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4 Bitcoin Catalysts That Will Shape the Crypto Market in 2024

4 Bitcoin Catalysts That Will Shape the Crypto Market in 2024

Bitcoin, the world’s leading cryptocurrency, has been on a remarkable rally since late 2023, reaching new highs and attracting widespread attention.

But what are the main factors driving its price and performance in 2024?

In this article, intergovernmental blockchain expert Anndy Lian will explore four potential catalysts that could have a significant impact on Bitcoin’s future — the impact of spot BTC exchange-traded funds (ETFs), the upcoming Bitcoin halving, the June quarterly expiry of Bitcoin options and futures, and the U.S. presidential election.

Spot Bitcoin ETFs: A Game Changer for the Industry?

One of the most anticipated events in the crypto space was the launch of spot Bitcoin ETFs in the US, which began trading in January 2024. These are financial products that track the price of Bitcoin and allow investors to buy and sell shares through their existing brokerage accounts without having to deal with the complexities and risks of directly holding or storing the cryptocurrency.

The approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) is seen as a major regulatory breakthrough and a validation of Bitcoin as a legitimate asset class. It is also expected to attract more institutional and retail investors into the crypto market, increasing the demand and liquidity for Bitcoin. As of the middle of March 2024, nine Bitcoin ETFs hold nearly half a million BTC.

Not everyone is optimistic about the impact of spot Bitcoin ETFs on the crypto industry. Some critics argue that these products could introduce more volatility and manipulation into the market, as well as undermine the decentralized and peer-to-peer nature of Bitcoin. Moreover, some investors may prefer to hold Bitcoin directly rather than through a third-party intermediary to enjoy the full benefits of its security, privacy, and resistance to censorship.

Bitcoin Halving: A Supply Shock or a Non-Event?

Another key event that could affect Bitcoin’s price and performance in 2024 is the Bitcoin halving, which is expected to occur next month. This is a pre-programmed adjustment to the Bitcoin protocol that reduces the amount of new Bitcoins generated per block by 50%, from 6.25 to 3.125 Bitcoins. This means that the annual inflation rate of Bitcoin will drop from about 1.8% to 0.9%, making it scarcer and more valuable.

Historically, each halving event has coincided with the beginning of a bull market for Bitcoin, as the supply reduction creates a supply-demand imbalance that drives the price up. For instance, the first halving in 2012 was followed by a 9,000% increase in Bitcoin’s price over the next year, while the second halving in 2016 was followed by a 2,800% increase over the next 18 months. The third halving in 2020 was followed by a 400% increase over the next 12 months.

Some analysts caution that the halving effect may not be as strong or predictable as in the past, as the market has become more mature and efficient, and the halving is already priced in by the rational expectations of investors. Moreover, the halving may not have a direct causal relationship with the price movements, as other factors, such as macroeconomic developments, regulatory changes, and technological innovations, may also play a role. Therefore, the halving may not necessarily trigger a new bull run but rather confirm an existing trend.

June Quarterly Expiry: A Volatility Spike or a Smooth Transition?

Another factor that could influence Bitcoin’s price and performance in 2024 is the June quarterly expiry of Bitcoin options and futures, which is scheduled for June 21, 2024. This is the date when a large number of contracts that give investors the right or obligation to buy or sell Bitcoin at a predetermined price and date expire and settle.

The expiry of these contracts could have a significant impact on the market, as investors may adjust their positions or exercise their options before or on the expiry date, creating large buy or sell orders that could move the price. Moreover, the expiry could also affect the implied volatility of Bitcoin, which is a measure of how much the market expects the price to fluctuate in the future. A high implied volatility means that the market anticipates large price movements, while a low implied volatility means that the market expects stable price movements.

Some analysts expect that the June quarterly expiry could cause a spike in volatility, as the market may experience increased uncertainty and speculation ahead of the event. This could create opportunities for traders to profit from the price swings but also pose risks for investors who are not prepared for the potential price shocks.

On the other hand, some analysts believe that the June quarterly expiry could be a smooth transition, as the market may have already priced in the event and adjusted its positions accordingly. This could result in a calm and orderly market with minimal impact on the price and volatility.

US Presidential Election: A Bullish or a Bearish Scenario?

