Lưu trữ cho từ khóa: European Union

Pháp Lý

Can global regulation keep up with the tokenization boom? | Opinion

Để lại phản hồi

Imagine a world where everyday investors can own a part of underground oil reserves or a share in a skyscraper with the click of a button. This is the promise of tokenizing real-world assets—a technology poised to unlock trillions of dollars in traditionally illiquid markets like real estate, commodities, and infrastructure. However, while this innovation is set to revolutionize global finance, the regulatory frameworks needed to support it are often being outpaced by the rapid developments in this space.

Security tokens, such as those representing RWAs like property, commodities, or oil and gas, have the potential to transform how we invest, but they also come with strict regulations that need to be followed.

The growing market for tokenized assets

According to the Boston Consulting Group and World Economic Forum, the tokenized asset market is expected to reach 16 trillion by 2030. Another report suggested that the market value for tokenized assets could soar up to $10 trillion in a ‘bull case’ scenario or $3.5 trillion in the ‘bear case’ by 2030. This projection covers a wide range of real-world assets, from real estate to commodities like oil and gas, and demonstrates the growing appetite for fractional ownership models that allow everyday investors to participate in markets that were previously the domain of institutional players​.

Yet, for all its promise, the road to tokenizing these assets is paved with regulatory hurdles.

The challenges of fragmented regulations

Specifically, one of the primary challenges facing tokenization today is the fragmented nature of regulatory frameworks across different jurisdictions. While some countries, such as Liechtenstein and Switzerland, have developed clear regulatory structures for security tokens, many other key markets remain ambiguous or lag behind in defining how tokenized assets fit into existing securities laws.

For instance, the European Union’s Markets in Crypto-Assets Regulation, set to roll out fully by 2024, provides some clarity on how certain digital assets, including tokenized securities, should be regulated across the bloc. This kind of regulatory framework is crucial for establishing investor confidence and ensuring that these new financial instruments adhere to established legal norms. However, MiCA’s approach, while promising, is still limited geographically, and global markets remain fragmented​. Moreover, there is ongoing debate within the legal community about the interpretation and implementation of MiCA, particularly regarding its application to tokenized assets, underscoring the complexity of aligning regulatory frameworks with the rapid pace of innovation.

In other regions, regulatory ambiguity is more pronounced. In the United States, the Securities and Exchange Commission has signaled that many tokenized assets fall under its jurisdiction as securities. However, a lack of definitive rulings on specific tokens has left many in legal limbo, unsure of whether they comply with US securities law. This uncertainty poses a significant challenge to global interoperability—an essential feature for the widespread adoption of tokenized assets.

The role of compliance and security

The regulatory uncertainty surrounding security tokens is not just an issue of compliance but also one of security. Blockchain technology promises greater transparency and security, with tokenized assets recorded on an immutable ledger that can be easily audited. However, these benefits hinge on ensuring that the platforms facilitating tokenization are compliant with anti-money laundering and know-your-customer regulations.

A key consideration for tokenization platforms is following financial rules set by local and global authorities. To do this, many platforms use private blockchain systems or permissioned blockchain models to track who is using them and prevent illegal activities like money laundering. However, the lack of standardization across jurisdictions creates significant friction for cross-border transactions, a key value proposition for the tokenization of global assets​.

Additionally, ensuring the security of the blockchain infrastructure and the underlying assets remains a top priority. The potential for hacking, fraud, or mismanagement of tokenized assets could undermine the credibility of this emerging market. For tokenization to gain traction, particularly among institutional investors, robust security measures, transparency and compliance are essential.

Opportunities for innovation in regulatory sandboxes

Despite these challenges, tokenization platforms are already finding success by collaborating with regulators in regulatory sandboxes—controlled environments where they can test innovative financial products. In places like Singapore, the United Kingdom, and Switzerland, regulatory sandboxes have provided a testing ground for blockchain projects, allowing developers to identify compliance issues before full market deployment. 

For instance, Switzerland’s SIX Digital Exchange has successfully issued tokenized bonds in a fully compliant manner, demonstrating how traditional securities can be brought onto the blockchain. In May 2024, SDX issued a CHF 200 million digital bond in collaboration with the World Bank, further showcasing how traditional securities can be brought onto the blockchain while adhering to regulatory standards. ​

In Singapore, the Monetary Authority of Singapore’s regulatory sandbox has enabled projects like BondEvalue, which has tokenized government bonds, to test their platforms under regulatory supervision. In 2023, BondEvalue rebranded as BondbloX and expanded its platform, allowing bonds to be traded in smaller denominations and making bond investments more accessible to retail investors. These examples show that innovation and compliance can work hand-in-hand, laying the foundation for a more secure and accessible market for tokenized assets.

