Binance believes the core tenets of a regulatory framework for crypto should be consumer protection, market integrity, and financial stability.
The exchange made the statement in its response to a recent consultation initiated by the U.K. HM Treasury regarding the regulation of crypto-assets.
Binance said watchdogs need to take a balanced approach to regulating the crypto industry to ensure it can continue to grow and innovate in a competitive environment.
The exchange added that “disproportionate regulation” will ultimately cause consumers to turn to markets and operators that are not bound by these rules — which could lead to financial stability issues.
‘Same risk, Same regulatory outcome’
Binance said it agrees that the financial services activity of crypto-assets should be defined and regulated properly. However, the regulatory regime needs to ensure that it does not impact the underlying non-financial activity of a crypto-asset.
The exchange said that crypto-assets that carry similar risks as other traditional financial assets should be treated the same under the regime, and it should ensure that watchdogs like the FCA create rules that are “consistent” with the framework.
The exchange added that regulators should also take into account the fact that “new technology changes the balance of risks” associated with “clearing, settlement, auditability, transparency and governance.”
Additionally, the rules should account for the “nuances” of different crypto assets and adapt regulations accordingly to accommodate these assets and their underlying technology.
Binance also said that the regime should create “pragmatic” rules around disclosures for crypto-assets to ensure consumers have access to the “right information.”
Exchanges should be in charge of the listing and delisting process for new cryptocurrencies and performing the necessary due diligence on issuers. As such, exchanges will also be held responsible for any violations or lapses.
The exchange added that it supports introducing a proper regulatory framework for admission and believes that market abuse will decline once these rules come into effect and there is “greater surveillance” of the markets.
According to Binance, the Treasury needs to carefully and clearly define DeFi in the regulatory regime as its “future development” is uncertain.
The exchange said that DeFi affects markets “differently” from traditional financial services and carries its own unique risks and advantages.
Binance added that DeFi would continue to evolve rapidly and disrupt markets in new ways — which should be considered properly when drafting legislation and policies for the industry.
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