The final event that could have a significant impact on Bitcoin’s price and performance in 2024 is the U.S. presidential election, which will take place on November 5, 2024. The election will determine the next president and vice president of the United States, as well as the composition of the Congress and the state governments. The outcome of the election could have major implications for the U.S. and global economy, the geopolitical landscape, and the regulatory environment for the crypto industry.

The main contenders for the presidency are the incumbent Democrat Joe Biden, who is running for re-election, and the former Republican Donald Trump, who is running for a second, non-consecutive term. Both candidates have different views and policies on various issues, such as taxation, trade, health care, immigration, foreign affairs, and climate change, that could affect economic growth, inflation, interest rates, and market sentiment in the U.S. and abroad.

The election could also have a direct impact on the crypto industry, as both candidates have different stances and approaches to the regulation and innovation of the crypto space. Biden has been generally supportive of the crypto industry, in my opinion, as he has expressed interest in exploring the potential of a central bank digital currency (CBDC) and fostering the development of blockchain technology.

Trump, on the other hand, has been generally hostile to the crypto industry, as he has repeatedly criticized Bitcoin and other cryptocurrencies, calling them a “scam” and a “threat” to the U.S. dollar. He has also imposed sanctions and restrictions on several countries and entities that are involved in the crypto space.

He has also expressed skepticism and opposition to the idea of a CBDC and the innovation of blockchain. However, things may be turning for Trump, who is now appearing to be warming towards Bitcoin in a recent article, saying that some regulation was likely required, but many people are embracing it, and he could “live with it one way or the other.”

The Bottom Line

Bitcoin, the world’s leading cryptocurrency, has a lot of potential catalysts that could affect its price and performance in 2024. These include spot Bitcoin ETFs, the upcoming Bitcoin halving, the June quarterly expiry of Bitcoin options and futures, and the U.S. presidential election. Each of these events could have positive or negative implications for the crypto industry, depending on how they unfold and how the market reacts.

Therefore, investors and traders should be aware of these events and their possible outcomes and be prepared for the opportunities and challenges that they may bring.

Nevertheless, Bitcoin has reached a new all-time high of over $73,000. I am still very positive about its outcome for this year.

Let’s see.

 

Source: https://www.techopedia.com/4-bitcoin-catalysts-that-will-shape-the-crypto-market-in-2024

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Technical Break Down of the Markets in Crypto Assets Regulation

Technical Break Down of the Markets in Crypto Assets Regulation
The Markets in Crypto-Assets Regulation (MiCAR) is a landmark legislation that aims to create a harmonised and comprehensive framework for the regulation of crypto-assets and related services in the European Union (EU). MiCAR was adopted by the European Parliament and the Council of the EU in June 2023 and entered into force on 29 June 2023. It will apply from 30 December 2024, except for some provisions that will apply from 30 June 2024.

MiCAR is anticipated to bring about a substantial influence on the crypto-asset market, introducing legal certainty, consumer protection, market integrity, and financial stability. Moreover, it is poised to encourage innovation and competition by facilitating cross-border activities and providing passporting rights for crypto-asset service providers (CASPs) operating within the EU. Nevertheless, MiCAR presents certain challenges and responsibilities for crypto-asset issuers and CASPs, along with additional obligations for other financial institutions and investors engaged in transactions involving crypto-assets. In this article, I will provide a technical breakdown of the main aspects of MiCAR.

The definition and classification of crypto-assets under MiCAR

MiCAR characterizes crypto-assets as “a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology.” This definition is expansive and impartial to specific technologies, encompassing various crypto-assets like cryptocurrencies, tokens, stablecoins, and non-fungible tokens (NFTs).

However, it’s essential to note that it excludes crypto-assets qualifying as financial instruments, deposits, structured deposits, electronic money, securitisation positions, insurance products, or pension products under existing EU financial services legislation. These excluded crypto-assets remain subject to the pertinent sectoral rules and regulations.

