Cryptoassets  

Global policymakers must harmonise crypto regulation

Global policymakers must harmonise crypto regulation
The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C. (REUTERS/Andrew Kelly/File Photo)

Policymakers must co-ordinate internationally to develop cryptoasset regulation, the global association of investment professionals has said. 

The CFA Institute said in a report yesterday (January 4), that crypto “demands” a strong and clearly defined regulatory framework to protect investors.

Without this, crypto will be unable to gain mainstream acceptance, it said.

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The report focused on the need for crypto rules to be in harmony across different jurisdictions, with an agreement on definitions.

This includes whether or not cryptoassets are securities, commodities, currencies, or otherwise.

The CFA Institute said it believes in the US, crypto meets the definition of a security under US Securities laws, however it is still unclear what the equivalent definition would be in the EU.

The report warned against designing new regulation in order to solve the problem of quantifying cryptoassets, saying this would be a “simplistic response”.

Olivier Fines, head of Emea advocacy at the CFA Institute, said a strong regulatory framework needs to be established for the benefit of both crypto providers and users. 

“Policymakers must either agree on the application of existing laws to various components in the crypto ecosystem or craft new laws to fill in any gaps. 

“Trust in the integrity of crypto markets is essential to attract investors and build crypto networks to scale.”

Fines added that the collapse of FTX has highlighted the importance of introducing regulation to solve custody issues in crypto in particular.

The crypto exchange sent shockwaves through digital asset industry after it lost most of its market value and filed for bankruptcy in the space of a few days.

Executives at crypto firms have since told MPs they want more regulation, saying the collapse of FTX could have been prevented if the industry was properly regulated.

A number of functions that are kept separate from one another in mainstream finance, such as exchanges, market makers, custodians and clearing agencies, are combined in crypto platforms.

“Existing regulations that intend to prevent traditional finance firms from using customers’ assets to fund their own or affiliated businesses may not always provide similar protections for investors in crypto,” Fines said.

“The debacle at FTX shows the harm that can come to investors and platform participants when client assets are not kept safe.”

sally.hickey@ft.com