The proposed regulatory solution will unite global policymakers for the first time in recognizing that the future of the cryptocurrency industry depends on its regulation. Specifically, on Friday, October 18, 2024, the given announcement will contribute to developing clearer and more stable rules within the rapidly growing crypto-sphere.

The new proposed rule-making process, which has been in process for over two years, is developed through the cooperation of the financial regulators of various big economies, including the United States, the European Union, the United Kingdom, Japan, and China. From the framework designed, it is evident that the objective is achieved by ensuring that, on one side, innovation in the cryptographic field is encouraged while, on the other side, the consumers and investors are protected against any losses.

Among the novelties of the new approach, which has been discussed above, it is worth identifying the division of cryptocurrencies into groups according to their functions and features. Being a comprehensive framework, this form of classification will assist in arriving at the right regulatory plan to apply to different digital assets, such as payment tokens, security tokens, and utility tokens.

The following measures apply to payment tokens which are, for example, Bitcoin as well as some of the stablecoins These measures include the following The issuer of a payment token needs to publicly communicate and meet certain obligations Regarding exchanges that facilitate trading in payment tokens the following conditions apply These include the improvements of the KYC & AML standards, CAP regime to support the stablecoins.

As for trying to integrate security tokens within the space, security tokens that represent ownership in traditional assets such as equities, bonds, real estate, etc., will be regulated by securities laws in the jurisdiction of the token offering. At the same time, the application of the mentioned framework is also equipped with solutions to harmonize the processes of launching and trading these tokens, which may create new opportunities for implementing the principle of fractional ownership, as well as enhance the liquidity of rather rigid and narrow markets.

Utility tokens which are designed to be tokens that grant their holders rights to use a product or a service in a blockchain environment will be allowed with less scrutiny. The framework focuses on the revelation objectives and the consumer protection policies at the same time providing more flexibility with regards to the innovation and use of these tokens.

The regulatory consensus also covers the emergence of the decentralized finance (DeFi) market. Although acknowledging the creativity of decentralized finance, authorities have set requirements for these platforms to apply sufficient measures to manage risk and offer sufficient information to consumers concerning the platforms they use.

Another launch within the new regulation is the world crypto-asset reporting network as well. This system will enable information sharing in between the regulators and the ‘law enforcement agencies’ of different jurisdictions; this will enable them fight bribes like the money laundering and the financing of terrorism.

The new rule-making framework has been received positively by the cryptocurrency industry so far, with many stakeholders seeing its adoption as an important element in the cryptocurrency industry’s legitimisation. Most major cryptocurrency exchanges and other blockchain companies said they will abide by the new rules as they can help to gain the trust of users and institutions alike.

That is how the cryptocurrency market reacted to the announcement of new regulations: it demonstrated a positive trend. On alphabetical arrangement, bitcoin, the number one digital currency, advanced 3% to $69,500, while ether, the token used on the Ethereum platform, was up 2.5% at $2,680. The overall market capitalization of the crypto market reached $2.4 trillion, meaning that investors continue to have confidence in the development of the crypto market.

Because the regulatory environment for cryptocurrencies is now more transparent, the more staid and conservative traditional banks are anticipated to increase their participation in the sector. Some large banks have already stated that they are working on the development of their cryptocurrency products and services which will include dealing in Coinbase and other cryptocurrency based services such as wallet services.

The new regulatory framework also provides solutions to problems such as the environmental impacts posed by proof-of-work assets such as Bitcoin. Instead of an outright ban of certain consensus mechanisms, the guidelines suggest and call for the migration to alternative, more energy-efficient consensus mechanisms and energy use goals set for providing crypto mining using renewable energy.

For the retail investor it is anticipated that the regulatory clarity would enhance protection and confidence while participating in the provision of cryptocurrency products and services. It complies both the investor education plans and requires specific risk disclosures for the cryptocurrency linked financial products.

While the cryptocurrency industry platform is still pondering the new regulatory measures, the question has now shifted towards its application. In the coming months, the regulators of the participating countries have explained their plans on how they will incorporate the outlined principles into their jurisdictions laws.

However, industry observers warn that there is still a lot to be done even as the world celebrates the new global consensus. The fast developments in the crypto industry will continue to present policymakers with novel forms of technologies and associated economic structures to monitor and respond to.

Over time, the development of cryptocurrency market is still in its process of growth, thus, the new regulation is a step forward for the more stable, transparent and securely developed market in the future. Modern industry is on the verge of a new development period defined by clear rules of relationships, which can entirely transform the further evolution of financial and technological sectors.