There is a lot going on in terms of new legislation, and all at once; from the Crypto Travel Rule, to Markets in Crypto-Assets Regulations (MiCAR), and Digital Operational Resilience Act (DORA), just to name a few key pieces. Today, we at bitFlyer Europe are involved in a number of consultations on the Regulatory Technical Standards for these legislative initiatives at both European and national level with industry associations here in Luxembourg. 

It may sound a little out of character, but bitFlyer welcomes regulations. We believe proportionate regulation can be a strategic partner to our business. For over a decade, the legal position for the provision of crypto-currencies was mired in inconsistent regulatory approaches, changing licensing requirements and unclear expectations from regulators. As a result, crypto-asset service providers were involved in inadvertent breaches of local regulations, were penalised for conducting business that was initially considered to be outside the regulatory perimeter and some exited the market.

We do strive for a level playing field and therefore for alignment, harmonisation, and uniformity of regulatory standards across financial sectors. We emphasise this need in our contributions to the consultations by the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) on the Regulatory Technical Standards further to MiCAR. The inherent risks of a crypto-currency platform, or a Crypto-Asset Service Provider (CASP) in MiCAR-terms, are different, but not necessarily higher, compared to the inherent risks of a payment institution or investment firm. Hence, the internal controls of a CASP will look different as well. The mitigated outcome, the result, the standard we should all be held against should be the same. Especially when it comes to product agnostic elements as for example complaints management. The complaints management of a MICAR CASP should meet the same standard, no more or less strict, as the complaints handling of a PSD payment institution and a MiFIR investment firm. 

bitFlyer Europe is licensed as a payment institution and registered as a Virtual Asset Service Provider (the first in Luxembourg) and so we have  two EU regulatory regimes under our one roof. Ideally, these two EU regulatory regimes should be as aligned and harmonised as possible. But we’re not advocating for harmonisation just for ourselves, but also for our customers. All our customers have an account with a bank, or a payment institution, they will have insurance policies, and many have a diversified investment portfolio with traditional products managed by investment firms. Many financial customers feel they are already battling a complex and often incomprehensible environment, filled with CRS tax residency statements, customer risk profiles, and what more. The more aligned, harmonised and uniform regulations are, the better for all.

Being part of the global bitFlyer group of companies, with our parent company based in Japan and another affiliate company operating in the USA (holding a BitLicense issued by the New York Department for Financial Services since 2017), the higher goal is a worldwide alignment of regulatory standards. 

It seems like everybody has an opinion about crypto. Only a few have actual experience with crypto. And so, it is on us. We have the responsibility to provide meaningful, experience-based input into the legislative process and regarding the proposed regulatory standards. We have an obligation, towards our customers, colleagues, and investors, to educate legislators and regulators about the features of Blockchain/Distributed Ledger Technology and the demand driven use cases of crypto-currencies in our industry. We have to be part of the process to bring about a proportionate set of regulations for our industry. 

Key compliance and regulatory elements are not just about legislative initiatives and their harmonisation. It is also about us, the industry. Traditional finance has lost its exclusive rights on the news headlines when it comes to mistreating their customers. The recent calamities of crypto-currency platforms are often enthusiastically covered by the media. 

Now, the crypto-currency platforms must “walk the talk” to increase the overall maturity of the industry. For example, consistently implement and execute the Crypto Travel Rule with discipline. The Blockchain/Distributed Ledger Technology brings many advantages; cost efficiency, cross-border capabilities, immutability, speed, transparency, etc. We must ensure that pseudonymity can remain an advantage to the user and is not turned into an un(der) managed risk. Ubiquity is a challenge in the execution of the Crypto Travel Rule, there  are a number of different tools about, but also here: alignment, harmonisation and uniformity from the industry partners please!