A path forward: Collaboration and global standards

Ultimately, the future of tokenizing real-world assets will depend on global collaboration between regulators, developers, and investors. Security tokens offer a tremendous opportunity to reshape how we view and access traditional assets, but this can only be realized if the regulatory landscape evolves in tandem with technological innovation.

A unified global regulatory framework may be the ideal, but in the short term, clearer guidelines from national regulators and further development of international standards like MiCA are essential. Moreover, establishing interoperability between blockchain platforms could ease cross-border compliance, enabling tokenization to reach its full potential in a decentralized global economy​.

For now, as both opportunities and challenges in tokenizing RWAs come into sharper focus, businesses must tread carefully. The winners in this space will be those who embrace both innovation and compliance, striking the right balance as the market continues to mature.

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

EU markets regulator demands enhanced cybersecurity audits for crypto firms: report

Để lại phản hồi

The EU’s markets watchdog is reportedly set to call for mandatory external audits of crypto companies’ cyber defenses to enhance consumer protection amid rising security breaches.

The European Securities and Markets Authority is said to be gearing up to advocate for mandatory external audits of cyber defenses for crypto businesses as part of its broader effort to enhance consumer protection in the crypto space.

According to a Wednesday report from the Financial Times, which does not cite specific sources, ESMA is considering stricter cyber protection rules and urging European Union lawmakers to amend upcoming regulations to mandate third-party audits assessing the resilience of crypto firms against cyber attacks.

However, the European Commission “has pushed back against the move,” the report reads, adding that the commission is suggesting that ESMA’s proposals may exceed the intended scope of the legislation.

Cybersecurity has become a pressing issue for the crypto industry, with hackers stealing almost $1.4 billion, nearly doubling last year’s figures, per data from TRM Labs. Another blockchain forensic firm Chainalysis reported that the number of hacking incidents in 2024 has seen a modest increase of 2.8% compared to 2023. However, the average value lost per hack has surged by 79.5%, escalating from $5.9 million per incident in 2023 to $10.6 million in 2024, highlighting a growing concern as cybercriminals increasingly focus on centralized exchanges.

Under the upcoming Markets in Crypto-Assets framework, crypto firms will be required to secure licenses from European Union member states starting Dec. 31 and demonstrate robust controls against money laundering and other financial crimes. Some aspects of this regulatory framework have already begun to reshape the industry, with Coinbase recently announcing plans to remove non-compliant stablecoins from its European exchange by year-end.

Concerns about the regulations persist among industry leaders. Paolo Ardoino, CEO of Tether, the largest stablecoin issuer, cautioned that strict cash reserve requirements could create systemic risks for banks. The trend of delisting is not limited to stablecoins, as Kraken recently also announced plans to suspend trading for privacy-focused Monero (XMR) in the European Economic Area, following similar moves by Binance and OKX.

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

Shaping the future of crypto: Regulation and collaboration are the key | Opinion

Để lại phản hồi

The rise of cryptocurrency and blockchain technology has opened new avenues for financial innovation, with digital token payments emerging as a transformative force in this evolution. However, for the crypto space to truly flourish—especially in payments—the regulatory environment must be conducive to growth while safeguarding consumer interests. 

Cryptocurrencies thrive on innovation, but without clear and consistent regulations, this innovation risks being stifled or, at the very worst, descending into chaos. An ideal regulatory environment strikes a balance between protecting consumers and fostering innovation. Regulations should be clear, consistent, and applicable across global jurisdictions to prevent regulatory arbitrage and ensure that businesses can operate confidently within a legal framework.

The importance of balanced regulation has been underscored by recent developments in regions such as the European Union, where the Markets in Crypto-Assets Regulation has set a precedent for global regulatory standards. MiCA’s comprehensive approach is already influencing regulations in the UK and Singapore, where authorities are developing frameworks that emphasize both consumer protection and industry collaboration​.

The digital token payment industry faces significant challenges, including regulatory uncertainty, inadequate infrastructure, and even distrust from some areas of the public. These barriers prevent the widespread adoption of crypto payments and slow the development of the broader web3 ecosystem. Both consumers and businesses are hesitant to fully embrace crypto payments without assurance that their transactions are secure and compliant with local laws.

