In a recent document JP Morgan, the famous American banking firm, stated that crypto regulation in 2023 would be intense after the latest FTX collapse. Also, the banking giant noted that customer protection, self-custody, and asset security would form crucial aspects of the regulation.
JP Morgan & Chase, a Wallstreet banking company, has released a document predicting changes it expects for the crypto industry. The company’s newest Global Markets Strategy report noted that massive changes are coming to the crypto sector in 2023.
JP Morgan added that the changes would come as regulations and could cause a merger between the traditional finance and crypto sector. In the report, the banking giant also commented on the saga of Alameda Research and FTX.
The report said that the crypto ecosystem is about to change due to the recent collapse of crypto entities. First, the document investigated the possibility of speeding up regulatory processes that are currently underway.
One of them is the Markets in Crypto Assets (MiCA) the European Union is considering. According to JP Morgan, the final approval will likely occur before the beginning of 2023.
This is because the EU has cleared most of the legislative processes and is only waiting for the final approval. The financial institution also predicted that there might be a transitional phase of about 18 months.
Thus, delaying the bill from taking effect until 2024. Furthermore, the Wallstreet giant suggested that countries may issue new regulations.
These regulations would focus on storing and protecting consumers’ crypto assets. This is similar to what is done in the conventional financial system.
The Merging Of The Crypto And TradFi Sector
Meanwhile, the document acknowledged that crypto self-custody is gradually becoming a norm. Trezor and Ledger, two hardware wallet companies, have recorded huge financial growth following the FTX implosion.
JP Morgan also highlighted that upcoming regulations would focus on lending, clearing, broker, custody activities, and trading. Hence, the giant firm believes such laws would affect crypto entities that offer most of these services.
Such regulations aim to prevent conflicts of interest, protect consumers’ assets, and prevent market manipulation. Additionally, regulations would also focus on increased transparency by crypto entities.
The report suggested that crypto firms must regularly report and audit their assets, reserves, and liabilities. Some crypto firms that fall into this category include stablecoin issuers, custodians, lenders, brokers, and exchanges.
Interestingly, JP Morgan believes these regulations would be similar to the ones guiding the traditional financial sector. Hence, it believes the crypto sector would eventually merge with the conventional financial system.
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