In recent years, the rapid development of financial technologies and the crypto market has led to the need for an adequate legal framework to regulate activities in these areas. The widespread use of cryptocurrencies, blockchain, and decentralized finance has made it necessary for regulators to develop new approaches that consider the specifics of these areas.
Main trends in legal regulation
The formation of the legal and regulatory framework in fintech and crypto assets is characterized by several key trends:
Licensing of activities
Many jurisdictions are introducing mandatory licensing for companies working with cryptocurrencies and providing blockchain-based services. The most common types of licenses are the crypto exchange license, crypto wallet license, and cryptocurrency transaction license.
Expanding the scope of SEC regulation
The U.S. Securities and Exchange Commission (SEC) is expanding its influence in the crypto market by extending its authority to ICOs and stablecoins. The regulator requires tokens to be registered as securities if they meet the criteria of an investment contract.
AML and KYC tightening
AML/CFT regulations are tightening across the board, extending additional requirements to crypto market entities. Regulators are pushing to implement enhanced KYC procedures, customer identification, and suspicious activity monitoring.
Blockchain lawyer to mitigate the risks
The transformation of the regulatory landscape carries certain legal risks for participants in the fintech and crypto industry. These include, among others:
- The risk of violating licensing requirements, both in a company’s home country and in target markets
- Risk of token mischaracterization and regulatory consequences, up to and including prohibition of activities
- Risk of sanctions for non-compliance with AML/CFT regulations
Recent exemplary investigations by regulators confirm this. In such cases, blockchain lawyer services are required to prevent and minimize potential risks.
Problems with obtaining licenses
Separately, the problems with obtaining a license in jurisdictions are worth mentioning. It is often an unnecessarily long and costly process, sometimes taking up to 18 months from the time of submission of documents to the actual receipt of authorization. Companies may face excessive reporting requirements and business capitalization requirements. This makes it challenging to launch and run a cryptocurrency and blockchain business.
The process of obtaining a Costa Rica Gaming License is a case in point. Although there is no gambling permit here, companies must go through a series of formal procedures called “data processing licenses.” It takes between 2 and 6 weeks of time and their resources.
Future regulatory trends
The legal landscape for the fintech and crypto industry will continue to evolve. Global regulatory initiatives point to likely directions of evolution.
For example, the MiCA regulation is being actively promoted in the European Union. It is designed to establish uniform rules for crypto exchanges, crypto wallets, and issuers of stablecoins throughout the region. With collective regulation at the international level, a similar approach can be applied by global supranational organizations – FATF, Basel Committee on Banking Supervision, and IOSCO. A well-constructed legal strategy with the involvement of specialized lawyers will help ensure long-term success in this promising but complex market.