Barries for financial inclusion

Recent statistics underscore the urgency of addressing these barriers. As of 2024, global cryptocurrency ownership has surged to 562 million, a 34% increase from the previous year​. However, this rapid growth has also highlighted the need for robust fiat-to-crypto on-ramps and other infrastructural developments.

Services such as fiat-to-crypto on-ramps act as a bridge between traditional finance and the digital token space, making it easier for users to obtain access to digital assets. Platforms such as Mercuryo play a crucial role in this ecosystem. The presence of multiple crypto-to-fiat, on-ramp providers is essential to mitigate risks such as technical issues or coverage gaps that could disrupt transactions and lead to deposits being rejected. By leveraging diverse solutions, the ecosystem remains resilient, offering users a seamless experience across different platforms. 

Ultimately, collaboration between the cryptocurrency industry and regulators is vital for developing frameworks that encourage innovation while ensuring security and trust. Recent events, such as the Consensus 2024 conference, have highlighted the growing alignment between institutional investors and regulators in the US, where there is increasing optimism about the future regulatory landscape​.

Crypto payments have the potential to significantly enhance financial inclusion, particularly in Latin America. According to World Bank data, approximately 122 million people in Latin America  (approximately 26% of the population) were still unbanked in 2021. Where access to traditional banking services is limited, digital token payments offer a way to participate in the global economy. This capacity is enhanced by the wide penetration of smartphones and mobile applications in regions such as Latin America, where the smartphone adoption rate is expected to reach 92 percent by 2030, up from approximately 80 percent in 2023, according to Statista. Stablecoins transferred on mobile apps represent a disruptive technology to traditional money transfer services that are laden with expensive fees and charges.

For regulators and stakeholders in the Global North, financial inclusion should be a priority. A more inclusive financial world aligns not only with ethical considerations but also with broader goals of economic development and global stability. By fostering crypto adoption in the Global South, stakeholders in the Global North can drive innovation and economic growth, benefiting the global economy as a whole. This interconnectedness makes it crucial for stakeholders to support regulatory frameworks that promote financial inclusion through crypto payments.

Crypto adoption as a solution

Even in Europe, cryptocurrency adoption is increasingly recognized as a powerful tool for enhancing financial inclusion, particularly in regions and demographics that have been underserved by traditional banking systems. With over 49.2 million cryptocurrency owners in Europe as of 2024, representing a 60.3% increase from the previous year, there is growing evidence that digital currencies are playing a significant role in broadening access to financial services even in the developed world​.

One of the key factors driving this trend is the region’s robust regulatory environment. The EU’s MiCA, which came into effect in 2024, is setting global standards for the crypto industry by providing clear guidelines that enhance market integrity and boost investor confidence. MiCA is expected to serve as a model for other jurisdictions, fostering a secure and inclusive environment for the growth of crypto assets across Europe​.

In addition, the World Economic Forum highlights that the growing digital finance ecosystem in Europe, supported by blockchain technology, is opening up new opportunities for financial inclusion. Digital assets and blockchain technology are enabling more efficient, low-cost financial services, which can be particularly beneficial for Europe’s unbanked or underbanked populations. This is especially relevant in Eastern Europe, where access to traditional banking services has historically been limited​.

Financial inclusion through the adoption

For regulators and stakeholders in Europe, the focus should be on continuing to support regulatory frameworks that promote financial inclusion through the adoption of digital assets. This approach not only aligns with the EU’s broader economic development goals but also positions Europe as a leader in the global push towards a more inclusive financial system.

For the average person, the evolution of digital token payments and the regulatory environment around them might seem abstract. However, the implications could soon impact daily life in meaningful ways.

Imagine being able to send money across the world instantly, with low fees and no concerns about exchange rates or bank delays. As crypto payments become more mainstream and regulatory frameworks mature, these transactions will become safer and more accessible. This shift means more people can enjoy the benefits of digital currencies without the fear of losing their money to scams or technical glitches.

The ongoing efforts to clarify and enhance the regulatory environment, as seen in the EU’s MiCA framework and similar initiatives, are paving the way for broader adoption and integration of crypto into daily life. As these frameworks are implemented, the average user will likely experience a more stable and secure crypto environment​.