MiCAR distinguishes between three main categories of crypto-assets that fall within its scope:

  • E-money tokens (EMTs): These are crypto-assets that purport to maintain a stable value by referencing the value of one official currency that is legal tender. EMTs are similar to electronic money under the Electronic Money Directive 2009/110/EC (EMD2), but they use distributed ledger technology or similar technology to issue, store and transfer value. Examples of EMTs are Tether (USDT) and USD Coin (USDC), which are pegged to the US dollar.
  • Asset-referenced tokens (ARTs): These are crypto-assets that are not EMTs and that purport to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies, commodities, crypto-assets or a basket of such assets. ARTs are a type of stablecoins that are backed by a pool of assets, such as fiat currencies, gold or other crypto-assets.
  • Other tokens: These are crypto-assets that are neither EMTs nor ARTs and that have various purposes and characteristics. This category includes utility tokens, which provide access to a good or a service supplied by the issuer, such as decentralized applications (DApps) or platforms. It also includes payment tokens, which are used as a means of exchange, such as Bitcoin or Ether. Furthermore, it includes hybrid tokens, which combine features of different types of tokens, such as governance tokens, which grant voting rights or other benefits to the holders.

They bring forth the concept of significant tokens for EMTs (Electronic Money Tokens) and ARTs (Asset-Reference Tokens). These tokens are subjected to additional requirements owing to their potential impact on financial stability or monetary policy. The task of identifying and monitoring significant tokens falls under the purview of the European Banking Authority (EBA). The EBA employs criteria such as the number of users, transaction values, interconnectedness with the financial system, substitutability with existing payment instruments, and the innovation or complexity of the token to determine significance. The EBA will publish and update a list of significant tokens on its website.

The authorisation and supervision requirements for crypto-asset issuers and CASPs

MiCAR also imposes different authorisation and supervision requirements for crypto-asset issuers and CASPs, depending on the type and significance of the crypto-asset involved.

Crypto-asset issuers

Crypto-asset issuers are natural or legal persons who offer crypto-assets to the public or seek the admission of crypto-assets to trading on a trading platform for crypto-assets. MiCAR requires crypto-asset issuers to comply with the following obligations:

  • White paper: Crypto-asset issuers must prepare and publish a white paper that discloses essential information about the crypto-asset project, such as the features, rights and obligations of the crypto-asset, the project’s objectives and intended use of funds, the risks and costs involved, the governance and technical arrangements, and the identity and contact details of the issuer. The white paper must be notified to the competent authority of the issuer’s home member state at least 20 working days before its publication and must be made available on the issuer’s website and the website of any CASP involved in the offer or admission to trading of the crypto-asset. The white paper must also be updated whenever there is a material change that affects the information disclosed.
  • Authorisation: Crypto-asset issuers of EMTs and ARTs must obtain an authorisation from the competent authority of their home member state before offering such tokens to the public or seeking their admission to trading on a trading platform for crypto-assets. The authorisation process involves submitting an application that includes information such as the identity and contact details of the issuer, the white paper, the governance and technical arrangements, the risk management and internal control mechanisms, the complaints handling procedures, and the arrangements for the protection of the reserve assets backing the EMTs or ARTs. The competent authority must assess the application and grant or refuse the authorisation within three months of receiving a complete application. The authorisation is valid in all member states and allows the issuer to passport its activities across the EU. Crypto-asset issuers of other tokens do not need an authorisation, but they must comply with the white paper requirement and other general obligations under MiCAR.
  • Supervision: Crypto-asset issuers of EMTs and ARTs are subject to ongoing supervision by the competent authority of their home member state, which may impose administrative sanctions or remedial measures in case of non-compliance with MiCAR. The competent authority may also withdraw the authorisation of the issuer if certain conditions are met, such as the issuer no longer meets the authorisation requirements, the issuer has obtained the authorisation by false statements or any other irregular means, the issuer has not made use of the authorisation within 12 months of its granting, or the issuer has ceased to offer or admit to trading the EMTs or ARTs for more than six months. Crypto-asset issuers of other tokens are not subject to ongoing supervision, but they must cooperate with the competent authorities and provide any information requested by them.

Crypto-asset service providers

Crypto-asset service providers are natural or legal persons who provide or perform one or more of the following services or activities on a professional basis:

  • Custody and administration of crypto-assets on behalf of clients
  • Operation of a trading platform for crypto-assets
  • Exchange of crypto-assets for fiat currency or other crypto-assets
  • Execution of orders for crypto-assets on behalf of clients
  • Placing of crypto-assets
  • Reception and transmission of orders for crypto-assets on behalf of clients
  • Providing advice on crypto-assets
  • Providing portfolio management on crypto-assets
  • Providing transfer services for crypto-assets on behalf of clients

MiCAR requires CASPs to comply with the following obligations:

