The Development of Cryptofinance Regulation - National Focus (September 2022)

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Foreword: METI Advisory wrote this report for SEBA Bank AG. Regulation met cryptofinance five years ago, when regulators in many countries warned investors about the risks posed by a new form of financing – the ICOs – and issued supporting guidance. Since then, an increasing number of countries have developed relatively sophisticated and stable frameworks – on balance favouring the development of cryptofinance while focusing on investors protection and prevention of money laundering.
Early adopters of a regulation supporting cryptofinance in different ways include Switzerland, Liechtenstein, Singapore, UK, Japan, Hong Kong, Germany, and France. Early banners of all or parts of cryptofinance comprise China, India, South Korea, Laos, Burundi, Venezuela, Israel, and Qatar. Over time, the countries banning cryptofinance in different degrees have lost importance in relative terms.
More recent adopters cover important regions and capital markets such as the USA and the EU, while late movers encompass a growing number of African, Central and South American jurisdictions.
Key drivers for this development are the compelling cryptofinance business propositions, a demand for alternative investments and business cases, and, not least, the fundamental support to innovation in finance provided by international regulators and regulatory policy bodies, as well as their own endorsement of the distributed ledgers as a possible technological solution for Central Bank Digital Currencies.
The integration of DLT in finance and the trust of regulators and market participants is increasing over time and the direction seems irreversible. Yet, tensions persist in areas, such as DeFi, where extending the regulatory principles of traditional finance is not straightforward or even possible. An open and constructive dialogue between regulators and the industry is key to harvest the benefits of Distributed Ledgers Technologies.