In regions with limited access to banking, crypto payments could be transformative, providing a gateway to global financial markets and opportunities that were previously out of reach. As the cryptocurrency industry continues to evolve, the importance of a regulatory environment that encourages innovation while protecting consumers cannot be overstated. Overcoming existing barriers to growth requires collaboration between the industry and regulators, with a focus on building trust and facilitating adoption. Additionally, the potential for digital token payments to drive financial inclusion globally should be a key consideration for stakeholders.

By working together, the cryptocurrency industry and regulators can shape a future where digital token payments are not just a niche innovation but a mainstream financial tool that benefits everyone—especially those looking for a better, more inclusive way to manage their finances.

This article was co-authored by Max Zheng and Pascal Kurzawa.

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

Navigating the Travel Rule in 2024 amid rising fraud and regulatory scrutiny | Opinion

Để lại phản hồi

Cryptocurrencies have seen an exponential rise in adoption over recent years. In late 2023, the number of global cryptocurrency owners reached approximately 580 million — a 34% increase from 432 million at the beginning of the year. 

As more individuals and institutions adopt cryptocurrencies, the ecosystem has inevitably attracted a mix of genuine participants and fraudsters. Recent statistics reveal growing concerns regarding cryptocurrency fraud.

According to the Better Business Bureau (BBB), cryptocurrency fraud is now considered the riskiest type of scam in the US, with about 80% of Americans targeted in crypto scams losing money. The median loss reported was $3,800, although many victims lost substantially more.

The surge in crypto-related fraud has, therefore, prompted regulators worldwide to tighten their grip on the industry. For example, in 2023, the European Union adopted the Markets in Crypto-Assets Regulation (MiCA) regulation, a comprehensive framework designed to regulate the issuance and provision of services related to crypto assets.

The government in Thailand is taking steps to block access to unauthorized crypto platforms to combat fraud and enhance consumer protection. Similarly, the United States has seen increased scrutiny from agencies like the Securities and Exchange Commission, which has been actively investigating and prosecuting crypto fraud cases.

Introducing the Travel Rule

To address the risks associated with the anonymity and pseudo-anonymity of cryptocurrency transactions, the Financial Action Task Force (FATF) introduced the Travel Rule. Although the Travel Rule is controversial, as not all players know how to comply with it smoothly, it helps the market become more transparent and reduces fraud and money laundering. Businesses just need to choose the right way to deal with their challenges successfully. 

There is an option to handle Travel Rule compliance in-house, but it is technologically complex and expensive, typically affordable only for large crypto exchanges. Another option is to outsource it to external compliance providers. Let’s dive into the Travel Rule challenges and discuss whether a compliance provider is a good solution.

Transparency and compliance challenges

The FAFT Travel Rule mandates that virtual asset service providers (VASPs), or crypto asset service providers (CASPs), such as exchanges and custodians, share specific information about the sender and recipient in cryptocurrency transactions exceeding a certain threshold. The counterparties need to share and prove this information before the transaction hits the blockchain. The threshold is usually 1,000 US dollars or euros, but it may differ depending on the jurisdiction. For example, in Lithuania, the regulation does not specify the threshold; therefore, it can be assumed that the rule is applied to all transactions regardless of the amount. In Mauritius, there’s no de minimis threshold.

While the Travel Rule aims to enhance transparency and deter illicit activities, its implementation has presented several challenges for industry players. 

  • Sunrise issue: Different jurisdictions adopt the Travel Rule at different times, creating inconsistencies in compliance requirements across borders.
  • Data privacy concerns: Sharing detailed transaction information raises concerns about user privacy and data protection.
  • Technological hurdles: Various countries are encountering difficulties related to technology requirements and regulatory harmonization. As the FATF states in their 2023 report, “for many jurisdictions, the source of the challenges is <…>, a lack of resources, technical expertise and capacity, as well as potentially a lack of recognition of urgency.”
  • Interoperability: Ensuring that different VASPs’ systems can communicate effectively to share the required information is a significant technical challenge.

Healthier industry

Despite these challenges, the Travel Rule is not an adversarial measure. Instead, it represents a necessary step towards creating a more secure and transparent cryptocurrency ecosystem. By compelling VASPs to share critical transaction information, regulators can more effectively monitor and prevent money laundering, terrorist financing, and other illicit activities.

Moreover, compliance with the Travel Rule can enhance the credibility of the cryptocurrency industry. By adhering to regulatory standards, VASPs can build trust with users, investors, and regulatory bodies, fostering a more stable and legitimate market environment.

