There have been numerous discussions in recent months about establishing international laws for the cryptocurrency sector. However, following the bloodbath of crypto and the growing number of bankruptcy cases of crypto companies, the need for robust crypto regulations has been voiced by many — including Binance’s CEO Changpeng “CZ” Zhao.
Binance CEO On Crypto Regulations
Speaking on the recently released 5-point crypto regulation scheme by the International Monetary Fund (IMF), CZ claims them to be highly beneficial and “good” for crypto & its related businesses. According to CZ, the most effective method of user protection is risk-based regulation that is implemented on a worldwide scale. And, while talking about the potential threats of crypto facing outright bans in certain jurisdictions, he was quoted as saying:
Outright bans will just lead to users operating in the shadows, at their own risk, and without any safety net.
As highlighted by the exchange CEO, the IMF first wants crypto asset service providers to be licensed, registered, and authorized. This comprises businesses that offer services such as storage, transfer, exchange, settlement, and custody, and are subject to regulations that are comparable to those that control service providers in the traditional financial sector. It demands that assets belonging to customers be kept in a distinct location from those belonging to the company itself, as well as that the responsible authority is made perfectly clear.
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According to CZ, the cryptocurrency industry wants crypto legislation that is robust, comprehensive, and globally consistent so that it can accommodate its cross-border nature. He further stresses the fact that, in order for a global strategy to be successful, it is necessary for it to evolve along with the shifting landscape of the sector.
Regulating Lending, Stablecoins & More
Second, organizations that perform a variety of tasks inside the cryptosphere should be subject to more regulation. Such businesses should be subject to strict restrictions on transparency so that all dependencies and operations may be properly defined. If there is any conflict of interest, it should be reviewed by the relevant authorities and prohibited, if necessary.
Good approach to crypto regulations by Bo Li & Nobuyasu Sugimoto at @IMFNews.
“Stronger financial regulation & supervision, & developing global standards, can help address many concerns about crypto assets.”
Regulatory clarity is needed ASAP. Thoughts🧵 https://t.co/BBVqxDcq86
— CZ 🔶 Binance (@cz_binance) January 24, 2023
Thirdly, given that an increasing number of investors are looking to stablecoins as a form of value storage, issuers of stablecoins ought to be held to stringent prudential standards. These holdings, if not subject to appropriate scrutiny and regulation, could threaten the stability of the monetary and financial systems. In the case of significant stablecoins, a level of regulation comparable to that which is prevalent in the banking industry might be required.
CZ highlights as a last point of conclusion that user protection and market integrity are better when politicians and regulators broaden the scope of activities that are permitted. This phenomenon has been observed in a great number of different industries, like traditional finance, health care, pharma, the internet, and content, amongst others.
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