  • Authorisation: CASPs must obtain an authorisation from the competent authority of their home member state before providing any of the above services or activities. The authorisation process involves submitting an application that includes information such as the identity and contact details of the CASP, the programme of operations, the governance and technical arrangements, the risk management and internal control mechanisms, the complaints handling procedures, the arrangements for the safeguarding of clients’ funds and crypto-assets, and the policies and procedures for the prevention of money laundering and terrorist financing. The competent authority must assess the application and grant or refuse the authorisation within three months of receiving a complete application. The authorisation is valid in all member states and allows the CASP to passport its activities across the EU.
  • Supervision: CASPs are subject to ongoing supervision by the competent authority of their home member state, which may impose administrative sanctions or remedial measures in case of non-compliance with MiCAR. The competent authority may also withdraw the authorisation of the CASP if certain conditions are met, such as the CASP no longer meets the authorisation requirements, the CASP has obtained the authorisation by false statements or any other irregular means, the CASP has not made use of the authorisation within 12 months of its granting, or the CASP has ceased to provide or perform the crypto-asset services or activities for more than six months.
  • Prudential requirements: CASPs must comply with prudential requirements, such as holding a minimum amount of own funds, maintaining adequate capital adequacy ratios, applying sound accounting and auditing standards, and ensuring the continuity and regularity of their operations. The prudential requirements vary depending on the class of the CASP, which is determined by the type and scope of the crypto-asset services or activities provided
  • Conduct of business rules: CASPs must comply with conduct of business rules, such as providing clear and accurate information to clients, acting honestly and fairly, avoiding conflicts of interest, ensuring the suitability and appropriateness of their services or activities, executing orders promptly and efficiently, and disclosing any fees or charges. The conduct of business rules vary depending on the type of client, which may be retail, professional or eligible counterparty.
  • Safeguarding requirements: CASPs must comply with safeguarding requirements, such as segregating clients’ funds and crypto-assets from their own assets, keeping accurate records and accounts, ensuring the availability and accessibility of clients’ funds and crypto-assets, and protecting clients’ funds and crypto-assets from insolvency, fraud, theft or cyberattacks. The safeguarding requirements vary depending on the type of crypto-asset service or activity provided or performed and the type of crypto-asset involved.
  • Anti-money laundering and counter-terrorism financing (AML/CTF) obligations: CASPs must comply with AML/CTF obligations, such as applying customer due diligence measures, monitoring transactions, reporting suspicious activities, keeping records, and cooperating with the competent authorities. The AML/CTF obligations are aligned with the Fifth Anti-Money Laundering Directive 2018/843/EU (AMLD5) and the Sixth Anti-Money Laundering Directive 2018/1673/EU (AMLD6), which apply to other obliged entities in the financial sector.

The transitionary provisions and exemptions under MiCAR

  • MiCAR provides for some transitionary provisions and exemptions for crypto-asset issuers and CASPs that are already operating in the EU before the application date of MiCAR.
  • Grandfathering clause: Crypto-asset issuers and CASPs that are authorised or registered under national regimes in one or more member states before the application date of MiCAR may continue to provide or perform their services or activities in those member states until 30 June 2025, without obtaining an authorisation under MiCAR. However, they must comply with the relevant national rules and regulations and notify the competent authorities of their intention to continue their operations. They must also apply for an authorisation under MiCAR by 30 June 2024, if they wish to provide or perform their services or activities in the EU after 30 June 2025.
  • Pilot regime for distributed ledger technology (DLT) market infrastructures: MiCAR establishes a pilot regime for DLT market infrastructures, which are a new type of market participants that use DLT to provide both trading and settlement services for crypto-assets that qualify as financial instruments. The pilot regime aims to test the use of DLT in the trading and post-trading of crypto-assets, while ensuring a high level of investor protection and market integrity. The pilot regime will apply for five years from the application date of MiCAR, with a possibility of extension. DLT market infrastructures must obtain an authorisation from the competent authority of their home member state and comply with specific requirements under MiCAR. They are also subject to the supervision and cooperation of the European Securities and Markets Authority (ESMA) and the EBA. The pilot regime will allow DLT market infrastructures to operate in a sandbox environment, where they can benefit from certain exemptions and derogations from existing EU financial services legislation, such as the Markets in Financial Instruments Directive 2014/65/EU (MiFID II), the Central Securities Depositories Regulation 909/2014/EU (CSDR) and the Settlement Finality Directive 98/26/EC (SFD).
  • Exemptions for central banks and public authorities: MiCAR does not apply to crypto-assets that are issued or guaranteed by central banks, member states, third countries or public international organisations. It also does not apply to crypto-asset services or activities that are provided or performed by central banks or other public authorities in the performance of their public tasks or functions. These exemptions aim to preserve the monetary sovereignty and policy of the EU and its member states, as well as to facilitate the development of central bank digital currencies (CBDCs) and other public initiatives in the crypto-asset space.

