Countries outside of the United States are working to clarify the regulatory status of different crypto assets.
With the U.S. crypto sector rocked by Securities and Exchange Commission (SEC) lawsuits against Binance and Coinbase, other countries are working to avoid a similar situation with clear crypto regulations.
US crypto sector in limbo as SEC lawsuits unfold
Criticism of the SEC’s recent actions hinges on the fact that if it won its lawsuit, the agency would have dramatically reduced Americans’ ability to trade cryptocurrencies.
Already, major exchanges are in decline. Binance has suspended USD deposits and crypto-dollar exchanges. And the company narrowly avoided a full shutdown by agreeing to a deal to avoid freezing its assets.
Meanwhile, companies like Robinhood, eToro, and Bakkt quickly delisted the tokens named in the SEC lawsuits. And until some degree of regulatory clarity is achieved, it seems likely that such restrictions will remain in place.
Registering a securities offering with the SEC is an onerous undertaking for any company. And one that few crypto exchanges are willing to take on. Such a requirement would spell the end of the crypto trading market as we know it. And that could force many players out of the US market.
And as Coinbase CEO Brian Armstrong recently noted in an interview, the SEC has offered no avenue for his company or any other crypto exchange through which they could receive the necessary clearance to operate.
By classifying the majority of cryptocurrencies as securities but offering no way for exchanges to register, the SEC is threatening to impose a de facto ban on crypto trading in the United States.
Indonesian regulator approves list of tradable cryptocurrencies
Earlier this month, the Commodity Futures Trading Regulatory Authority of Indonesia released a list of 501 cryptocurrencies that have been deemed legal to trade. Significantly, all tokens that the SEC believes are securities are included in the list.
The regulator’s decision to enshrine the legality of crypto trading bolsters Indonesia’s credentials as a crypto-friendly nation. It also provides traders with some assurance that they will not fall victim to market disruptive actions like the recent SEC lawsuits.
Brazil Passes Law Establishing Central Bank Crypto Regulator
One of the challenges facing the United States is that lawmakers have never designated a specific agency to regulate the crypto space. As a result, for years the SEC and the Commodity Future Trading Commission (CFTC) have questioned whose jurisdiction crypto trading falls under.
This week, the Brazilian government took a major step to prevent such inter-agency conflicts. President Lula has now signed a law that authorizes the Central Bank of Brazil to oversee virtual asset service providers.
Under the new framework, eligible tokens will still fall under the jurisdiction of the securities regulator (CVM). Importantly, however, it will be up to the central bank to determine which tokens count as securities.
CVM Crypto Regulation Lays Foundation for Security Token Market
The demarcation of regulatory territories is now enshrined in Brazilian law. And the country is now on its way to becoming a leader in the field of cryptocurrencies.
Through its regulatory sandbox, the CVM has already approved three projects allowing the issuance and trading of tokenized securities. Going forward, the body is developing a regulatory framework based on the experiences of its sandbox. This will set the stage for Brazil to become one of the first countries to establish a fully regulated market for cryptocurrencies.
Compare that to the United States, where the SEC’s stance has not only crippled crypto trading, but also blocked innovation in the development of true crypto securities.
In his recent interview, Armstrong said that Coinbase does not dispute the classification of many crypto assets as securities. In fact, he said securities offerings are one area where crypto regulation could help update the financial system.
But again, the lack of any clear pathway for registration of crypto securities only holds the technology back. Meanwhile, countries like Brazil are stepping forward to support its development.
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