What should the crypto industry expect from regulators in 2022? Experts answer, Part 1

One of the most important topics for the entire crypto and blockchain industry is regulation. 2021 was full of news in that area, and one of the most widely discussed topics was the unprecedented experiment in El Salvador, the first country to give Bitcoin (BTC) the status of legal tender. Another hot topic was the United States Securities and Exchange Commission’s approval of the first futures-based Bitcoin exchange-traded fund (ETF), which had been awaited for eight years and was hailed as a breakthrough moment in crypto history. I expect that these trends will continue in 2022: Small countries will follow El Salvador’s example of legalizing Bitcoin, while developed countries will most likely follow with the cautious approval of Bitcoin ETFs. But that’s just my opinion.

To gain more insight on the matter, I reached out to various experts from the crypto and blockchain industry, asking them: “In your opinion, has the crypto space reached any milestones in 2021 in terms of regulation? And what do you expect from regulators in 2022?”

Alan is the chief legal officer of PrimeBlock, a sustainable Bitcoin mining operation and infrastructure solutions provider with locations spread across North America. PrimeBlock is a member of the Bitcoin Mining Council.

“China has had this love-hate relationship with Bitcoin since it came on the scene in 2009. The domestic political considerations that led to the change in policy this year and that led to Chinese exchanges and mining being pushed out of the picture won’t change in 2022. I don’t think we’re going back into the love part of the cycle. These changes in the competitive dynamic will continue to benefit the United States and other territories.

We will see increasing regulation and increasing political dialogue that touches crypto. The hope is that what comes out of Congress and from the regulators is going to be designed in partnership with the industry and part of a thoughtful dialogue that recognizes the way crypto is different from traditional finance and securities regulation, that some of the traditional tools don’t work in crypto, and that a lot of the same principles such as investor protections apply and need to be recognized, but the details need to look different. The hope is that things will come out of that constructive dialogue as opposed to folks just transferring legacy concepts wholesale or regulating by enforcement.”

Ankitt is the CEO of EasyFi Network, a layer-two DeFi lending protocol for digital assets.

“DeFi’s unprecedented growth and technological innovations in recent years baffled the global financial markets and regulators, who, I believe, are still trying to make sense of the whole situation. This is probably why cryptocurrencies as an asset class were ignored and regulation was completely absent for over a decade. But now, as DeFi is slowly making its way toward the mainstream, conversations around regulation are emerging. Coinbase’s recent tiff with the SEC is a clear sign that regulators are finally considering DeFi.

The Indian government is also expected to be working on a cryptocurrency bill to regulate the use of digital assets within the country. Given that India has the highest number of crypto users, this bill could be crucial for the crypto market. A lot of other countries could also clarify their stance on cryptocurrencies come 2022. The brighter side of all this is that official recognition from world governments could increase users’ trust in digital assets.”

Bobby is the founder and CEO of Ballet, a company that provides simple, secure cryptocurrency storage solutions for the global mainstream market.

“The most important development in cryptocurrency regulation this year was El Salvador’s adoption of Bitcoin as legal tender. This fulfilled and exceeded my prediction five years ago, in December 2016, that a small country’s central bank would add Bitcoin to its foreign exchange reserves. Although El Salvador is a small country, the implications of this change will be profound. The Federal Reserve, the IMF and the Bank of England have stated that they are ‘concerned’ about El Salvador’s declaration of financial independence. Their concern is hardly benevolent. It’s based on the fear that if one country flourishes because of Bitcoin, it will trigger a cascading global exodus from the debt-based dollar system.

The United States won’t be following El Salvador’s example of making Bitcoin legal tender, but that’s not an obstacle to Bitcoin’s success. U.S. regulators and tax collectors have correctly decided to treat Bitcoin as an asset akin to gold, not as a currency or security. Fiat currency is backed by debt, and securities are backed by promises of future earnings; Bitcoin is backed by nothing except its proven utility as a permissionless, immutable, inflation-resistant ledger. So, I expect regulators to focus on squeezing more tax revenue out of Bitcoin holders rather than outright prohibition.”

Dave is the CEO of Compute North, a cryptocurrency mining and infrastructure provider.

“The industry demonstrated its strength and ability to organize. With the U.S. legislature’s activity around crypto as part of the infrastructure bill, the industry was able to unite and get the message out: Cryptocurrency and blockchain are here to stay. While proponents are in favor of regulation to bring clarity to the market and encourage adoption, it needs to be thoughtful and encourage innovation, not restrict it. In 2022, we expect to see organizations such as the Digital Chamber of Commerce and the Bitcoin Mining Council, as well as regional groups like the Texas Blockchain Council, become more active in advocating policy and working with leaders of the Congressional Blockchain Caucus to write policies that are practical.”

Hatu is the co-founder and chief strategy officer of DAO Maker, which creates growth technologies and funding frameworks for startups while simultaneously reducing risks for investors.

“2021 has been a stop-start year for crypto and DeFi, as regulatory bodies have not clarified their stance on the industry. This has held back the retail population from getting involved, and this is a huge opportunity cost for the industry. However, with El Salvador adopting Bitcoin as legal tender and more countries embracing crypto, the future looks brighter.

