US-UK Financial Regulatory Working Group Emphasizes Effective Regulation of Crypto Assets

The U.S. and U.K. Financial Regulatory Working Group (FRWG) convened in London for its ninth official meeting on January 31, underscoring the importance of robust regulation and oversight of cryptocurrency assets and markets. In a statement issued on February 5, the group highlighted discussions on crypto regulation and central bank digital currencies (CBDCs). The United States Securities and Exchange Commission (SEC) has enacted stringent regulations affecting liquidity providers, extending beyond federal securities laws to impact cryptocurrency and decentralized finance (DeFi). Approved with a 3-2 majority vote during a meeting on Tuesday, the long-awaited 247-page rule imposes obligations on individuals dealing with crypto assets classified as securities or government securities, excluding those with assets under $50 million.

Reacting to the SEC’s decision, industry voices have raised concerns about the impact of the rules on innovation and the DeFi ecosystem. The DeFi Education Fund criticized the move as “misguided and unworkable,” highlighting the practical difficulties faced by DeFi entities in complying with the regulations. Similarly, the Chamber of Digital Commerce criticized the SEC for its perceived hostility towards the digital asset industry, suggesting that the regulator overlooked industry perspectives in formulating the rules. SEC Chair Gary Gensler defended the regulatory changes, emphasizing investor protection and fair competition. While the $50 million exception aims to alleviate regulatory burden on smaller entities, questions remain regarding the treatment of automated market makers (AMMs) under the rules. Republican Commissioner Hester Peirce raised concerns about the inclusion of AMMs, highlighting transparency and market participant understanding as key considerations. The final rules will take effect 60 days after publication in the Federal Register, with a one-year compliance period. As the crypto industry prepares for heightened regulatory scrutiny, the full implications of the SEC rules on decentralized finance remain uncertain, raising questions about the balance between regulatory oversight and fostering innovation in the digital asset space. (Source: