It’s gambling not crypto – Regulating Cryptocurrency Markets

    The focus seems to be on unbacked crypto assets, but unfortunately that includes Bitcoin and Ethereum the two largest cryptocurrencies available today. But Europe and Britain are both leading the way with defining regulation around Cryptocurrencies and Crypto-assets not as a financial service, but as gambling.

    The UK rules are here, and the EU rules are here. Both are pretty new and are an outfall of the FTX collapse. Both of these rules are highlighting the basic risk to working with cryptocurrencies as well as investing in non-backed crypto assets.

    The good part of this is that the UK rule set looks at Issuance, disclosures, trading and intermediation activities that all are going to touch on both the consumer and investor class participants. Maybe making things safer, but not sure how well this will simply address the fraud issue, or the failure rate issue.

    In my DAO class on uDemy it was really hard to find DAOs that worked, and continued to work over time. Many of the ones I wanted to use as a case study had gone through their Initial Coin Offering but since had become delisted because there were not enough participants, or community around the DAOs. This includes Andrew Yang’s DAO Lobby3.

    It really is a caveat emptor situation here with tokens, currency and how those are expressed as an investment vehicle.

    The good part is that the UK is very direct in what they want to accomplish as a “regulatory outcome”:

    1. Custodians should ensure adequate arrangements to safeguard investors’ rights to their crypto assets when it is responsible for them such that, if and when the custodian becomes insolvent, those assets are returned to investors promptly and as whole as possible

    2. Custodians should have sufficient financial resources to conduct business, wind down and, where applicable, fail without causing significant harm to consumers and market participants

    3. Custodians should establish clear processes for redress in the event that crypto assets held in custody are lost

    4. Custodians should maintain adequate systems, controls, and governance arrangements to help minimize risk of misuse or loss to investors’ crypto assets

    5. Authorities would retain the ability to put in place more comprehensive reporting requirements in future, including regular and wider reporting over time

    None of this should be a surprise here, and in many cases is something I can advocate for. Especially reporting and just basic fraud that is part of the risk process around anything to do with Crypto.

    Well worth the time to read the UK proposal.

    Leave a Reply