Crypto Regulation 2024: New Laws Will Bring Clarity and Trust

We believe that regulation is necessary to further cultivate innovation in the crypto industry in a way that best protects consumers, while attracting greater retail and institutional investment as well as broader adoption.

In 2023, while other jurisdictions around the world took great strides toward thoughtful regulation, the United States has lagged behind due to an approach that has too often favored regulation by enforcement over clear rulemaking. Over the past year, Gemini’s leadership team held conversations with dozens of regulators around the world who are working to put in place sensible regulation that fosters innovation while protecting consumers, and in the process gained key insights into the future of crypto.

Clear Crypto Regulations Benefit Customers and Innovators

While many regulators globally have made strides toward regulating crypto over the past year, the European Union stands out both for its influence in traditional global markets and the quality and thoughtfulness of its approach.

In April 2023, EU lawmakers passed a vote to implement a piece of regulation — Markets in Crypto-Assets Regulation — which was hailed as the most significant crypto-specific regulation in the world to date. At a high level, the law states that crypto exchanges and custodian wallet providers must be licensed, and that token issuers must follow requirements for whitepapers, transparency, reserves, and disclosure as appropriate. Furthermore, MiCA aims to combat fraud and market manipulation, thereby safeguarding consumer interests.

By creating a standardized legal framework across the EU, MiCA not only increases the accountability of service providers but also fosters consumer confidence in using and investing in crypto-assets. This harmonization also facilitates easier access to cross-border services, ensuring EU consumers benefit from a diverse and competitive market.

The cost and effort associated with doing business in multiple jurisdictions can be prohibitive for those in the crypto industry, stifling innovation and blocking new players from participating. MiCA allows market participants to provide services to customers in 27 jurisdictions while complying with a single, streamlined set of regulations.

Consistent crypto regulations across the EU also benefit consumers. With multiple jurisdictions adhering to the same stringent regulations, companies are held to a consistently high standard and consumers will not be tasked with unpacking the nuances of various jurisdictions’ regulatory standards.

MiCA Could Serve as Model for Other Jurisdictions Like the UK and Singapore

MiCA is also unique in its influence among global crypto regulatory regimes. The EU rules cover 16% of the global economy, setting an important precedent for countries like the UK and Singapore, both of which have been actively developing their own regulatory regimes.

In the UK, where government leaders have been vocal supporters of the crypto industry, there has been a flurry of activity in recent months. In September, the UK Travel Rule, which requires financial institutions and virtual asset service providers (VASPs) to share information about the senders and recipients of crypto, came into force. The Rule is designed to make it more difficult for crypto to be used in criminal and terrorist financing, and to enhance transparency.

In October, the FCA Financial Promotions Regime brought into effect rules that set out new standards for financial promotions of crypto, all of which are designed to protect consumers. And most notably, also in October, UK lawmakers signaled that legislative proposals for a more comprehensive oversight framework of crypto-related activities, similar to MiCA, will be introduced in 2024.

2024 will also bring new regulation in Singapore as the Monetary Authority of Singapore (MAS) recently announced proposals that limit financing and incentive programs for crypto customers. In the wake of the collapse of FTX, the MAS has focused on designing rules with consumer protection and innovation in mind, but has done so in a way that invites industry collaboration, as evidenced by their frequent consultations with market participants. This measured approach is likely to benefit the good actors in the industry.

In order for crypto to gain mainstream adoption, laws and regulations are an important step. If lawmakers in the EU and other jurisdictions globally did not see crypto playing a part of the financial ecosystem, they wouldn’t have brought MiCA and other regulations into play.

The United States Is at a Crossroads

The U.S. is at a crossroads when it comes to crypto regulation. During a time when the crypto industry is yearning for regulatory clarity, there has been a failure to provide fair and clear guidance and vast overreach by regulatory agencies. Regulation by enforcement fails to provide needed clarity or protect consumers while chilling innovation.

Failing to provide clarity could have dire consequences. A regulatory regime that is hostile to crypto will not only drive good actors offshore, but could create an existential threat for the economy as the artificial intelligence revolution beckons and the next wave of value creation emerges from Web3 innovation. Bipartisan support to address risks while maintaining a commitment to innovation is key. It is imperative that Congress act by establishing a comprehensive framework that makes clear which agencies oversee the crypto markets.

While we continue to wait for greater progress in the US, we applaud the EU for setting a new precedent globally and look forward to seeing how the region and other global partners continue to push the industry forward.

What country is going to lead as the crypto hub of the future? Let us know what you think by tagging us on X.

Onward and Upward!

Christopher Mariadason
Chief Compliance Officer