What’s new in the world of crypto regulations?

The European Union’s MiCA regulation exemplifies the move towards comprehensive regulatory frameworks for cryptocurrencies. MiCA aims to provide legal certainty for crypto assets that are not covered by existing financial services legislation, establish uniform rules for crypto-asset service providers and issuers at the EU level, and ensure high standards of consumer protection and market integrity.

MiCA addresses several key areas, including the issuance of stablecoins, the regulation of crypto-asset service providers, and the prevention of market abuse. By providing a clear regulatory structure, MiCA aims to mitigate the risks associated with cryptocurrencies while fostering innovation and ensuring that Europe remains an attractive destination for crypto businesses.

In South Africa, the Financial Intelligence Centre recently issued a draft directive requiring accountable institutions that provide crypto asset services to adhere to and implement the Financial Action Task Force’s recommendations. In Singapore, the Monetary Authority of Singapore last year announced a series of measures aimed at regulating digital payment token (DPT) service providers more stringently. In Thailand, regulators, inspired by the examples of India and the Philippines, are blocking unlicensed crypto exchanges “to solve online crimes.”

Moreover, according to the FATF’s April 2024 assessment, 65 of 94 jurisdictions have passed legislation implementing the Travel Rule, while 15 reported that they are in the process, which shows improvement since 2023. Although the number of jurisdictions that have implemented the rule is not yet impressive, we see a stable trend indicating that more countries will adopt it in the near future.

Assisting in Travel Rule compliance 

For crypto-asset service providers, navigating the complex landscape of regulations like the Travel Rule and MiCA necessitates the selection of robust compliance solutions. Partnering with a provider that supports a broad network of VASPs is crucial for seamless compliance. Companies like Sumsub, which has over 1,700 VASPs in the ecosystem and 10,000 supported assets, offer comprehensive compliance solutions that can help service providers meet regulatory requirements efficiently.

Moreover, a reliable provider should offer tools for identity verification, transaction monitoring, and regulatory reporting, ensuring that VASPs can comply with the Travel Rule and other regulatory mandates without compromising on user experience or operational efficiency. A reliable anti-fraud and Travel Rule solution should also handle the “sunrise” and other issues related to the Travel Rule implementation in different jurisdictions.

The rapid growth of the cryptocurrency industry has brought with it increased scrutiny from regulators seeking to protect users and prevent financial crimes. The Travel Rule, while challenging to implement, is a crucial step towards greater transparency and security in the crypto space. Regulations like MiCA further exemplify the global trend towards comprehensive crypto regulation. For VASPs, leveraging the right compliance partners is essential to navigate this evolving landscape successfully and contribute to a healthier, more transparent cryptocurrency ecosystem.

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

Thiel-backed One Trading secures license from Dutch regulator for perpetual futures

Để lại phản hồi

Crypto exchange One Trading has been granted an Organized Trading Facility license by the Dutch financial regulator to bring crypto futures onshore in the European Union.

One Trading, a crypto trading platform incubated by Bitpanda, has secured a license from the Dutch Financial Markets Authority, becoming the only perpetual futures trading venue in the European Union, the company said in a Monday press release.

The so-called Organized Trading Facility license positions the Netherlands-headquartered crypto exchange as the first cash-settled perpetuals platform in Europe, including the U.K., the press release reads. One Trading founder Joshua Barraclough says the license is part of the company’s mission to enable all customer types “to go long or short on any asset, use any asset as collateral, settle everything instantly, and perpetually roll contracts.”

“With this license, we are well positioned to introduce new regulated products and offer institutional-grade solutions to all customer types starting with BTC and ETH products where no onshore E.U. regulated venue currently exists.”

Joshua Barraclough

One Trading emerged as an independent entity from Bitpanda Pro, a unit of the Austrian exchange catering to institutional crypto traders. In 2023, the exchange raised €30 million in a Series A round led by Peter Thiel’s Valar Venture with participation from other investors, including MiddleGame Ventures, Speedinvest, Keyrock, and Wintermute Ventures. In addition to the OTF license, One Trading holds a virtual asset service provider license from the Dutch regulator.

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

What’s missing from MiCA’s comprehensive crypto manifesto? | Opinion

Để lại phản hồi

In April 2023, the European Union rolled out a comprehensive piece of legislation to finally reign in the crypto and blockchain industry. The Markets in Crypto-Assets Regulation (MiCA) is a bold and pioneering initiative aimed at applying a unified regulatory framework to the industry and establishing clearer laws for crypto asset service providers and token issuers.

