The rapid growth of crypto assets, their creep into regulated financial systems and the spectacular, if volatile, price declines have intensified efforts to regulate. Regulatory initiatives are underway globally to establish frameworks that balance innovation, investor and consumer protections, financial transparency, and systemic stability.
Some countries have prohibited or discouraged issuance of crypto assets while others have opened their doors, with some even wooing crypto actors by offering favorable tax rates and relaxed rules on money transmission and securities offerings. Other regulators are pushing for new standards addressing know-your-customer (KYC), anti-money laundering and tax compliance, while still others seek to protect consumers and investors against fraud, cyber security risks, market volatility and liquidity.
The global financial standard-setting bodies, particularly the Basel Committee on Banking Supervision (BCBS) and FATF, have developed a framework to govern banks’ exposure to crypto assets. Meanwhile, the FSB is working to develop standards for stablecoin arrangements and is supporting the development of a global approach to mitigating illicit financing risks in crypto-asset markets.
The US federal and state-level regulatory frameworks are complex, and businesses must comply with a host of different laws that can change rapidly. This is made more difficult by the lack of uniformity in money transmitter licensing rules across states. To address these challenges, the CFTC and Pennsylvania Department of Banking issued guidance that identifies which businesses are considered Money Transmitters under the Money Transmitter Act. We expect to see more state-level guidance in the future that will help businesses navigate the complexities of the U.S. regulatory landscape for digital assets and stablecoins.
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