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The recent developments of charges filed by the United States Securities Exchange Commission (SEC) against Binance, one of the world’s largest cryptocurrency exchanges, and its founder, Changpeng Zhao, for illegal activities have put commoners’ and businesses’ thinking about the legitimacy and security that was initially promised by cryptocurrencies, non-fungible tokens (NFT) and virtual asset service providers (VASP).

Cryptocurrency is a modern-day juggernaut. Its global market was valued at $2,191.25 million in 2022 in the Cryptocurrency Market Report by Polaris Market Research, with an expected Compound Annual Growth Rate (CAGR) of 11.6 per cent from 2023 to 2032. Additionally, NFTs reached a global market size of $18.47 billion in 2021, with a projected CAGR of 34.1 per cent until 2030, in NFT Market Report by the same source.

This increase in the adoption and popularity of cryptocurrencies and the lack of regulations have attracted scammers and fraudsters. From fake Initial Coin Offerings (ICOs) to phishing attacks, these criminals have managed to steal millions of dollars from unsuspecting individuals. In 2017, CoinDash reported ICO Hack stole funds amounting to $7- 10 million from users. In 2021, scammers stole an estimated $14 billion in cryptocurrency, as reported by CNBC.
AML Penalties, the flagship product of ZIGRAM, recorded more than 180 crypto-related incidents resulting in almost $3 billion in fines and penalties and 11,000 months imprisonment sentences to more than 350 individuals and organizations since 2020. Tracking the regulatory landscape, it recorded 42 regulations that were introduced since 2020 with 31 per cent and 48 per cent of the regulations targeted towards Cryptocurrencies and Virtual Assets respectively.

Governments around the world have taken significant steps in mitigating the losses from scammers to keep the industry clean for users. Some of the recent developments in this area are:

International Monetary Fund( IMF) and G20 nations are collaborating to establish a comprehensive policy approach for crypto assets. Nine key elements, including regulation, legal certainty, and international cooperation, aim to balance innovation and risk management. India has brought cryptocurrencies or virtual assets under the Prevention of Money Laundering Act (PMLA). Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND). In the United States, on August 3, 2022, The Senate Agriculture Committee’s Digital Commodities Consumer Protection Act (DCCPA) was introduced. It mandated rypto firms to protect customer assets, eliminate conflicts and disclose the risks of trading in digital commodities. It also gives the Commodity Futures Trading Commission (CFTC) real-time visibility into digital commodity transactions to prevent fraud before it happens and additional authority to regulate the market for non-security crypto assets.

In Europe, a new regulatory framework for European crypto-assets, The Markets in Crypto-Assets (MiCA) Regulation was introduced to establish new rules for stablecoins including Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs) and utility tokens. It aims to protect investors and ensure financial stability while fostering innovations.

Japan, the first to regulate cryptocurrencies, has established Anti-Money Laundering (AML) standards, enforced by the Japan Financial Intelligence Center (JAFIC), to undertake strict Know-Your-Customer (KYC) checks and track questionable transactions.

On February 3, 2023, the Australian government published the “Token Mapping Consultation Paper”, explaining investments in cryptocurrencies and other digital assets must be included in tax returns and how it fits into existing regulatory frameworks.

As the space keeps increasing and become more complex, we might see improved regulations and amendments to these laws.

The balance between regulation and innovation remains a delicate one, as policymakers seek to protect investors, prevent illicit activities, and promote the growth of this transformative technology. As the regulations keep updating, businesses and private entities will also have to be vigilant not only from scammers but also to be compliant with the changing regulatory structure. This presents an opportunity for a new section in the market, called Regulatory Technology (RegTech), to emerge as an option for businesses to be stress free.

“At ZIGRAM, we believe that harnessing the power of crypto data assets is the key to unlocking regulatory clarity and fostering a secure and transparent cryptocurrency ecosystem.”, Abhishek Bali, CEO of ZIGRAM Data Technologies said. “As the crypto industry continues to mature, regulatory clarity becomes increasingly crucial. By establishing comprehensive frameworks that address risks, protect investors, and encourage responsible practices, we can unlock the immense potential of cryptocurrencies and drive their mainstream adoption,” Bali said.