The implications of MiCAR for investment firms and the travel rule

MiCAR also has some implications for investment firms and the travel rule, which are relevant for the crypto-asset market.

  • Investment firms: Investment firms are natural or legal persons who provide or perform investment services or activities on a professional basis, such as reception and transmission of orders, execution of orders, portfolio management, investment advice, underwriting or placing of financial instruments. Investment firms are subject to the MiFID II framework, which regulates their authorisation, conduct of business, organisational and prudential requirements, and supervision. MiCAR allows investment firms that are authorised under MiFID II to provide or perform crypto-asset services or activities in relation to crypto-assets that qualify as financial instruments, without obtaining an additional authorisation under MiCAR. However, they must comply with the relevant MiFID II rules and regulations, as well as some specific requirements under MiCAR, such as the safeguarding and AML/CTF obligations. Investment firms that wish to provide or perform crypto-asset services or activities in relation to crypto-assets that do not qualify as financial instruments must obtain an authorisation under MiCAR and comply with its rules and regulations.
  • Travel rule: The travel rule is a requirement that obliges financial institutions to exchange certain information about the originator and the beneficiary of a funds transfer, such as their names, addresses, account numbers and transaction amounts. The travel rule aims to prevent money laundering and terrorist financing, as well as to facilitate the traceability and transparency of funds transfers. The travel rule applies to crypto-asset transfers under MiCAR, which are defined as any transaction that results in the change of ownership of one or more crypto-assets from one person to another person. MiCAR requires CASPs that are involved in crypto-asset transfers to exchange the following information with other CASPs:
    • The name and account number of the originator
    • The name and account number of the beneficiary
    • The originator’s address, official personal document number, customer identification number or date and place of birth
    • The beneficiary’s address, official personal document number, customer identification number or date and place of birth
    • The amount and type of crypto-asset transferred
    • The date and time of the crypto-asset transfer
    • Any other information required by the competent authorities

The CASPs must ensure that the information is accurate and complete, and that it is transmitted securely and confidentially. They must also keep records of the information for at least five years. They must implement the travel rule by 30 June 2024, which is the same date as the application of the Financial Action Task Force (FATF) standards on virtual assets and virtual asset service providers.

The leading EU jurisdictions for MiCAR compliance and regulatory arbitrage

MiCAR’s objective is to establish an equitable environment and a unified market for crypto-assets and associated services within the EU. This is to be achieved by standardizing and simplifying the current national regulatory frameworks, thereby eradicating regulatory fragmentation and uncertainty. Nonetheless, MiCAR acknowledges the need for a degree of regulatory flexibility and discretion at the national level, which opens the door to regulatory arbitrage and competition among EU member states in specific areas.Some of the areas where MiCAR grants national discretion and flexibility are:

  • The definition and treatment of crypto-assets that qualify as financial instruments, deposits, structured deposits, electronic money, securitisation positions, insurance products or pension products under existing EU financial services legislation. MiCAR does not provide a clear and uniform definition of these crypto-assets, nor does it harmonise their classification and regulation across the EU. Therefore, the member states may adopt different approaches and interpretations, which may affect the scope and applicability of MiCAR.
  • The authorisation and supervision of crypto-asset issuers and CASPs. MiCAR establishes a home member state principle, which means that the crypto-asset issuers and CASPs are authorised and supervised by the competent authority of the member state where they have their registered office or head office. The authorisation is valid in all member states and allows the crypto-asset issuers and CASPs to passport their activities across the EU. However, the member states may have different procedures and criteria for granting or refusing the authorisation, as well as different supervisory practices and enforcement actions, which may create regulatory divergence and inconsistency.
  • The fees and charges for the authorisation and supervision of crypto-asset issuers and CASPs. MiCAR allows the competent authorities of the member states to charge fees or charges for the authorisation and supervision of crypto-asset issuers and CASPs, in order to cover their costs and expenses. However, MiCAR does not specify the amount or the calculation method of the fees or charges, nor does it impose any limits or caps. Therefore, the member states may set different levels and structures of fees or charges, which may affect the competitiveness and attractiveness of their crypto-asset markets.

