In a recent panel discussion hosted at the Finance Magnates London Summit (FMLS:23), prominent figures in the digital asset industry shared crucial insights into the evolving landscape of crypto regulation. The panel, moderated by Erwin Voloder, the Head of Policy at the European Blockchain Association, delved into the challenges and transformations catalyzed by recent events, notably the collapse of FTX.

The discussion on Crypto Regulation after FTX underscored the pivotal role of regulation in shaping the industry's trajectory. Despite the challenges posed by FTX's downfall, the consensus among panelists, including Stephanie Ramezan, the Head of UK at Gemini, Audris Siow, the Head of Business Development for EMEA at Talos, Dan Moczulski, the Managing Director for UK at eToro, Andrey Stoychev, the Prime Brokerage at Nexo, and Alex Royle, the Head of Compliance and Regulatory Affairs for EMEA at Galaxy, was that regulatory intervention is essential for the industry's growth and sustainability.

Transparency, Compliance, and Trust: Key Themes in Crypto

Reflecting on the market turbulence in 2021-2022, the panelists emphasized the need for a proactive approach to compliance. Ramezan highlighted Gemini's commitment to prioritizing regulation from the outset, fostering a culture of trust and collaboration with regulators. "We are so close, yet so far, this is how I feel. I've been speaking on panels in the crypto space for nearly five years, and I feel like the real progress, especially in the UK, has only really been made in the last maybe six or nine months," she added.

Siow underscored the importance of addressing conflicts of interest and implementing tried-and-tested practices, such as the separation of responsibilities and duties. “Regarding regulation or transparency, I think there was a general sweeping assumption that centralized means there's no assurance that it gives you legitimacy. There is still an element beyond transparency and regulation around it," she commented.

Moczulski provided insights from eToro's perspective, noting the resilience of the crypto audience during the "crypto winter." He observed that unlike traditional markets, crypto investors tended to hold their positions, indicating sustained demand even in challenging times.

He commented: "It is clear the Middle East and Asia are keen on this market. The jury is still out on the US, but there are strong voices against making it a crypto hub. In terms of the tipping point, only time will tell. I think we will see over the next couple of years, somewhere will get this right and others will use that as an example to follow."

Stoychev, representing Nexo, stressed the importance of risk management and compliance, drawing parallels between developments in the crypto space and experiences in the FX and CFD world. "Europe, as a location, is much better situated than US in terms of crypto regulations.”

“They prepared themselves, working for a few years on the MiCA regulation, which we are obviously facing next year. They give enough space and time for the crypto companies to prepare themselves, to start working on the regulations, and to initiate all the processes to meet the expectations," he said.

Royle, from Galaxy, offered a nuanced perspective on the impact of FTX on the industry's perception. While acknowledging the shockwaves caused by FTX's collapse, Royle pointed out that it served as a catalyst for reevaluating regulatory assumptions and addressing issues related to trust and misrepresentation.

"I think the other thing is, the industry as a collective has not done a very good job of telling regulators or jurisdictions what good regulation looks like. Unfortunately, it's still a patchwork, and people still have their own views," he commented.

Prudential Oversight and Balanced Regulation: Shaping the Future

The panel discussion also delved into reflections on the risks associated with crypto, such as leverage and liquidity, citing instances like Celsius and other collapses. The conversation shifted to the regulatory landscape, emphasizing that it was the providers' failures, not the technology itself, that were on trial. A comparison was drawn to "Norm Entrepreneurialism" in political science, exploring how different jurisdictions worldwide approached crypto regulation.

The talk explored regulatory effects from various regions, including the UK, Europe, APAC, and MENA. The panelists discussed the challenges faced by firms in complying with new rules, emphasizing the need for global harmonization. Despite the progress in the UK, the holy grail of regulation was yet to be found in any jurisdiction. The conversation touched on post-FTX developments, highlighting the sudden focus on audits and stock reports by certain industry players.

The panel discussed the importance of transparency and legitimacy in the industry. There was an acknowledgment that the jurisdiction at the forefront of the regulatory waterfall was a complex and evolving matter. The UK's recent progress was recognized, but the global ideal involved collaboration and decision-making among stakeholders.

As the discussion narrowed down to MiCA, the panelists examined its strengths and areas for improvement. They discussed the comprehensive nature of MiCA and its role in shaping global regulatory conversations. While recognizing MiCA's positive impact, there was a call for faster iterations in addressing gaps, such as staking and lending.

The conversation additionally highlighted the significance of prudential oversight, emphasizing the need for a balanced regulatory approach. The panelists expressed optimism about the future iteration of rules, expecting a faster pace due to the industry's growing dialogue with regulators. The retail perspective underscored the necessity of embracing and nurturing companies doing things properly, bridging the gap between regulators and the crypto ecosystem.

In closing statements, the panel emphasized that there was no silver bullet for crypto regulation. The importance of embracing regulation for industry legitimacy was stressed, along with the need for ongoing collaboration and transformation.

The retail broker's viewpoint anticipated the impact of upcoming regulations on the crypto market, questioning whether it would drive participants toward regulated or offshore markets. The overall sentiment reflected a dynamic industry grappling with evolving challenges and regulatory dynamics.

The panelists concurred that the industry's future success hinges on a collaborative effort between industry participants and regulators. The discussion highlighted the maturation of the crypto sector and the imperative for proactive regulatory frameworks to ensure its long-term viability.

As business executives navigate the ever-changing landscape of digital assets, the insights shared during this panel discussion offer valuable perspectives on regulatory considerations, risk management, and the path forward in a post-FTX era.