stability and liquidity, and more. This is why regulatory bodies in different countries are implementing strict policies and measures. Countries like the UK and the US where cryptocurrencies have gained much popularity have been enforcing various regulations on crypto assets, crypto derivatives, and so on. The process is still going on with new initiatives coming up. Though regulations boost the crypto industry, there are a few drawbacks such as compliance costs and barriers to entry. But, while weighing the positives, these might not pose as big problems. This is why the future of crypto assets seems safe in regulated markets.</p>

Impact of UK and US Regulations on the Safety of Top Cryptocurrencies

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TheBitTimes

Інші статті, опубліковані 16 лип. 2024 р.

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