Why should regulation be such a barrier for crypto? It should be a cornerstone
Today, as the whole issue surrounding Binance, the largest cryptocurrency exchange in the world in terms of daily trading volume, continues to attract media attention for its brushes with the regulatory authorities of several countries over the past few weeks, some degree of sensibility is beginning to shine through.
The inevitable move toward global crackdowns began at the hands of the UK’s Financial Conduct Authority which altogether banned Binance from carrying out regulated activity in the UK, following what has largely been cited as the company’s inability to meet the UK’s anti-laundering requirements.
The reality is that the company was not regulated by any financial services provider, therefore was brought to book for that, which is a basic fundamental requirement for operating in any form of financial services in most countries.
Therefore it could well be considered that some cryptocurrency exchanges and related entities have been conducting ‘regulatory arbitrage’, which is the dubious practice of capitalizing on loopholes in regulatory systems in order to circumvent what some firms consider to be unfavourable regulations.
The reality is that regulations are not unfavourable at all. They are essential and if the Binance debacle has done anything positive, it is the bringing of this important matter to light.
Over the past few weeks, since this began , there have been a lot of discussions in the media and within the FinTech industry across many verticals about how the regulation of cryptocurrency is actually a very positive, and very much needed direction.
This was strengthened by the US Senate’s discussions last week on potential tax treatment and regulation of cryptocurrency assets, which sent the price of Bitcoin and Ethereum rallying back to the pre-Elon Musk tweet era.
If that is not a clear demonstration of how important regulation is to cryptocurrency investors, it’s hard to know what is.
Today, it was pointed out by Farhana Rahman in her analysis why Binance may have considered compliance to be a ‘journey’ that should not have been viewed as such, that “When Binance came onto the scene in 2017, the key to its success was the company’s willingness to take on any token under the sun. While this positioned Binance as a dominant crypto player — the biggest exchange on the market — the approach was also inherently far riskier. Now that the massive exchange has attracted enough attention for its regulatory problems, the company is trying to transition to a legitimate buttoned-up company.”
That is a very accurate assessment, and one that CoinMetro considered from the very beginning.
CoinMetro took the approach that being regulated as a fully comprehensive venue and fully comprehensive range of services for cryptocurrency from the outset was vital.
It is vital for the sustainability and future development of the ever-evolving cryptocurrency world. Today we have complex protocols, new versions of cryptocurrencies featuring highly complex smart contracts, and e-wallet solutions that make international settlements easy and cheap, but the range of blockchain-related decentralized financial services is increasing all the time to the extent that the cryptocurrency world has an exponential range of solutions for all areas of private and commercial business.
This needs a regulatory framework to be able to build forward. CoinMetro began its life in 2018 with the FinCEN registration in place, and registration with Austrac. These are national standards in the United States and Australia.
CoinMetro also began its life as a cryptocurrency exchange as a fully regulated entity, holding a cryptocurrency exchange license in with the Estonian regulatory authorities, Estonia being one of the pioneers in blockchain technology. It was one of the first countries to offer cryptocurrency business licenses.
Since the question of regulation has now become a major discussion in the public domain, the initial reason which the Financial Conduct Authority (FCA) in the UK gave for censuring Binance was that it does not meet the anti-money-laundering (AML) rules.
This is vital, when handling client assets and conducting decentralized transactions on blockchain technology. On this basis, CoinMetro is fully compliant with AMLD5, which is an anti-money-laundering directive that is an update to the European Union’s AML legal framework.
It was first published on June 19th, 2018 in the Official Journal of the European Union as an iteration of the 4th Anti-Money Laundering Directive (AMLD4).
The AMLD5, also known as 5AMLD or 5MLD, came into effect on July 9, 2018, and mandated the European Union (EU) bloc’s 28 member countries to transfer its requirements into domestic laws before a deadline of 10th of January of 2020.
It is therefore only possible to build the decentralized financial services (DeFi) infrastructure of the future with full compliance of these rules.
Ms Rahman, who is a digital marketer for start-ups, made the observation in her analysis today that many cryptocurrency exchanges have gone down the regulated route and that these are the companies that have proven that cryptocurrency can work within a regulated framework from the outset.
Given that CoinMetro is planning to launch its own Multi-Lateral Trading Facility (MTF) within the next 12 months, this would elevate it to become a genuine challenger bank as it is a regulated cryptocurrency exchange, a payment facilitator with an EMI (electronic money institute) license, and full multi-lateral venue facilities, with one of the best fiat on-ramps in the industry.
This is how participation in the decentralized financial services world should look – one route into the crypto world via a class-leading fiat on-ramp, and then access to all manner of blockchain related services, smart contract facilities, trading instruments and payment functionality, under a fully regulated framework.
It’s the future. The US government understands it, the financial regulators do, and the cryptocurrency community does too, as reflected in the price increase post-US Senate discussions.
CoinMetro’s activities in this area are down to our firm belief in the importance of a fully regulated cryptocurrency environment. It’s business as usual, but with greater opportunities, more alignment with new technologies and more value for the cryptocurrency community in all areas.