Ever since something like a “technical experiment” with bitcoin (BTC) began more than a decade ago, the crypto industry has become an important engine of change in global financial markets. Currency exchange began as a way to allow crypto enthusiasts to trade digital currencies outside of the traditional financial system on a largely independent and decentralized basis.

It is likely that along with regulatory recognition and development of digital market infrastructure, adoption of a major anti-money laundering effort, investment in security protection systems and recognition of investor protection measures, these companies will continue to expand and possibly merge or compete regularly. basis with existing ones. Organized markets.

The success of these platforms in ensuring the free and unregulated flow of assets across national borders has not surprisingly piqued the interest of governments and regulators. Initial doubts were replaced by concerns over vulnerabilities in anti-money laundering and fraud measures and investor protection. As cryptocurrency exchanges have improved their systems to meet anti-money laundering and investor protection requirements, it is a misconception that these platforms have brought much-needed modernization and democratization to a market that was generally considered remote and privileged.

Cryptocurrency exchanges provide 24/7 global access to trading platforms with qualified participants from all walks of life who can participate directly through access to online trading tools and charts that have historically been available almost exclusively to a limited group of professional investors.

Crypto regulation overview
Crypto assets have tended to be on the periphery of the regulatory framework but are under increasing pressure to be included in regulations.

An important first step in this direction internationally was the extension of the anti-money laundering standards announced in June 2019 to cryptocurrency-related companies from the Financial Action Task Force, the global standards body for fighting economic crime.

RELATED: Slow But Steady: FATF Review Highlights Crypto Exchanges Struggle To Meet AML Standards

In the European Union, this was followed by the adoption of the Fifth Anti-Money Laundering Directive, or 5AMLD, which put cryptoasset and safe providers in the European Union’s anti-money laundering regime. As a result, crypto-active firms operating in the European Union and the United Kingdom are now subject to a range of anti-money laundering obligations that apply to most financial market participants, such as the need to conduct customer checks on the rise. new client. … In addition, they must register with the relevant national competent authorities where they intend to carry out activities related to cryptocurrencies.

General organizational position
The overall approach to regulatory processing of cryptocurrencies has been more complex. At the European Union level, there has so far been a situation where the current rules have been applied to cryptocurrencies that have the characteristics of a regulated asset. Specific rules have been established, such as banning the sale of cryptocurrency derivatives to retail investors, but more specific requirements are important.

Thus, stock markets that trade digital assets are subject to regulation if the assets traded fall within this regulatory range. To a large extent, this meant understanding the application of the regulations in force and their application to relevant issues, relying on explanatory guidance as necessary.

As a result, two main classes of cryptocurrencies have been created that work in the same way as regulated instruments, and corresponding service providers within the framework of existing regulations. These are digital assets that resemble “financial instruments” (usually cryptocurrencies used to obtain funding and derivatives), but they are handled in accordance with the current rules for tokens, which act as “electronic money”. This hijacks cryptoassets designed to facilitate payment transactions, or a few stacked coins.

It is important to note that this means that cryptocurrency exchanges that trade digital securities such as stocks, bonds, fund units or derivatives based on DLT, often referred to as collateral, must be approved as a regulated trading platform in order to do business in the European Union. … This will also cover European Union cryptocurrencies that are traded in extremely popular instruments such as derivatives that reference Bitcoin (BTC) or other cryptocurrencies as their underlying assets.

Source: CoinTelegraph