GLOBAL CRYPTO REGULATION: COMPLIANCE AND ENFORCEMENT

R&C: What do you consider to be among the most significant developments shaping the crypto landscape? How has the market fared over the last year or so?

Alvarez: Over the past few years, significant developments have emerged in the cryptocurrency landscape. Regulatory scrutiny has intensified, especially after high-profile collapses of major crypto companies, prompting discussions for clearer regulations worldwide. More businesses and financial institutions are integrating cryptocurrencies into their services, enhancing mainstream acceptance and usage. Innovations such as Layer 2 solutions and decentralised finance (DeFi) platforms have improved scalability and usability, making digital assets more attractive for everyday transactions. Institutional interest from hedge funds and traditional financial firms has remained strong, contributing to market stability. In 2023, the cryptocurrency market showed mixed performance following a downturn in 2022, but signs of recovery emerged by late 2023 and into 2024, driven by renewed interest from retail and institutional investors. Major cryptocurrencies have demonstrated resilience, indicating growth potential, although ongoing regulatory developments and market dynamics continue to influence investor sentiment and trading activity.

Kerrigan: Crypto exchange-traded funds (ETFs) have demonstrated there is demand for bitcoin as an asset class. Whether regulators like it or not, people want exposure within a traditional investment wrapper and the launches broke records for inflows to new ETFs.

Salmon: Arguably, the most significant development shaping the cryptoasset industry is regulation. Regimes such as the Markets in Crypto-Assets Regulation (MiCA) in the European Union (EU) have forced firms to adapt their processes to comply but also chart a more long-term future and allow investment into the industry, safe in the knowledge of regulatory clarity. Furthermore, it has also provided the basis for institutional investment and involvement in the industry as noted by greater institutional adoption, as well as the development of bitcoin futures ETFs to embed cryptoassets as a mainstream asset class. This latter point has perhaps shielded the industry from what have been quite difficult conditions, as high interest rates, high inflation and geopolitical events have stymied investment in the industry. However, over this period industry has also witnessed increased consolidation and ongoing innovation. For example, we have seen the building of more Layer 2 products to improve efficiencies as well as to support scaling.

Jan-Mar 2025 Issue

BDO

CMS UK

Hogan Lovells International LLP

Watson Farley & Williams LLP