A “one-size-fits-all approach” when developing a regulatory framework for digital assets will not work, many nuances must be taken into account. This conclusion is contained in Andreessen Horowitz’s (a16z) response to the UK government’s advisory report.
1/ @a16zcrypto submitted our response to the UK @HMTreasury “Future Financial Services Regulatory Regime for Cryptoassets” consultation. We enthusiastically embrace the UK’s approach for a “proportionate and focused, agile and flexible,” regime. 🧵. . https://t.co/rT85Xfd8so
— Brian Quintenz (@BrianQuintenz) May 1, 2023
In early February, the Ministry of Finance of the country published a document on the preparation of the introduction of supervision over cryptocurrency exchanges and landing platforms in order to comply with “fair and reliable standards”.
The Ministry expects to mitigate the most serious volatility risks and structural vulnerabilities that plague some business models in the sector, bringing them in line with Tradfi.
Under the regulations, crypto exchanges must define detailed requirements for the content of asset admission documents and disclosures.
The presented measures also imply tougher rules for financial intermediaries and custodians.
The agency will explore opinions on improving market integrity and consumer protection.
“A one-size-fits-all approach to regulating transactions with cryptoassets would not be consistent with the Treasury’s main development principle of “same risk, same oversight”,” – noted in a16z.
Lawyers of the firm proposed to unify the understanding of the principle of decentralization in Web3.
According to a16z, the regulatory framework should include a “principles-based analysis” that considers whether the very design of a given platform or protocol has already mitigated possible risks. In other words, the rules should not unnecessarily hinder the decentralization of the project.
The company urged not to focus on the experience of the United States.
“Washington’s approach is not worth considering. The UK can successfully implement a principles-based approach to decentralization that encourages widespread adoption of crypto assets to drive Web3 innovation while prioritizing consumer protection.” – explained in a16z.
Company representatives called for regulation of DeFi applications and businesses, not protocols or software.
“DeFi can present unique risks that the current regulatory framework is ill-suited to address. For this reason, an individual regulatory framework is optimal… businesses can understand the rules of the jurisdiction and comply with them. Globally available software can’t do that.”experts concluded.
Recall that the Deputy Governor of the Bank of England, John Cunliffe, proposed to regulate digital assets by analogy with traditional finance. He also pointed out that decentralized protocols do not yet provide an effective way to manage risk.
In December 2022, Cunliffe called for the creation of a regulatory framework for cryptocurrencies before “systemic problems” arise.
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