The two research outputs are intended to inform the work of regulators devising rules for cryptoasset markets, particularly those in Emerging Markets and Developing Economies (EMDEs)
“Consistent with the core mission and purpose of CCAF, we hope that the insights from this global study and the accompanied digital regulatory tracker can inform data-driven policymaking and regulation, by offering regulators an empirical and comparative evidence-base and facilitating meaningful peer-learning and knowledge exchange,” said Bryan Zhang, Co-Founder & Executive Director of the CCAF.
“This is especially relevant for emerging markets and developing economies, which face heightened challenges in devising and enforcing effective regulatory frameworks for cryptoassets and related activities with limited resources,” he added.
The report titled 2nd Global Cryptoasset Regulatory Landscape Study – Emerging Practices and Early Lessons Learned will be launched at the Insights Forum, Singapore Fintech Festival, on 4 November 2024.
Drawing on a comparative analysis of regulatory initiatives across 19 representative jurisdictions, it identifies key areas of convergence and divergence and explores the early lessons from their implementation.
It comes at a critical juncture, as regulators and standard setters intensify their efforts to address the challenges posed by the rapidly growing cryptoasset market and learn the lessons from the failures of market participants such as Terra/Luna and FTX.
Despite the concerted push, the global landscape remains fragmented. Jurisdictions are taking different approaches to implement global standards and moving at different speeds to regulate the sector, the study shows.
“EMDEs, where the case for regulation can be stronger, are lagging advanced economies in the implementation of these global standards,” said Hugo Coelho, Head of Digital Policy and Regulation at the CCAF.
“They are also more likely to introduce partial or full prohibitions on the use and provision of activities related to cryptoassets. This is probably due to a combination of factors, from lack of resources and knowledge to macro-economic instability.”
Other study findings include:
- Cryptoasset activities are banned or restricted in part in a minority of jurisdictions, particularly in EMDEs. Bans are in most cases driven by concerns over currency substitution and capital outflows.
- The terms ‘cryptoasset’ and ‘virtual asset’ have become the most widely used across jurisdictions, suggesting that regulators increasingly see cryptoassets to be more like (speculative) investments than a means of payment.
- Advanced economies, in particular large economies with international reserve currencies, are leading the way in the regulation of stablecoins. As a minimum, regulations are aimed at ensuring stablecoins maintain a stable value and are redeemable.
- To mitigate conflicts of interest, some jurisdictions explicitly ban trading platforms from trading on their own account and are targeting platforms that list their own issued tokens.
- Regulatory frameworks for staking and tokenisation of financial instruments are in their infancy, with DeFi largely unregulated.
The study also identifies early lessons for regulators, particularly in EMDEs, as they develop cryptoasset regulatory frameworks. These include the importance of clear classification frameworks for cryptoassets, the gradual lifting of restrictions to maintain macroeconomic stability, leveraging existing anti-money laundering (AML) rules to build comprehensive regulatory frameworks, and the need for enhanced mechanisms of cooperation and information sharing.
In parallel with the study, CCAF is launching a tracker of cryptoasset regulatory frameworks. The Global Regulatory Innovation Dashboard (GRID) is an online, interactive resource that presents a visual representation of regulatory frameworks and innovation initiatives, globally. It offers actionable insights and data on regulatory innovations to a broad, global audience including regulators, supervisors, policymakers, industry, researchers and individuals.
This research was conducted by the Cambridge Centre for Alternative Finance at Cambridge Judge Business School, University of Cambridge, with the support of the UK Foreign, Commonwealth & Development Office and the Swiss State Secretariat for Economic Affairs.