The blockchain world has evolved significantly over the years, creating the need to develop specific rules and regulations for its intended use, thus becoming one of the most discussed issues.
We interviewed Ronnie Studer, a compliance consultant in Switzerland and Liechtenstein, who shared his vision on these issues with us.
Why is regulation so important for the crypto asset industry to develop?
Institutional investors, which are significant for an asset class to grow because institutional investors do manage a large part of the world’s assets, are themselves often regulated and therefore restricted in the selection of assets in which they can invest. They are usually not allowed to invest in unregulated assets. That is why regulation is so important for the crypto asset industry.
Consequently, institutional investors’ exposure to crypto assets should be able to reach new dimensions with the implementation of MiCAR (Markets in Crypto Asset Regulation) in Europe and it is expected that this will boost the adoption of crypto assets enormously.
After the issue of the new EU decrees regarding the regulation of crypto assets, do you think there are still large regulatory gaps? Which ones?
The MiCAR is the first Europe-wide regulation in the field of the crypto assets. However, NFTs as an important example, will – with a few exceptions – basically not become regulated yet with MiCAR. The competent European authorities have already scheduled the examination of further need for regulation for the coming years.
It is often said that the crypto assets industry is currently at about the same stage of development as the internet was in 1995. Although mass adoption of crypto assets will very likely reach new levels in the next few years, it is still largely unclear which aspects will prevail and which will disappear again. Accordingly, crypto asset regulation will also have to be constantly adapted and improved over the next few years.
An issue related to crypto assets is the environmental impact because there is a large consumption of energy. How do you think it could be overcome?
I think the media coverage regarding the energy consumption of bitcoin mining is not very objective. Thanks to the proof-of-work consensus mechanism – which is the cause for the energy consumption – the Bitcoin blockchain is the most secure network in the world.
Nevertheless, MiCAR includes specific environmental safeguards. For example, crypto issuers and exchanges should disclose the climate and environmental impacts of the consensus mechanisms used to issue crypto. Crypto asset service providers are to make publicly available on their website information on the environmental and climate impacts of the individual crypto assets for which they provide services. Within 36 months of the entry into force of MiCAR, the European Commission is to submit a report on the environmental impact of crypto assets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including proof-of-work.