The current year for the cryptocurrency market is taking place under the auspices of regulation. Or attempts to introduce it.
After the European Parliament voted for MiCA, the UK's Financial Conduct Authority (FCA) now wants to cooperate with cryptocurrency firms to form regulation, as stated by Executive Director Sarah Pritchard at the City Week conference in London on Tuesday.
The United Kingdom and its crypto-friendly attempts
The UK has sought to create a new regime for "crypto – that one-time symbol of alternative rebellion – [that] has become more widespread," Pritchard noted.
In February, the UK government's financial division, the Treasury, launched consultations on cryptocurrency, during which it seeks feedback from stakeholders on how to regulate the sector.
The FCA is one of the main cryptocurrency regulators in the country, along with the Ministry of Finance, and it deals with the registration of crypto firms to operate in the UK.
According to Pritchard, in the consultations they conducted, it was indicated that the FCA could introduce a new authorization regime for cryptocurrency companies, including foreign firms, which is "an uncharted territory" for them. The authority also plans to launch a digital asset promotion regime.
"Let's work together to shape our rules and regulations to benefit markets, consumers and firms as crypto goes from niche to mainstream," Pritchard urged. "Let us do it with our minds open to the potential gains and our eyes open to the risks."
The FCA is known for its critical attitude towards the crypto sector, which is not helped by the fact that the amount of cryptocurrency received at illegal addresses reached a record level of $20.6 billion last year. The FCA has repeatedly warned consumers about cryptocurrency risks.
According to Pritchard, out of the cryptographic applications received by the FCA from firms wishing to register with them, 195 were either rejected or withdrawn. Only 41 crypto firms managed to obtain registration.
Nevertheless, the FCA also began to listen to the crypto industry at its meetings with industry representatives.
U.S. regulators seek to mitigate risks
Almost simultaneously, a senior official of the U.S. regulatory agency stated that anonymity allows crypto assets to finance illegal activities, which creates risks to national security that need to be addressed.
Commodity Futures Trading Commission Commissioner Christy Goldsmith Romero stated that cryptocurrencies are used to finance cybercrimes with victims, including individuals, companies, hospitals, and critical infrastructure facilities.
"Fraud is a hallmark of digital asset markets, the human toll of which may be overlooked," Romero told a City Week conference in London, adding that the problem of a lack of transparency in crypto markets needs to be addressed.
"It's essential for governments and particularly the industry to address that which makes crypto so attractive to illicit finance, and that is the allure of anonymity," she said.
Cryptocurrency companies that comply with legislative requirements should not use "mixers" or software tools that effectively anonymize users by combining and scrambling cryptocurrencies from thousands of addresses.
"Congress is already considering new laws on addressing anonymity and digital identity," Romero said.
Cryptocurrency companies that meet the requirements must demonstrate that they have internal controls to prevent money laundering and terrorist financing.
Last year, the U.S. imposed sanctions on the virtual currency mixer Tornado Cash, claiming it helped hackers, including from North Korea, launder proceeds from cyber crimes.
"It's possible for all crypto companies to distance themselves from mixers and anonymity enhancing technology while still providing customers financial privacy," Romero stressed.
Regulators in the U.S., the European Union, the UK, and other countries are trying to curb cryptocurrency before global standards for the borderless sector are agreed upon and implemented.
John Schindler, secretary general of the Financial Stability Board (FSB), the G20's coordinator for financial rules, told the conference that the agency will soon issue the final version of recommendations for regulating crypto assets.
"We're catching up to this innovation that's going so quickly," he added.