Given these areas of national discretion and flexibility, some of the leading EU jurisdictions for MiCAR compliance and regulatory arbitrage are:

  • France: France is one of the first and most proactive EU member states to adopt a national regime for crypto-assets and related services, under the PACTE law of 2019. The PACTE law provides an optional registration and an optional licence for CASPs, as well as a mandatory approval for initial coin offerings (ICOs). The PACTE law also recognises crypto-assets as intangible property and grants them legal and tax certainty. France has a supportive and innovative regulator, the Autorité des Marchés Financiers (AMF), which has issued several guidance and recommendations on crypto-assets and related services. France is also a founding member and a key player of the European Blockchain Partnership (EBP), which aims to develop a European Blockchain Services Infrastructure (EBSI) that supports the delivery of cross-border digital public services. France is likely to maintain and enhance its leading position in the crypto-asset market under MiCAR, as it has a solid and flexible national regime, a favourable and stable legal and tax environment, and a strong and cooperative regulator.
  • Germany: Germany is another pioneer and leader in the crypto-asset market, as it has a comprehensive and advanced national regime for crypto-assets and related services, under the Banking Act of 1961 and the Securities Trading Act of 1998. The Banking Act defines crypto-assets as financial instruments and subjects them to the MiFID II framework, while the Securities Trading Act regulates the issuance and trading of crypto-assets that qualify as securities. The Banking Act also requires CASPs to obtain a licence from the Federal Financial Supervisory Authority (BaFin), which is a competent and experienced regulator that has issued several guidance and circulars on crypto-assets and related services. Germany has a robust and diversified crypto-asset ecosystem, with several established and emerging players, such as Bitwala, Bison, Bitbond, Nuri and Neufund. Germany is expected to retain and strengthen its leading role in the crypto-asset market under MiCAR, as it has a clear and consistent national regime, a reliable and efficient legal and tax framework, and a reputable and supportive regulator.
  • Malta: Malta is a small but ambitious EU member state that has positioned itself as a global hub for crypto-assets and related services, under the Virtual Financial Assets Act of 2018. The Virtual Financial Assets Act provides a comprehensive and bespoke regime for crypto-assets and related services, which covers the issuance, offering and admission to trading of crypto-assets, as well as the licensing and supervision of CASPs. The Virtual Financial Assets Act also introduces the concept of a virtual financial asset (VFA) agent, which is a person who acts as an intermediary between the crypto-asset issuers or CASPs and the regulator, the Malta Financial Services Authority (MFSA). The MFSA is a proactive and forward-looking regulator that has issued several rules and guidance on crypto-assets and related services, as well as a VFA framework that sets out the principles and best practices for the crypto-asset industry. Malta has attracted and hosted several prominent and innovative players in the crypto-asset market, such as Binance, OKEx, BitBay and ZBX. Malta is likely to continue and expand its leading role in the crypto-asset market under MiCAR, as it has a comprehensive and bespoke national regime, a favourable and attractive legal and tax framework, and a proactive and forward-looking regulator.

Conclusion

MiCAR is a landmark legislation that aims to create a harmonised and comprehensive framework for the regulation of crypto-assets and related services in the EU.

They will introduce legal certainty, consumer protection, market integrity and financial stability, as well as foster innovation and competition, by enabling cross-border activities and passporting rights for crypto-asset issuers and CASPs within the EU. However, MiCAR also poses some challenges and obligations for crypto-asset issuers and CASPs, as well as for other financial institutions and investors that interact with crypto-assets.

I look forward to see the development of this framework.

 

Source: https://www.securities.io/technical-break-down-of-the-markets-in-crypto-assets-regulation/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Anndy Lian: South Korea’s New Crypto Rules Bring Market Stability

Anndy Lian: South Korea’s New Crypto Rules Bring Market Stability

South Korea is a significant player in cryptocurrency and blockchain adoption — and has a regulatory framework that recognizes this.