Viewed as a milestone in the crypto regulatory landscape, MiCA recently approved a provision to address stablecoins, which have long been seen as complicated assets to regulate due to their unclear classification and common use in cross-border transactions. Following the approved provision, Circle, the issuer of the USDC stablecoin, became the first stablecoin issuer to formally be recognized as compliant under the EU’s crypto legislation. 

Circle’s newly granted status has led many to ponder MiCA’s implications on the $160 billion aggregate stablecoin supply as well as the broader crypto and web3 economy.

While the idea behind the most thorough attempt to regulate crypto is to protect investors by placing liability on the organizations issuing digital assets and providing services, onboarding new users, and fostering innovation while ensuring competition, it will take some time to gauge its full impact. 

The idea for MiCA was born out of a wave of ICOs in 2017 and 2018 that raised concerns about scams, frauds, and other manipulations that could upend financial stability within the European bloc. After years of research, due diligence, and good intentions, MiCA deserves a lot of credit for its approach to balancing regulation with innovation—a clear recognition of crypto and blockchain’s technological and business advantages. Furthermore, MiCA bolsters stability, investor trust, transparency, and oversight with its comprehensive legal framework.

But MiCA has some blind spots. 

While the regulatory framework acknowledges the importance of bridging crypto asset service providers and traditional finance, it doesn’t offer much on how to make that a reality. Indeed, the growing overlap of tradfi and digital assets bodes well for boosting adoption and has likely contributed to a maturing crypto ecosystem, but MiCA places limitations on stablecoins that seem counterproductive. 

Non-Euro-pegged stablecoins are not allowed to be used in transactions for goods and services and face daily limitations on the number of transactions (up to one million) and their total value (€200 million). This essentially puts usage limits on USDC and USDT, the two leading stablecoins, even if they are certified as MiCA compliant.

And since stablecoins are so crucial for facilitating transactions, enabling defi, and boosting nearly every aspect of the industry, these curbs could potentially impact liquidity and disrupt innovation and defi activity, undermining a core pillar of MiCA’s mission. 

Moreover, these limitations are compounded because MiCA doesn’t emphasize interoperability, one of the industry’s most pressing needs, nor does it seem interested in encouraging crypto-fiat payment solutions—key avenues for bolstering liquidity and sparking innovation that stretch beyond crypto.

While it’s too early to understand how MiCA’s stablecoin approach will play out, Europe’s regulators can do more to address interoperability and cross-ecosystem payments to future-proof its economy and avoid market fragmentation. This can be improved by working with EU organizations like Horizon Europe and the European Innovation Council to find innovative startups that address areas MiCA has neglected.

For example, Kima, an asset-agnostic, peer-to-peer money transfer and payment protocol, provides an interoperable settlement layer for interchain and crypto-fiat transactions. By removing the barriers between blockchains and between traditional financial instruments and blockchain networks or decentralized apps, Kima’s protocol enables developers to access greater amounts of liquidity. This also benefits non-crypto native users and financial institutions by enabling funds to flow in all directions. 

MiCA will undoubtedly serve as the standard bearer for crypto regulation, guiding other nations and economic blocs on how to regulate a burgeoning, complex, and volatile market that offers a lot of promise. It’s important that in its just desire to protect its monetary interests, it doesn’t overlook other areas that impact the industry’s ability to grow. 

The EU has shown a willingness to adapt and study trends as they emerge, and in the fast-paced crypto world, this is needed to ensure appropriate measures are taken to protect investors as well as the integrity of the entire industry. 

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News

Pháp Lý

Crypto and the Kafkaesque | Opinion

Để lại phản hồi

In this week’s #hearsay column, Dorian Batycka marks the 100-year anniversary of the Bohemian writer Franz Kafka’s death on June 3, 1924, taking you on a literary journey through the most “Kafkaesque” moments in all of crypto.

Imagine a world where you are ensnared in a web of bewildering and illogical situations, powerless against faceless bureaucracies that wield omnipotent and indifferent authority. This nightmarish distortion of reality is the essence of the term “Kafkaesque,” derived from the German-speaking Bohemian writer Franz Kafka. Through seminal works like The Trial (1914), The Castle (1922), and The Metamorphosis (1912), Kafka’s narratives have become foundational texts in modern literature, depicting protagonists trapped in existential anxiety and futility. Strikingly, these Kafkaesque themes find resonance in the chaotic and often dystopian world of cryptocurrency, where the promise of financial liberation is fortuitously often overshadowed by paradox and disillusionment.

