Considering all the issues that the proposed EU-wide law on virtual assets will present, it would have been better to regulate virtual assets under the Markets in Financial Instruments Directive (MiFID) framework, essentially considering them as financial instruments.

Key Takeaways;

• The Luna-UST debacle has led to increasing calls for regulating the nascent digital assets industry globally
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• Today, the European Union’s “Markets in Crypto-assets Regulations” draft is among the most comprehensive regulatory frameworks. It aims to put an end to the free-run enjoyed by digital assets industry in the political and economic union of 27 countries
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• Despite what experts may say, the EU’s “Markets in Crypto-assets Regulations” is far from perfect. For instance, if the proposed law comes into effect, it will ensure that the only digital assets available in the European Union are the ones that have received authorization from relevant authorities

Amid the current crypto market turmoil in the face of the unraveling global economic crisis and the LUNA-UST debacle, the need for strong regulatory measures is being felt globally.

At the same time, keeping in mind the growing demand for virtual assets, the European Union will soon be releasing a concrete framework around digital assets. Now, some in the crypto regulatory circles view it as much needed exercise to prevent unscrupulous elements from exploiting the nascent industry. Yet, the reality is altogether different.

In fact, the proposed law is far from being a remedy to bring virtual assets under the regulatory net. For instance, under the proposed rule, the only virtual assets that can be offered to investors in the European Union are the ones that have received permission from relevant authorities in the European Union member states.

Thus, Bitcoin, Binance Coin, Ethereum, and some of the top-most virtual assets may have to apply for authorization if the proposed bill receives a green light in the EU. Another thing to consider here is that many crypto founders have chosen to remain anonymous, such as Satoshi Nakamoto of Bitcoin. So, who will apply for EU authorization in such cases? Will Satoshi Nakamoto apply for the approval? Well, there are bleak chances of it. Mutual recognition of virtual assets across jurisdictions, too, is out of the question, as governments’ view on digital assets varies drastically worldwide.

Then there is the issue regarding supervisory authority, which is too tangled to differentiate the role of regulatory bodies within the member states and the EU-wide authorities. Such is the extent of complexity of the proposed law that launching a virtual asset exchange is far easier than launching a traditional exchange governed under the Markets in Financial Instruments Directive (MiFID) framework.

Less said, the better when it comes to the rules around market manipulation and insider trading of digital assets. The truth is that the rules are not comparable to the current EU rules. Among all these issues, the most affected party will be none other than the consumer, as they will be the ones receiving the shorthand of the stick.

Considering all the issues that the proposed EU-wide law on virtual assets will present, it would have been better to regulate virtual assets under the Markets in Financial Instruments Directive (MiFID) framework, essentially considering them as financial instruments.

All in all, crypto businesses must comply with the stringent requirements that traditional financial institutions and companies already comply with. Anything less is unacceptable for the greater good of the nascent virtual assets ecosystem.

There is no doubt doing so will draw complaints from crypto asset companies saying that such measures would throttle the industry’s growth. But why should regulators cut them any slack!

That said, virtual asset service providers have nothing to worry about. Shyft knew the day would come when VASPs would have to comply with regulations. Thus, we have developed solutions to smoothen the transition from “No Compliance” to “Full Compliance” for VASPs. Shyft’s Veriscope, for example, makes it easy to comply with FATF’s Travel Rule. It is also the only official solution against the much-dreaded “Sunrise Issue” that VASPs face while complying with the Travel Rule.

So, visit our website to know more about Veriscope and learn how it can enable your company to stay compliant. Follow us on LinkedIn, Twitter, Discord, and Telegram to remain up-to-date on the evolving regulatory compliance landscape in the digital assets space.