Swiss and Hong Kong regulation: the future of DeFi
Date: 2024-07-03 Author: Gabriel Deangelo Categories: IN WORLD
Decentralized financial (DeFi) technologies have entered a new era, presenting a challenge to traditional financial regulators around the world. However, Switzerland and Hong Kong stand out for their proactive approach to regulating cryptocurrencies and DeFi, making them leaders in this revolution.
Complexities of DeFi Regulation
Regulating public protocols, which are characterized by decentralization and complex structures, poses a huge challenge for global regulators. Many consultation documents and recommendations from international organizations such as IOSCO do not pay enough attention to the specifics of DeFi.
The main criticism is that traditional regulators do not fully understand the concept of decentralization. This makes it difficult to develop adequate legal frameworks and policies that take into account emergent behavior and substitutability of actors in DeFi projects.
Switzerland and Hong Kong stand out as prominent examples of countries that are actively developing a favorable regulatory environment for cryptocurrencies and DeFi. Their approach is based on a balanced approach to stimulating innovation and ensuring consumer protection.
Switzerland: An innovative approach to regulation
Switzerland is becoming a magnet for DeFi projects due to its flexible regulation and support for innovation. Unlike the European MiCA regulation, which offers rigid rules to protect consumers, the Swiss approach focuses on principles and flexibility, which attracts a wide range of projects not limited to payment services.
Switzerland is also actively developing an ecosystem, such as the Crypto Valley in Zug, which provides access to capital and creates conditions for experimentation and growth of innovative projects.
Hong Kong: A dynamic environment for crypto innovation
Hong Kong is implementing a new Virtual Asset Service Provider (VASP) regime, providing structured and dynamic regulation that supports crypto innovation and protects customer interests. This includes VASP licensing, which ensures strict liquidity and cybersecurity standards, promoting a balanced approach to regulation.
Allowing retail trading of cryptocurrencies makes Hong Kong an attractive destination for investors, while the development of dedicated regulation for DeFi is under active discussion.
Challenges for other countries
Other countries, including the US, Japan and South Korea, are having difficulty integrating cryptocurrencies into traditional financial systems due to regulatory uncertainty. The need for transparency and clarity in legislation is becoming a key factor for progress in this area.
In order to develop DeFi, countries must take lessons from the example of Switzerland and Hong Kong by developing their own innovative approaches to regulating cryptocurrencies. This includes taking into account the specifics of DeFi and striking a balance between sector growth and investor protection.
Switzerland and Hong Kong continue to set the standard for cryptocurrency and DeFi regulation, providing examples of progressive approaches to creating a supportive regulatory environment. They demonstrate how countries can support digital asset innovation while maintaining stability and protecting the interests of market participants.