Wojak, crypto, and the Kafkaesque

Franz Kafka wrote A Hunger Artist in 1922 and published it in 1924, the same year he passed away from a brutal condition that made him die of starvation due to complications from laryngeal tuberculosis. Kafka’s final story centers on a professional hunger artist who fasts for extended periods as a form of art, attracting audiences fascinated by his self-imposed suffering. Despite such dedication, the hunger artist becomes increasingly marginalized and forgotten as public interest wanes, leading to his eventual demise.

It’s a situation that mirrors the experience of crypto’s most titular figure: the wojak. The proverbial McDonald’s night manager whose incessant pursuit of quick wealth becomes an unhealthy obsession, akin to gambling. With wojak consumed by the volatile and often isolating and crippling failure of crypto trading and investment, he finds himself constantly in profound loss and disillusionment. What hunger was to Kafka’s artist, cheap packets of ramen noodles are to the toiling wage cuck hoping to get rich on a Solana meme coin. What could be more utterly Kafkaesque?

Satoshi Nakamoto as Joseph K.

Self-revelations aside, let’s shift gears to conjure the term “Kafkaesque” not with the wojak loser, but with the OG of crypto himself, Satoshi Nakamoto. In Kafka’s The Castle (1922), the protagonist K. struggles against an opaque and inaccessible bureaucratic authority; similar to Satoshi himself, Kafka speculates on the often duplicitous nature of governments, remarking: “You mustn’t believe everything that officials say,” adding, “I have my rights, and I shall get them.”

In The Trial, Kafka describes the arrest of the main character. “Someone must have been telling lies about Joseph K., he knew he had done nothing wrong but, one morning, he was arrested.” Again, one is here confronted with the brutal reality of a system bearing consequences on someone born to change it, i.e., Satoshi, or even CZ, for that matter. The lack of current regulatory clarity in crypto, from legislation being proposed in the EU, MiCA, has only created widespread confusion on the continent, through to the befuddling situation around legislation in the United States, where things have not fared much better, with both Joe Biden and Donald Trump also recently U-turning on the crypto bandwagon.

KafkaCrypto: towards a new theory of technology and doomer

Lastly, think about the idea of paradox itself, perhaps the pinnacle of all Kafkaesque situations. It’s based on a supposition that two seemingly different realities can be true at once. While cryptocurrency was designed to circumvent traditional financial systems and their regulatory frameworks, as the market has grown, so too has the demand for regulation to prevent fraud, protect consumers, and ensure market stability, often under the guise of anti-money laundering (AML) initiatives that exist in stark contrast to privacy-focused tools like Monero or Tornado Cash.

Yet, on top of this reality, a paradoxical situation has emerged: where the decentralized crypto world ethos has increasingly brushed up against the centralized systems that crypto purported to disrupt. Look no further than China’s or Russia’s recently stated that they would embrace central bank digital currencies (CBDCs). Together with omnipresent state surveillance and control, the paradoxical reality of having crypto in the hands of a tyrannical government, while at the same time allowing for encrypted financial freedom, is indeed peak Kafkaesque.

“It’s only because of their stupidity that they’re able to be so sure of themselves,” Kafka concluded in The Trial, perhaps his most seminal work on the illusory nature of justice. It is perhaps in some ways related to the notion of effective altruism prevalent in modern echelons of crypto theory, and famously core to the convinced fraudster Sam Bankman Fried’s worldview, i.e., scamming for the greater good theory of crypto capitalism.

At its heart, cryptocurrency advocates for financial autonomy and individual control over one’s economic identity. Yet, as we mark the centennial since Kafka’s death, it’s clear that the crypto industry has taken on many Kafkaesque qualities. From the mysterious figure of Satoshi Nakamoto to the lowly wojak, through to the unsettling reality of crypto scams and the paradox of decentralization and regulation, the illusory sense of autonomy stands as a remarkable bellweather to how deeply problematic crypto has and continues to be. As Kafka once wrote:

“Every revolution evaporates and leaves behind only the slime of a new bureaucracy.”

Tổng hợp và chỉnh sửa: ThS Phạm Mạnh Cường
Theo Crypto News