The importance of regulation in cryptocurrency

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Arshad Khan, Founder & CEO, Yoshi Markets

Regulations in industry are important in guaranteeing operational integrity in business transactions. They compel the producers and providers of goods and services to maintain certain standards of production and supply chain while delivering their products to consumers. They protect the safety, security and rights of consumers and the general public, while providing a legal framework for the market as well as the operational activities carried out by the participating establishment.

In doing so, regulatory policy and governance play an important role in ensuring credibility for the industry in question, boosting consumer confidence and therefore adding life to the sector, in the process supporting economic growth.

Regulation is particularly important in the financial markets, and particularly in the cryptocurrency space. Centralized virtual asset exchanges and multilateral trading facilities (MTFs) form the backbone of the whole cryptocurrency industry and play a larger role in the standing of the industry than their decentralized counterparts and even virtual asset lending platforms. This explains the importance of regulating centralized exchanges and MTFs, as this would provide a legal base for the industry and enhance its overall legitimacy.

We have seen the cryptocurrency and blockchain sector thrive in the UAE, for example, due to continuous government efforts in supporting it, especially through the establishment of regulatory frameworks by the local governments of Abu Dhabi and Dubai. This made it necessary for exchanges and MTFs to seek adherence and maintain compliance with the regulatory standards, providing them with an edge in the market over non-regulated entities and boosting the industry and local economy.

In this context, Yoshi Markets Limited has been among the first establishments to receive the Financial Services Permission (FSP) to operate a regulated trading and custody platform for virtual assets, from Abu Dhabi Global Market (ADGM), through the Financial Services Regulatory Authority (FSRA).

For exchanges and MTFs, there is a high level of priority based on the protection of the funds and assets of clients utilizing investment and trading platforms. Both retail and institutions have their rights safeguarded by regulatory authorities, through the secure custody of their assets as well as the preservation of a fair and orderly trading market. This includes measures to prevent the manipulation of markets as well as ensuring the proper implementation of orders in the respective trading platforms. Additionally, regulations would necessitate that compliance measures are taken to prevent anti-money laundering (AML), with the help of Know Your Customer (KYC) procedures.

All these features have been accounted for by Yoshi Markets on their trading and custody platform, which includes a robust internal architecture that safely and securely stores customer assets through utilizing hot, warm and cold wallets in the facility. The measures taken by the platform, at the level of IT, trading, custody, compliance and surveillance are all in line with the regulations established by the FSRA.

Yoshi Markets aims to become a leading regulated MTF in the region and beyond, with its comprehensive internal processes and human resource capabilities complementing its robust technology and infrastructure.