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The lack of a standard regulatory structure sits at the top of the list of the major drawbacks of the crypto market. Who wants to trade in a market with no clear rules? High level of price volatility and manipulation are some of the attributes of such a market. This deterrent factor has caused many investors to steer clear of the crypto market.
The 2018 plunge in the prices of cryptocurrencies made matter worse, increasing the long-standing fears of investors. To this end, the chairman of the European Securities and Markets Authority (ESMA), Steven Maijoor, proposed that new regulatory rules should be made to ensure the safety of crypto investors and enthusiasts in the market.
Maijoor advocated that the existing lines are blurred, and as such, crypto assets will likely fall outside of the regulation of Europe’s securities laws. Currently, crypto assets do not qualify as financial instruments, giving room for crypto firms to circumvent existing laws. He advised that new laws should be enacted that clearly states what should be classified as securities and how crypto assets should be regulated.
The chairman explained that diverse regulatory laws across different countries is yet another reason for the blurred lines. Crypto assets are bound to skirt through different borders, hence the need for general rules that diverse regulatory regimes can adhere to.
Various countries across the globe are also struggling to tame this new wild economy called the crypto verse. A lawless state is home to all sorts of crimes. The US Securities and Exchange Commission (SEC) has been all up in this case too. Several amendments have been made as well as implementation of new rules to help protect crypto investors by keeping the crypto market in check. Last year, the SEC made it clear that all ICOs and tokens are considered securities and since then the market watchdogs have been on the lookout for defaulted crypto startups.
Maijoor proposed that Europe securities regulators should extend the ‘new rules’ to ICOs too because they have attached profits and dividend rights. These features make them no different from traditional financial instruments. The chairman stressed further that new rules should also be applied to money laundering requirements. He proposed the new rule should include exchange of crypto assets for another and not just the exchange of crypto assets for fiat currency.
In conclusion, he admitted that careful analysis clearly shows that it will be difficult for regulators to legally qualify crypto assets through a ‘one size fits all’ approach.