One development on this journey is the Virtual Asset User Protection Act, representing South Korea’s first formal attempt to establish legal guidelines for the management and oversight of virtual assets, including cryptocurrencies.

In essence, the Virtual Asset User Protection Act defines virtual assets as digital representations of value that can be electronically traded or transferred and grants authority to the Financial Services Commission (FSC), the primary financial regulator in South Korea, to supervise and regulate the crypto sector effectively.

The regulations, scheduled to take effect on July 19, 2024, are designed to protect user assets and interests, prevent misuse and abuse, enhance transparency and accountability, and promote innovation and development, and we took a closer look during the proposal stage.

We sit down with intergovernmental blockchain expert Anndy Lian for a nuanced take on the new regulations.

Key Takeaways

  • The Virtual Asset User Protection Act marks South Korea’s first formal attempt to establish legal guidelines for managing and overseeing virtual assets, including cryptocurrencies.
  • The regulations take effect on July 19, 2024, aimed at protecting user assets and interests, enhancing transparency and accountability, and promoting innovation and development.
  • They are expected to have significant implications for both South Korea’s virtual asset market and those abroad — but may pose challenges for teams complying with the strict regulatory standards.
  • There is room for future developments, such as smart contract-based services like DeFi, Decentralized Autonomous Organizations (DAOs), and Web3.

Impact of South Korea’s Crypto Regulations

Q: How is the Virtual Asset User Protection Act applied internationally, and what impact could it have on virtual asset service providers outside of Korea?

A: The Act is going to have a significant impact on the virtual asset industry, both in South Korea and abroad.

The primary function of the Act is to protect the South Korean market and its users. I think it fits the purpose.

On one hand, it may enhance the credibility and legitimacy of the virtual asset market, as well as the protection and security of users.

On the other hand, it may also pose challenges and costs for VASPs [virtual asset service providers] to meet the strict regulatory standards and requirements — some VASPs may decide to exit the South Korean market or restrict their services to South Korean users, while others may seek to adapt and innovate to comply with the law.

If you look deeper into the Act, I think it is fair for everyone — this is very similar to traditional finance.

Q: Regarding financial investment services and the Capital Markets Act (FSCMA), could you explain the changes brought about by the Token Security Guidelines? What are the potential implications of these changes on the virtual asset market?

A: The implications of these guidelines are significant for the virtual asset market, as they will enable the issuance and circulation of security tokens within the legal boundaries of the capital market regulations.

This will facilitate the creation and trading of new and diverse rights, such as fractional shares, in the form of security tokens. It will also foster the development of small-scale OTC markets where atypical types of securities can be exchanged.

Moreover, the guidelines will ensure the protection of investors and the maintenance of market order, as security tokens will be subject to the same rules and regulations as traditional securities, such as mandatory disclosure, authorization, and prohibition of unfair trading activities.

I think this is a positive and progressive move by the South Korean authorities, as it will promote innovation and inclusion in the virtual asset market while safeguarding the participants’ interests. I hope other countries will follow suit and adopt similar regulatory frameworks for security tokens.

Strengths and Challenges of South Korea’s Rules

Q: How does the Digital Asset Framework Bill specifically regulate virtual/digital assets, and what are its advantages and challenges?

A: The advantages of this bill are manifold.

First, it will create a more transparent and predictable legal environment for the development and innovation of virtual/digital assets, which will attract more investment and participation from domestic and foreign entities.

Second, it will enhance the credibility and legitimacy of the virtual/digital asset market, which will increase the public trust and acceptance of these new forms of value and exchange.

Third, it will foster the integration and interoperability of virtual/digital assets with the existing financial system, which will enable more efficient and convenient transactions and services for users and businesses.

Fourth, it will contribute to the global leadership and cooperation of South Korea in the virtual/digital asset space, as it will align with the international standards and best practices set by organizations such as the Financial Action Task Force (FATF) and the G2014.

Q: And the challenges…?

A: First, it will require a careful and balanced approach to ensure that the regulation does not stifle the innovation and diversity of the virtual/digital asset market, which is constantly evolving and expanding.

Second, it will demand a high level of coordination and collaboration among various stakeholders, such as regulators, legislators, industry players, experts, and users, to ensure that the bill reflects the needs and interests of all parties involved.

Third, it will entail a continuous monitoring and evaluation of the impact and effectiveness of the regulation, as well as a timely and flexible adjustment of the rules and standards to cope with the rapid changes and challenges in the virtual/digital asset market.

