Financial services regulation

Financial services legislation has been a cause for great debate when it comes to blockchain. Some jurisdictions, such as the UK have started with a position of applying existing legislation to the technology on the basis of regulating the activity. On the other hand, countries such as China (albeit this has since changed) took a prohibitive approach, banning the use of cryptoassets.

A third approach was to create a bespoke regime. Gibraltar pioneered this with its distributed ledger technology regulatory framework and followed by jurisdictions like Malta with the Virtual Financial Assets Act and France with Loi Pacte. More recently we have had a provisional agreement on the EU’s Market in Crypto-Assets Regulation (MiCA).

As policy makers and regulators across the globe continue to follow and assess cryptoassets in the financial services space, there is the recognition that existing legislation does not suitably cover cryptoassets.

Following instruction from the European Commission, the European Securities and Markets Authority and the European Banking Authority evaluated the suitability of existing EU legislation for the activities for which cryptoassets were used.

The conclusion of this was that while some areas were covered, there were instances where existing laws were not sufficient. As such the European Commission published a wide-scale consultation asking for feedback from the industry on a proposed framework for cryptoassets in the EU.

In June 2022, the Council Presidency and the European Parliament reached a provisional agreement on the Markets in Crypto-Assets Regulation (MiCA). This new regime includes obligations on cryptoasset issuers and service providers. The new regulation protects investors while fostering the potential of the crypto-asset sector.

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