APPROACHES TO VIRTUAL ASSET REGULATION
APPROACHES TO VIRTUAL ASSET REGULATION
The Cambridge Centre for Alternative Finance (CCAF) identified four principal types of regulatory responses to virtual assets:
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Application of existing regulation – this is the approach that many regulators have adopted, which involves applying existing laws and regulations to activities involving virtual assets by issuing regulatory guidance on how existing laws apply to those activities. Examples include Australia’s Information Sheet (INFO 225) on ICOs and cryptocurrency and Hong Kong’s Statement on Securities Token Offerings;
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Retrofitted regulation – extending existing laws and regulations to cover activities involving virtual assets. According to a study by the CCAF, countries with a higher level of domestic crypto asset activity, typically take this approach.[56] Of course, retrofitting regulation has its drawbacks (mainly the fact that distributed ledger technology (DLT) compares so starkly to traditional, centralised systems) however, this approach is attractive to many jurisdictions seeing rapid development of crypto activity;
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Bespoke regulation – a number of smaller jurisdictions have taken this approach by enacting new laws specifically to regulate virtual asset activities. An example is Malta’s Virtual Financial Assets Act. The CCAF study found that generally, the likes of Malta, Gibraltar and Luxembourg have been able to develop these bespoke crypto regimes due to their relative lack of crypto asset activity[57]; and
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Bespoke regulatory regimes – establishing a distinct regulatory framework applicable to a type of activities (typically fintech activities), of which virtual asset activities are one type.
