The Crypto Regulations you Haven't Heard About

What are the newest crypto regulations? And should you be afraid of holding crypto for upcoming regulations? Well...
by Yoaquim Boom
February 27, 2023

The Regulations you Haven't Yet Heard About

In this week’s report

  • Experts Weigh in on Potential Shortcomings of EU Crypto Regulation
  • Nigerian Central Bank Digital Currency (CBDCs) eNaira faces issues.
  • China shifts its stance on crypto. Markets flood with Asian firms.

European Regulation

The final vote on the European Union's Markets in Crypto Assets (MiCA) regulation has been delayed to April 2023 due to technical difficulties. While MiCA is on track to become the first comprehensive pan-European crypto framework, it is set to become effective only in 2024.

The current draft does not mention decentralized finance, lending, staking, or nonfungible tokens (NFTs), creating potential limitations to the regulation's efficacy.

MiCA lacks a distinct section dedicated to DeFi, leading to concerns that it is not an ideal regulatory framework for the decentralized sector.

Bittrex Global CEO Oliver Linch believes that DeFi is inherently unregulatable and, to some degree, a low priority for regulators. While the lack of a dedicated section for DeFi does not mean it is impossible to regulate, some stakeholders have concerns.

The MiCA regulation's lack of clarity on lending, staking, and NFTs is also concerning to stakeholders. Despite moderate optimism from the crypto industry, some question whether MiCA, with its existing imperfections, could qualify as a truly comprehensive framework by 2024.

Concerns have been raised about the potential need for a "MiCA-2" that can address the shortcomings of the current framework.

We are yet to see the actual effects of these bills, often in the cryptocurrency space we see these regulatory events only have an effect on the market symbolically.

CBDCs in Nigeria

Early in April 2022 we saw Nigeria attempt to roll out their own digital currency, the eNaira.

Yet, it was a major failure.

But in December 2022 Nigeria did a second rollout, in which they began their path to limit ATM withdrawals to $45 per day (per person) to force their government-controlled digital currency called eNaira.

The current limits stand at weekly cash withdrawals from banks are now limited to $225 and $1,125 for corporations. With an incurred fee if more is withdrawn from the ATM.

Nigeria's eNaira faces new challenges as the country seeks a new technology partner to manage its central bank digital currency (CBDC).

The Central Bank of Nigeria (CBN) wants to develop its proprietary software to control the underlying technology, rather than relying on U.S. firm Bitt Inc., which developed the eNaira.

Nigeria aims to increase the adoption of its CBDC by increasing control over its technology.

Currently the eNaira is only being used by 0.5% of Nigeria's population.

Nigeria's population is considered to be the most crypto-savvy on the African continent, with more than a third owning or trading cryptocurrencies.

The country is also moving forward with new regulations for non-governmental crypto.

China Softens Stance On Crypto

So, although China has been cracking down on cryptocurrencies on the mainland, it appears to be adopting a gentler approach to Hong Kong's hopes to become a crypto powerhouse.

Hong Kong is a Chinese Special Administrative Area with its own set of laws and government.

In contrast to China's extensive crypto prohibition, the Hong Kong government raised the notion of presenting its own bill to regulate crypto and enable ordinary investors to "directly invest in virtual assets" last October.

Reportedly, Beijing authorities have not been outright hostile to the notion, and members from the China Liaison Office have been attending Hong Kong crypto conferences to learn more.

According to a Bloomberg story, their interactions with Beijing authorities on the subject have been cordial, implying that China may be willing to use Hong Kong as a crypto testing ground.

National People's Congress member and digital asset lawyer Nick Chan stated that Hong Kong is allowed to pursue its own interests as long as it does not break the "bottom line" and endangers China's financial stability.

On February 20, Hong Kong's Securities and Futures Commission unveiled a new crypto licensing framework, proposing that all centralized exchanges operating in the territory obtain a license from the regulator.

Several crypto firms are looking to expand into the city as a result of the current regulatory push. Hong Kong's planned crypto licensing scheme also includes the provision of approved cryptocurrency trading platforms to retail traders.

This decision was taken in response to public comments indicating that restricting Hong Kongers access to cryptocurrency exchanges may force them to trade on unregulated offshore platforms.

This leads to the question: how much Hong Kong money can we expect to flood or have flooded the crypto markets?