The Digital Regulatory Framework is emerging

The regulatory framework supporting Digital Assets and the associated infrastructure is emerging.  The initial moves by the Regulators starting in 2019 indicated a growing focus on the desire to regulate the markets across three main areas:


  1. KYC, AML and Antiterrorist Financing
  2. Taxation
  3. Consumer Protections


The regulatory dialogue has recognised the benefits of financial innovation and the risks associated with distributed finance utilising new technology.  Most of the proposals to date are adopting a balanced approach and showing a willingness to work with industry to develop a framework that delivers the benefits of DeFi but injects some layers of protection for markets, users and tax revenues.

Europe

The European Regulators have been on the forefront of promoting the development and adoption of Digital Infrastructure.


DLT legislation has been introduced at a national level in many countries with Luxembourg, France and Switzerland having the most advanced frameworks at this point in time


The EU DLT Pilot Regime provides a Europe wide framework for the development of DLT Infrastructure.  Going live in Q2 2023 it is set to trigger a wave of DLT development across regulated assets.


UK

The UK has been a fast follower to the EU lead as the legislators have had to deal with the the impact of Brexit on their own legislative powers.


In July 2022 the Financial Services and Markets Bill was introduced to UK Parliament.  This piece of legislations set out to give the UK Regulators the powers to reform the UK legislation and create a supportive environment for the development of Digital Infrastructure in the UK.


This piece of Primary legislation is set to be the foundation for a comprehensive framework that builds upon the Financial  Services and Markets Act, FSMA2000.

US

The US has been the global leader in the Crypto markets, with a strong focus on innovation and rapidly developing scale models for crypto trading.  However in the area of regulated assets the US has been slower to move but recent regulatory activity and the slew of bills been introduced to the Senate it appears to be rapidly catching up.


Out of the 50 plus bills relating to digital assets introduced in Q2 2022 the Lummis Gillibrand Responsible Financial Innovation Act provides a potential framework for the regulation of Digital Assets and Markets in the US