I think this is a very important and timely initiative by the South Korean government, as it will provide a solid foundation and direction for the future of the virtual/digital asset market, which has a huge potential and value for society and the economy.

South Korea’s Digital Future

Q: How will the Virtual Asset User Protection Act contribute to market stability and investor protection? In your view, could it enhance the stability and transparency of the virtual asset market?

A: The Act will also establish a set of rules that virtual asset service providers (VASPs) are required to follow to ensure the protection of users’ assets, such as separating customers’ funds and virtual assets from their own, storing a certain proportion of virtual assets in cold wallets, having insurance or reserves for liability, and maintaining transaction records.

Moreover, the Act will confer the market oversight and sanctions authority to the Financial Services Commission (FSC), which will be able to punish unfair trading activities using virtual assets, such as insider trading, market manipulation, and fraud, with criminal penalties and fines.

I think it brings market stability and provides investor protection in several ways.

First, it will create a more transparent and predictable legal environment for the development and innovation of virtual assets, which will reduce uncertainty and risk for investors and users.

Second, it will enhance the credibility and legitimacy of the virtual asset market, which will increase public trust and confidence in these new forms of value and exchange.

Third, it will foster the integration and interoperability of virtual assets with the existing financial system, which will enable more efficient and convenient transactions and services for users and businesses.

Fourth, it will ensure the protection of users’ rights and interests, as well as the maintenance of market order, by imposing strict standards and obligations on VASPs and enforcing sanctions on violators.

Q: The Financial Services Commission excluded deposit tokens linked to NFTs, electronic bonds, mobile gift certificates, and CBDCs from the law. What do you think are the reasons behind this decision? In your view, does this effectively prevent virtual asset-related crimes?

A: In my view, excluding these types of tokens from the law does not necessarily prevent virtual asset-related crimes but rather clarifies the scope and applicability of the law to the relevant types of tokens that could pose potential risks or challenges to the financial system or the users.

The exclusion is very obvious as it overlaps with existing laws.

For a few examples, electronic bonds are tokens that represent the debt obligations of an issuer, such as a government or a corporation, to pay a fixed amount of interest and principal to the holders of the bonds.

These tokens are not considered virtual assets under the law because they are already regulated as securities under the existing capital market regulations and do not pose any additional risks or challenges to the financial system.

CBDC is a digital form of fiat currency issued by a central bank, which can be used as a legal tender for payments and settlements. CBDC is not considered as a virtual asset under the law, because it is a direct liability of the central bank, and does not involve any intermediaries or third parties that could pose any operational or security risks.

What Needs to Happen Next?

Q: There’s an opinion suggesting that while the Virtual Asset User Protection Act focuses mainly on asset segregation and unfair trading activities of virtual asset service providers, regulations on smart contract-based services such as DeFi, Decentralized Autonomous Organizations, and Web3 are inadequate.

How do you perceive this? What alternative methods do you see for the upcoming laws to provide more comprehensive regulations aimed at preventing user harm?

A: Personally, I think the current regulations are sufficient for the time being. We must understand that we are dealing with innovation, which changes very fast.

Putting up a base and having backup correction plans along the journey would be a more protective method for the South Korean market.

I think the best way to approach this issue is to adopt a balanced and flexible perspective that considers both the benefits and drawbacks of smart contract-based services and seeks to find a middle ground between regulation and innovation. Some possible alternative methods for the upcoming laws to provide more comprehensive regulations are:

  • Establishing clear and consistent standards and definitions for different types of smart contract-based services, such as decentralized finance (DeFi), DAOs, and Web3, and applying appropriate rules and requirements for each category.
  • Creating a sandbox or pilot program that allows for testing and experimenting with new and innovative smart contract services under certain conditions and exemptions and with regular monitoring and evaluation.
  • Encouraging collaboration and communication between regulators, developers, users, and other stakeholders to foster mutual understanding, trust, and feedback and to promote best practices and self-regulation.
  • Adopting a principles-based and risk-based approach that focuses on the outcomes and impacts of smart contract-based services rather than the specific processes and mechanisms and that applies proportional and tailored measures according to the level and nature of risk involved.

 

Source: https://www.techopedia.com/anndy-lian-south-koreas-new-crypto-rules-bring-market-stability

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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