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The Journey Towards DEX Regulation

In recent years, there has been an unmistakable explosion in the adaptation of decentralized exchanges as a sufficient tool for the execution of cryptocurrency transactions, which in turn reflects the boominess happening within the decentralized finance sector. As of the beginning of 2022, more than $170 billion has been circled and locked within the decentralized ecosystem. Also, the capital of Argentina, Buenos Aires, and Bahamas, has given statutory declarations to its citizens to pay their taxes with digital assets, while other countries are already on the brink of doing the same. Right now, there’s so much stark dynamism to predictory insinuations accosted to what the crypto industry would become in the coming years.

Here’s the truth, undeniably: popularity, in whatever form, breeds skyward attention. In the case of the crypto interspace, there’s quite a growing attention from the government who can no longer hide or subdue their protruding anxiety on how cryptocurrency keeps altering the wheels of the world economy; and, in the hang of things, has no alternative than to moderate the process — “a tipping scale of being forced into submission,” a crypto enthusiast once tweeted, and there’s no atom of falsity whatsoever to the fortunate joke.

On Decentralized Exchanges Regulatory Policies And the Beginning of a New Era

There has been securities and exchange commissions institutions set up in different parts of the world — ranging from the European Union’s MiCA (Markets in Crypto-Assets), U.K. Treasury’s, Brazilian Senate Plenary (which has drawn out two to six prison-stay for any junction of crime winded up with a virtual asset), still-in-the-process Australian Financial Regulator’s APRA (Australian Prudential Regulation Authority) — to oversee the bulk of financial transactions marked by crypto exchange. According to the overall summary of their bills, their goal is to combat the wide range of fraudulent charges existing within the crypto economy in a way of protecting the customers and market participants and making sure that invested assets are protected under the jurisdiction of competent and efficient authorities.

The European Union’s MiCA, which both the UK and others seem to be following their procedure, took many pages out of the 126 to illustrate three sectors of which its body must be accountable for: asset-referenced tokens, e-money tokens, and utility tokens. Asset-referenced tokens refer to cryptocurrencies or stablecoins designed to maintain its value through its single-phase circulation. E-money tokens are dollar-tagged fiat currencies such as USDC or USDT. Utility tokens hinge on the specific platform on which it’s been enacted. Each sector is marked by its own legal suppositories.

However, lobbyists think that there’s a black spot in the silver lining because in the beginning of this year, the Wall Street Journal pulled up a report that the U.S. Securities and Exchange Commissions is investigating the head developer of the world’s largest decentralized exchanges. Over the years, notably, decentralized exchanges such as Binance, Blockfi etc. have all gulped down the same flavour of ice cream, and has also been dragged to court on multiple occasions. Which begs the honest question: are these regulatory agencies mapped out by the government here to actually moderate, as in tap into, the miracle that the crypto economy affords, or are we peering at a chunk of unraveling negatives?

The Positive and Negative Sides of the Regulation Authorities

As said before, there’s no denying that there’s a bright side to the institutionalizing of regulatory authorities: ranging from security awareness to legitimacy to other brighter intentions. In fact, without doubt, legal certainty has its way of attracting more institutional and private investments, because of its proportionate collaboration with bank and traditional fiat exchange aggregators, which can help to ensure sufficiency of liquidity and asset availability status

On the negative side, in reference to the released bills across different parts of the world, lobbyists has noticed a sort of obscurity not just in the area of naming the sectorial area that would overlook the whole process, but also in the issue of crypto businesses not knowing the supposed contradictories. In some way, this builds a mausoleum of confusion for providers; for instance, the provider or market participant might want to know if one ought to apply to other different registrations within the channeling trade, after applying to the European Union.

There’s also a failure of depicting the statutory representation of the SEC, and also highlighting concretely the problems they are proffering solutions to. This is a much bigger problem because how can investors or entrepreneurs willingly wade into the carved-out picture if there’s no reason for the cause. Worthy of note: even though legitimacy can attract myriad investments, over-regulation can also wade off marketers and innovators.

The Trigger Point

Most countries should follow in the footsteps of the Australian government that has gathered top investors and providers to ascertain where and how they can ensure effective and error-free regulatory affairs, and has also stapled its implementation in mid-2025. And this is the problem: most countries are deep-diving headfirst into the crypto industry without understanding the internal and external engines that propels it. To paraphrase the words of Sarah Milby, a senior policy officer for the Blockchain Association in the US, “. . .the SEC is hastily trying to make regulations without fully understanding the effects and costs of those potential rules.” And this hastiness, however, sprouts forth unconscious negligence and obscurity. The remedy is to allow time to do its bidding; it always has.

CrossFi is a cross-chain protocol that provides liquidity to you for Filecoin staking and rewards.

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