State of Global and European Union Crypto and Blockchain Regulation Q2 2023 — A Brief Insight
As we enter Q2 2023, the global crypto regulation landscape continues to evolve. The PwC Global Crypto Regulation 2023 report provides an updated overview of the regulatory environment, with a particular focus on financial services. One key recommendation from the report is for stronger financial regulation and supervision, as well as developing global standards, to address concerns surrounding crypto assets .
In the United States, the government remains vigilant in monitoring the digital assets sector and associated illicit financing risks . Over the past months, several reports have been released to protect consumers, investors, businesses, financial stability, national security, and the environment in the rapidly growing digital assets market. These reports have recommended measures to promote innovation while mitigating risks, such as increased enforcement of existing laws and the creation of standards for cryptocurrency mining.
The reports also encourage the Federal Reserve to continue researching, experimenting, and evaluating a US Central Bank Digital Currency (CBDC) and support these efforts through a Treasury-led interagency working group. This indicates that the US government is still actively considering the possibilities of a CBDC.
However, digital assets still pose risks to consumers, investors, and businesses, including volatility, fraud, scams, and theft. The government plans to address these risks through increased investigations, enforcement actions, monitoring, guidance, and public awareness efforts.
Now specifically in European Union (EU), they are continuing to push for stricter regulations on cryptocurrencies and decentralized finance (DeFi) platforms. The EU’s executive has urged the bloc to implement tough capital rules for banks holding cryptocurrency assets as quickly as possible, in line with a globally-agreed deadline of January 2025. The aim is to ensure that crypto transfers can be traced and suspicious transactions blocked.
In addition, the European Parliament has adopted new draft legislation aimed at preventing the use of crypto-assets for money laundering and terrorist financing. Under the new rules, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, which would be made available to competent authorities. Transactions from unhosted wallets will also be covered by the rules, and providers will have to verify that the source of the asset is not subject to restrictive measures before making it available to beneficiaries. The European Banking Authority will also create a public register of high-risk crypto-asset entities.
These moves come as the EU seeks to balance the benefits of crypto and DeFi innovation with the need for consumer protection and financial stability. The EU may choose to expand existing banking laws to enforce the rules or enact a new regulatory regime.
Overall, as we enter Q2 2023, the regulatory environment for crypto and DeFi in the EU and the world remains fluid. It is crucial to stay informed and comply with existing and upcoming regulations to mitigate risks associated with these rapidly evolving technologies.
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