Tue. Apr 16th, 2024

Crypto assets, lawless territory? Just a few weeks ago, the platform for buying and selling cryptocurrencies and other cryptographic assets FTX declared bankruptcy, causing the biggest financial collapse in the world of cryptocurrencies to date. In just 72 hours, investors withdrew $6 billion from the platform. This situation has caused an earthquake that is already affecting other financial firms or crypto funds. But, above all, it has once again highlighted the urgent need for greater regulation of the sector. The cryptocurrency market is highly relevant. To give an example, at the end of last year, 4.4 million Spaniards had already acquired cryptocurrencies or similar digital assets. Today, there is a huge range of cryptography-based virtual assets such as cryptos or NFTs, specifically, more than 17,000 different ones according to the European Commission. This situation makes us ask ourselves, more and more urgently, whether or not we have a regulatory framework that adequately protects these investments. Naturally, new investors want guarantees. And they want them beyond the security offered by the encryption techniques that are currently used, which are robust, but also present certain vulnerabilities, as demonstrated by the more than 682 million dollars in crypto assets stolen by hackers that have been registered at the national level. worldwide in the first quarter of 2022. There is a lot of money at stake, and the guarantees must no longer be only technological, but also legal. For all these reasons, the European Union has been working since 2018 on a legal framework that specifically regulates the blockchain sector. As of today, the Parliament and the European Council already have a draft regulation on crypto-asset markets that modifies the only previous provision, a European Directive of 2019. It is expected that this document, baptized as the MiCA Regulation English of Markets in Crypto Assets), is concluded by the end of this year and enters into force in 2024.

crypto assets

If we go into the content a bit, the regulation proposes to introduce criteria that make it possible to stably regulate the acquisition of cryptocurrencies with conventional money — buying bitcoins with euros, for example — or exchanging cryptocurrencies among themselves — acquiring ether with bitcoin —. It also establishes under what specific conditions it will be possible for an intermediary or financial institution to manage crypto assets on behalf of third parties, or what legal guarantees will be available to people who suffer the theft of crypto assets. And, above all, how to prevent digital assets from being used to launder money of illicit origin or finance criminal activities.

Crypto assets, lawless territory?

This draft has generated some controversy from the beginning. For some sectors, attempts are being made to specifically or exhaustively legislate a volatile environment that has not yet been fully defined. On the other hand, there is also a current that welcomes these regulations, since they can be the foundations to fight against mistrust and ignorance in the sector. As far as Spain is concerned, in February 2022 the first regulation on crypto assets in our country came into force. It is a Circular of the National Securities Market Commission (CNMV) that regulates their advertising in the event that they are presented as an investment object. In addition, it is explicit in what specific terms the purchase of these products can be promoted without incurring in deceptive advertising practices or fraud. It should be noted that this standard is a reactive provision, which considers crypto assets with a certain suspicion and tries to protect investors from potential risks. However, it is also pointed out that the CNMV, in coordination with the Bank of Spain, sees enormous potential in this sector to boost financial services and create new products or business models. Therefore, it can be deduced that the restrictions established by the Spanish body are due to uncertainty due to the lack of a European regulatory framework. In other words, we need a series of definitive control tools for the sector as soon as possible. Not only to avoid situations like that of FTX, but also to provide security and confidence, and promote a market with enormous possibilities.
Author: José Ángel Fernández Freire, Innovation Director of Prosegur Cash and Executive Chairman of Prosegur Crypto
 

By Alvaro Rivers

Award-winning student. Incurable social media fanatic. Music scholar. Beer maven. Writer.