In response to a recent consultation by the UK HM Treasury on the regulation of crypto-assets, Binance has stated that a regulatory framework for crypto should prioritize consumer protection, market integrity, and financial stability. The exchange believes that regulators need to take a balanced approach to regulating the crypto industry to ensure that it can continue to grow and innovate in a competitive environment. Binance has warned that disproportionate regulation can cause consumers to turn to markets and operators that are not bound by these rules, potentially leading to financial stability issues.
Treatment of Crypto-assets
Binance agrees that the financial services activity of crypto-assets should be defined and regulated properly. However, the regulatory regime needs to ensure that it does not impact the underlying non-financial activity of a crypto-asset. Crypto-assets that carry similar risks as other traditional financial assets should be treated the same under the regime. Regulators should take into account the fact that new technology changes the balance of risks associated with clearing, settlement, auditability, transparency, and governance. The rules should account for the nuances of different crypto-assets and adapt regulations accordingly to accommodate these assets and their underlying technology.
Disclosure and Due Diligence
Binance supports introducing a proper regulatory framework for admission, and believes that market abuse will decline once these rules come into effect and there is greater surveillance of the markets. The exchange has called for pragmatic rules around disclosures for crypto-assets to ensure consumers have access to the right information. Exchanges should be responsible for the listing and delisting process for new cryptocurrencies and performing the necessary due diligence on issuers. As such, exchanges will also be held responsible for any violations or lapses.
DeFi and Future Developments
Binance has warned that the Treasury needs to carefully and clearly define DeFi in the regulatory regime as its future development is uncertain. DeFi affects markets differently from traditional financial services and carries its own unique risks and advantages. Binance added that DeFi would continue to evolve rapidly and disrupt markets in new ways, which should be considered properly when drafting legislation and policies for the industry.