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Regulatory and compliance issues have always been one of the most controversial topics in the cryptocurrency space, and it has been the front and center problem in the context of issues like Libra, a Bitcoin ETF, and initial coin offerings. Some believe that regulatory challenges were the biggest hurdle for crypto investment to go mainstream. Others argue that crypto-related products must be well regulated before entering the mainstream investment market. So, is there a middle ground on this? Meanwhile, we’ve seen the US and Asia have some very different approaches when it comes to crypto regulations. What’s the latest trend in the crypto compliance world? And how can it impact the future of the crypto industry?

Very Different Landscapes

The institutional and retail interest in cryptocurrency investing has been growing rapidly over the past years. Despite the high volatility and price fluctuations, global investors have been looking for a proper and legitimate way to tap into this emerging asset class, with the high demand for crypto interest too huge to ignore. Geographically, Asia, the US, and Europe all have very different approaches when it comes to regulations on cryptocurrency. So let’s have a brief review of their approaches.


As the fastest growing crypto region, Asia has the widest regulation spectrum than any other region in the world. Japan has created one of the most crypto-friendly environments and widely considers Bitcoin as legal tender. The country passed a law in mid-2017 recognizing cryptocurrencies as legal property. In late 2018, Japan also approved self-regulation for the crypto industry. In contrast, China completely banned all Bitcoin transactions in 2013, and later in 2017, the country outlawed initial coin offerings (ICOs). However, Hong Kong and Singapore have adopted a relatively open position. Both regions introduced new licensing laws with a prerequisite of obtaining regulatory approval before allowing trading. In terms of the ICO, both jurisdictions classify it as a security to be regulated under applicable laws.

United States

Regulators in the US seem to take a relatively active approach when it comes to overseeing the crypto industry. However, despite some high-profile cases such as the Bitcoin ETF applications, the SEC and the CFTC remain slower than their Asian counterparts in terms of developing a complete regulatory framework for cryptocurrencies, with guidelines being mostly product-dependent.


Europe lacks a clear stance on crypto regulations due to the diversified jurisdictions. However, this is going to change soon. In June 2018, the European Commission introduced ​the 5th Anti-Money Laundering Directive, which requires all the EU countries to limit anonymity related to virtual currencies and wallet providers.

Measures to improve the cooperation and information exchange between AML supervisors and the ECB are also included. EU countries are required to adopt the directive by January 10, 2020. Meanwhile in the UK, currently there are no specific cryptocurrency laws and crypto investments are mostly unregulated. Recently the FCA published its final guidance on crypto assets and restated its position that they have no intrinsic value.

Balancing Out

We may see regulators step up efforts in overseeing the crypto industry by requiring licensing in order to conduct crypto-related activities. In the past decade, the crypto industry has largely operated in an unregulated environment with the involvement of regulators only happening in the past few years. However, like it or not, the widespread absence of regulation has partly contributed to the exponential growth of the crypto industry over the years.

As the industry evolves and cryptocurrency investments become more mainstream, the call for a regulatory framework has been gaining momentum. It seems like licensing will play an inevitable part and could be one way to benefit both investors and industry players.

For example, required licenses would force exchange operators to adopt investment banking know-your-customer and anti-money-laundering standards, providing clear guidelines on what they can and can’t do, eliminating gray areas. Investors will also benefit from a more transparent exchange, experiencing greater user confidence when it comes to trading crypto assets.

The same goes for other players in the crypto industry, from investment service providers to brokerages. As an emerging sector, we’ve seen cases where industry participants’ practices fall short of investors’ expectations, failing to protect their interests. This comes at a time when traditional financial markets are adopting cryptocurrencies with increasing frequency, which also poses a challenge for regulators who are trying to manage this ever-changing new asset. In many cases, regulators aren’t able to catch up with the fast-growing industry.

What about ICO/IEOs?

While the nature of the initial coin offering (ICO) or initial exchange (IEO) offering remains highly debatable, ICO and IEO white papers could benefit from regulatory oversight.

Currently, there are no formal rules for writing white papers. Aside from including project descriptions and future development plans, white papers generally don’t require any third-party review. This differs drastically from an initial public offering prospectus where financial information must be audited by professional accountants, and many of the terms must be certified by a team of lawyers.

While securing third-party opinions for an ICO/IEO project could significantly increase the compliance cost, at the same time it could increase the level of transparency and confidence for investors.


Looking ahead, the crypto industry may have to embrace more regulatory guidelines and rules globally, as institutional and retail investors gain increasing exposure in cryptocurrency investment. Areas like AML, KYC, antifraud, transaction reporting and cybersecurity are likely in focus. While industry players may have to step up their efforts to adopt new requirements, an improved regulatory environment could enhance the transparency of the crypto industry as a whole and strengthen investor confidence.

This post originally appeared on OKEx Blog. Read more.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

About OKEx

OKEx is a world-leading digital asset exchange headquartered in Malta, offering comprehensive digital assets trading services including token trading, futures trading, perpetual swap trading and index tracker to global traders with blockchain technology. Currently, the exchange offers over 400 token and futures trading pairs enabling users to optimize their strategies.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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