Financial institutions and major banks have risen up in protest against excessively stringent regulations regarding cryptocurrency and warn that the excessive regulations could hinder creativity and drive businesses to offshore.
Mounting Frustrations in Finance
Recent weeks have seen leading banks around the world have increased their lobbying efforts. They argue that regulators are putting digital assets more closely in comparison to traditional financial instruments. While protecting the interests of investors is vital, rules concerning the requirements for capital, custodial, as well as obligation to report are burdensome in a way.
The executive team is concerned that these measures can deter banks from entering into the market and leave markets in the hands of unregulated or less regulated players. “We’re not asking for a free pass,” one banker in the senior ranks said, “but the rules should be workable if regulators truly want mainstream finance involved.”
The Innovation vs. Regulation Dilemma
Banks argue that strict rules hinder opportunities for building secure, reliable crypto-related services such as the tokenization of securities, Blockchain-based Settlement system as well as the custody of digital assets. In contrast, regulators insist the need for strong security to stop money laundering, the possibility of fraud and risk to the system.
This tension reveals a larger problem: how to manage the need for innovation and the stability in the industry which is moving quicker than conventional policies.
Global Divide
There isn’t a uniformity all over the globe. In Europe new legislation, such as the market-based Crypto-Assets (MiCA) law sets out clear regulations and has received a smattering of praise from banks. However, in the U.S., where regulatory fights are still a bit sporadic banks have voiced displeasure over what they refer to as regulatory enforcement and not specific guidelines.
However, Asian hubs like Singapore and Hong Kong are moving aggressively in attracting crypto companies with larger and more flexible licensing policies which is increasing the upon Western regulators to adjust or risk losing the best talent as well as capital.
What’s at Stake
In the world of banking it is a high-risk business. There is a growing demand by institutions in Bitcoin ETFs and stablecoins and tokenized bonds rising the banks are embracing the potential for digital assets to be a future revenue source. If there isn’t a regulated environment which encourages their participation, that they might be forced be on the outside.
The backlash is likely to get more intense as regulators finish new regulations in the coming months. The extent to which banks can succeed in relaxing the regulations will determine the way — and how the next round of adoption for crypto takes place.