In 2021, yes, there have been multiple deliberations at various levels regarding crypto and its regulatory status. Governments and regulatory authorities across the globe have expressed reservations against the mainstreaming of crypto. However, they also realize the industry is maturing and currently is even too big to have a blanket ban imposed.

I believe blockchain technology must be nowhere near the regulatory scheme of things, as the tech and its applications supersede the need for oversight. They bring much-needed facets like transparency and decentralization to the forefront. Regulating blockchain technology will only adversely impact our evolution as a society.

Apart from this, in 2022, I expect more acceptance on the regulatory front as crypto aims to revolutionize the financial system across the globe with DeFi. Crypto forensics is on the rise, and I expect it to be adopted by governments to safeguard their citizens.

Regulations are necessary for crypto in 2022, but restrictions are not.”

Jason is the head regulatory counsel and global chief compliance officer at Fireblocks, a digital asset custody, transfer and settlement platform.

“The year 2022 will be tumultuous, with regulators sending confusing signals around the world and a slew of high-profile enforcement actions, particularly in the United States. As we go from the current phase of trying to fit cryptocurrencies into existing asset categories to the future phase of adopting regulatory frameworks that treat digital assets as digital assets, we will see a growing agreement around cryptocurrency regulation.

In terms of regulation, Europe will take the lead, followed by the United States. While the specific outlines of future regulatory frameworks are unknown, there are grounds to assume that the industry’s biggest fears — such as outlawing DeFi and/or unhosted wallets — will not be realized. Institutional adoption will be fueled by regulatory clarity, or even signals of future clarity.”

Lisa is an Elliott Wave specialist trader with 20-plus years of experience in traditional stocks and commodities, now exclusively trading cryptocurrency. She runs and co-owns Getting Started In Crypto, Thousand To Millions and The Moon Mag with Josh Taylor.

“Most exchanges I trade on have asked me to complete KYC to stay trading on their platforms. A few exchanges took this too far by cutting accounts down to one per person, which, in reality, was crazy. With traditional banking, you can have numerous accounts with one bank, so in my opinion, a few bridges need to be crossed to meet in the middle. AML can still be tightened, but we have a long way to go. And as with traditional cash, there will always be ways around this. Blockchain does tighten the ability to follow the money trail, but there are new ways popping up daily to hide these trails.”

Nick is the head of compliance and regulatory affairs at CoinShares UK, a digital asset management firm that provides financial products and services for professional investors.

“I am expecting a trifurcation of approaches from regulators in 2022. Firstly, there will be the builders producing bespoke regulations for digital assets. Secondly, panicked by financial stability concerns, a subset of regulators will feel immediate action is required! Their default approach will be to simply right-click and copy across banking regulations. Thirdly, there will be a handful of regulators looking to impose significant restrictions on or outright ban digital assets.

My hope is that 2022 will belong to the builders and be seen as the year that international regulatory frameworks for digital assets truly commenced — future-looking frameworks that could support a cross-border approach to the technological, legal, regulatory and supervisory challenges.

In 2022, I am looking at two particular developments:

• The Markets in Crypto-Assets regulations, where negotiations may be finalized during Q2 2022, with MiCA commencing in 2024. By being the first mover, MiCA is likely to set the baseline for assessing future national regulations.
• The speed of implementation of the Financial Stability Board’s stablecoin recommendations and standards into national laws.

While any regulations are unlikely to be absolutely perfect upon their first implementation, they will mark significant steps forward in the building of digital asset regulation.”

Paolo is the chief technology officer of Bitfinex, a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers.

“Regulators will continue to look at how to put in place appropriate rules and regulations for blockchain-based technologies, and I would encourage the industry to proactively work with regulators to help them achieve this aim.”

Roger is an early Bitcoin adopter and investor. He is the executive chairman of Bitcoin.com, a site featuring cryptocurrency news in addition to an exchange and wallet service. He is also one of the five original founders of the Bitcoin Foundation.

“I look forward to the day government regulators have to find honest work in the private sector and their salaries are no longer extracted from others with threats of violence.”

Simon is the crypto analyst at eToro, the world’s leading social trading platform, which offers both investing in stocks and cryptocurrencies.

“EToro fully supports regulatory measures designed to protect and educate investors and end-users. We hope that any guidelines put in place will balance the need to protect retail investors with a desire to support their participation in the crypto markets. We hope that increased regulation will help to facilitate greater use of a technology that can not only deliver real benefits to the financial services sector but also facilitate greater financial inclusion globally.”

Yat is the co-founder and executive chairman of Animoca Brands, which delivers digital property rights to the world’s gamers and internet users, thereby creating a new asset class, play-to-earn economies and a more equitable digital framework contributing to the building of the open Metaverse.

“Regulation will start to become more defined in 2022, although how, exactly, remains to be seen. 2021’s milestone was probably the substantial growth in public awareness of blockchain — Collins Dictionary even declared ‘NFT’ the word of the year.”