Financial regulators in Sweden and the US over the weekend both hinted at a tightening of the largely unregulated cryptocurrency markets. They cited the lack of a stable regulatory framework, general concerns about their role in financial crime and the risks they pose to consumers on cryptocurrency exchange platforms, which some British banks have reportedly banned from flowing into.
Michael Hsu, the new head of the US banking regulator, told the Financial Times that he wanted US agencies to coordinate and set a “regulatory framework” for cryptocurrencies, but also to take a more active role in regulating it.
Meanwhile, Sweden’s central bank governor Stefan Ingves said on Monday that a tighter regulatory framework for bitcoin and other digital assets is possible, especially since the market is so large that ” issues such as consumer interest and money laundering come to the fore”. Ingves stressed that oversight is likely to “occur at different times for different sectors”.
Meanwhile, Asa Lindhagen, Sweden’s finance market minister, told Bloomberg that the country has already started the process of setting up cryptocurrency exchange platforms and is working with other regulators around the world to tackle money laundering from illegal activities.
Lindhagen added that international efforts are “ongoing”, although she emphasised the cross-border dimensions of the issue that arise in the case of financial crime.
At the same time, some banks in the UK – including Starling, Monzo and Barclays – have reportedly suspended payments at cryptocurrency exchanges in recent weeks to address “high levels of suspected financial crime through such payments”.
The extreme instability of cryptocurrency markets, the high risk of financial crime augmentation and their rapidly growing popularity have prompted financial regulators around the world to seek the best way to adopt the necessary digital ecosystem safeguards without compromising the digital ecosystem.
China – which, like Sweden, is developing its own digital currency – imposed restrictions on financial institutions trading digital assets in May, contributing to a rapid market reduction of almost 30%.
In addition, the Biden government is feverishly considering “gaps” in cryptocurrency surveillance, and the chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, recently told a House of Representatives committee that it may be necessary to enact specific legislation, as he explained, money laundering and illicit activities are at the heart of the US Treasury Department’s efforts to regulate the cryptocurrency market.
Hsu, the new head of the US banking regulator, told Congress in May that he had a “déjà vu” feeling, observing the current enthusiasm for financial innovation. He also added that he novel tools being developed “bring great promise, but also risks”.
Finally, the tax plan promoted by US President Biden, which will help fund his plan to financially support Americans, is linked to the cryptocurrency boom. This is because it tightens the rules for declaring financial transactions on cryptocurrency trading platforms, with the ultimate goal of identifying undeclared revenue.