Regulation
Impact of Regulatory Clarity on Bull Markets and Global Developments
As the technologies underlying blockchain, cryptography and tokenization continue to rapidly evolve, the regulatory frameworks in many countries continue to develop. We have seen some regions have unclear regulatory frameworks, while others are clear about their regulatory stance.
The digital asset space needs pillars of trust through regulatory certainty to bring codified benefits to investors, allowing the community to grow securely and operate for the long term.
Below, David Lawant And Purvi Maniar of FalconX have simplified the current landscape of global cryptocurrency regulation, explaining how certainty has already impacted price action.
Read on to understand the thriving regulatory frameworks at work in our industry.
Navigating the Global Crypto Regulatory Environment: Global Developments and the American Challenge
Technical developments and the emergence of additional applications have been the hallmark of cryptocurrency bull markets. Even more surprising, as the technology has matured, regulatory clarity has been a significant driver of crypto markets since the emergence of this asset class.
The recognition of Japan The rise of crypto as a means of payment in 2016 was a significant driver of the 2016-2017 bull market. More importantly, a series of interpretative letters of the Office of the Comptroller of the Currency (OCC), the main US banking regulator, which reassured financial institutions to engage in crypto in 2020, was an undeniable catalyst for the 2021 campaign.
Crypto has grown to the point where regulatory clarity is essential for the next potential bull market. And as the stakes rise, the dynamics become more complex.
The casual observer might be surprised by the large number of regions around the world that are trying to attract crypto businesses and innovators by offering clear and understandable regulations. Here are some of the key developments occurring so far in 2023:
On the other hand, it’s hard to deny that the United States lags behind other financial jurisdictions when it comes to providing much-needed regulatory clarity to the industry.
Lack of access to banking services in the United States posed a significant barrier to crypto companies’ operations earlier this year due to what many saw as a coordinated effort, dubbed by the industry. Operation Chokepoint 2.0. The SEC’s commitment to the crypto industry has gone beyond simply pursuing bad actors to creating widespread uncertainty around applicable crypto regulation, which is now legitimate. players to move abroad.
There are, however, early signs that the tide is turning for crypto in America.
Each of these events suggests a move toward improving the regulatory status of crypto in the United States by key industry players or lawmakers.
Crypto regulatory clarity is no longer a wish list item but a necessity. The good news is that the outcome of 2023 is strongly positive in many important jurisdictions. The less good news is that we probably still have a long and winding road to get to where the industry wants and deserves to be. In the United States, for example, even if the market structure and stablecoin bills pass the House, they will still face a potentially more hostile Senate and White House, likely over the course of ‘a year of national elections.
We are optimistic. Even though regulatory developments around the world are not perfect and the United States still has a a long way to go to catch upYears from now, we will remember this period as the critical moment when the foundations for proper crypto regulation were laid.
Q: My US clients have already invested in crypto, but wonder if it’s legal. How can I help them?
A: You can start by informing your customers about the regulations. Unfortunately, in the United States, regulation regarding crypto assets is less clear than virtually anywhere else in the world. The need for clarity falls on many regulatory agencies – primarily the SEC, IRS, and Treasury Department.
If your customers purchased crypto assets through an exchange like Coinbase or Kraken, they may not have been considered a security at the time of purchase. If the tokens they invested in are later determined to be securities, your client may have tax considerations to manage.
For now, we are sure that Bitcoin is not a security. Everything else is up for grabs, and the answer for each individual asset may be more nuanced than a simple “yes or no.”
Regulatory issues revolve around the ability to issue and market the tokens. If a token is determined to be a security, it will likely need to be delisted from most U.S. exchanges, which could have significant value implications. This is a good place to discuss the risks of investing in crypto.
Q: My clients want to know: should they create accounts or crypto wallets in friendlier jurisdictions?
A: It really depends on how much money your clients are investing in crypto. Clients who hold large crypto positions may consider geographic arbitrage. However, this could potentially cause more problems than it solves as they have to adapt to more regulatory environments.
Either way, if you have clients who are investing significant amounts of money, it may be time to hire a seasoned crypto CPA or attorney who can help you answer these questions. The jurisdiction where the assets are held and the form in which they are held will depend on the treatment of the assets, confidentiality, tax treatment, asset protection, etc.
The XRP token is NOT a title when sold to the public, according to a Manhattan judge’s decision in June. The SEC disagrees with the decision, so the issue may not be settled yet, but markets have reacted favorably to the decision.