Crypto: What to expect as world leaders meet in Davos

Monday, January 16, 2023 5:17 p.m.

World leaders, regulators and executives are due to meet in Davos this week

The future of global crypto regulation is set to fall into the spotlight at Davos this week as regulators and policymakers scramble to shore up the industry in the wake of FTX’s collapse last year.

The FTX failure, founded by disgraced former billionaire Sam Bankman-Fried, has lit a fire under pressure from rules tailor-made for the market, after clients were left with billions of dollars in their pockets and its management team was accused of defrauding investors.

A host of crypto chiefs are now set to take the stage for the World Economic Forum in Davos to debate the future of crypto rules, including the blockchain boss and crypto company Ripple, Brad Garlinghouse, who will appear alongside regulators including Dutch central bank chief Klaas Knot and EU financial stability commissioner Mairead McGuinness.

Jeremy Allaire, the leader and co-founder of Circle – best known as the transmitter of the USDC stablecoin – will also debate the future of tokenization alongside a Finnish government official and other crypto bosses.

But what can we expect from the debate?

KPMG regulatory analysts said AM City today, discussions will likely focus on how to develop rules for trading crypto assets and integrating blockchain technology into mainstream financial services.

“Many [attendees] discuss whether, and how, trading and investing in crypto assets should be regulated. Some participants will be looking for the crypto-asset industry to comply with a set of regulations very similar to that of the existing traditional financial industry,” said Kate Dawson, head of the capital markets sector at the Regulatory Insight Center of KPMG UK. AM City

“Others will say that crypto is different and that issues with certain centralized entities should not taint the potential offered by self-executing decentralized finance (DeFi) applications which will likely require a different form of regulation.

She added that the use of blockchain technology by traditional financial players was also likely to be high on the agenda.

“Davos attendees will discuss the use of blockchain technology. For example, how existing financial instruments and other real-world assets can be represented and traded on blockchain and how this could bring efficiencies and new investment opportunities,” she said.

Regulatory push

Davos comes after a push by regulators to craft rules over the past 12 months, with European lawmakers announcing crypto-asset markets (MiCA) rules that aim to establish “harmonised rules for crypto-assets at EU level”.

UK lawmakers have also sought to intervene in the sector with amendments to the Financial Services and Markets Bill this will bring the sector into the remit of regulators, although City Minister Andrew Griffith told a parliamentary session last week that the rules would not be introduced this year.

Crypto chiefs and lawyers said AM City Today, next week’s debate must lead to action by regulators to help protect investors from future crises while giving companies the freedom to innovate.

The hope is that Davos can be a forum to develop practical work on crypto regulation,” Charles Kerrigan, a crypto and digital assets partner at law firm CMS told City AM. “It would involve regulating the international financial system, developing policy for DeFI and policing the dark web – all at the same time. It’s a big challenge.

“Nuanced” debate

Ahead of Ripple chief Brad Garlinghouse’s appearance, the company’s EMEA policy chief, Andrew Whitworth, told City AM that he expects discussion of the sector to be “nuanced” throughout. week long.

“There is a need for strong regulation – which most jurisdictions recognize and work towards. It doesn’t mean starting from scratch,” he said. AM City

“There are many traditional financial regulations that make sense for the regulation of crypto-assets. Global coordination will also be extremely important to ensure that there is no gap between jurisdictions around the world – something that can be fostered by events like the WEF annual meeting.

Ripple, which expanded its presence in Europe late last year, warned MPs in November that “one size fits all” regulation would not protect investors.

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