Financial news

It’s a time of reflection and anticipation at The Fintech Times throughout December, as we look back at developments and trends over the last 12 months and forward to the year ahead.

We’re excited to share the thoughts of fintech CEOs and industry leaders from across the globe to 2023’s key takeaways and what we should expect to be top of the agenda in 2024.

In this instalment, we address the regulatory landscape in the fintech and blockchain industries, with a focus on the need for compliance, transparency and the impact of regulations like MiCA, as well as the positive effects of regulatory advancements on the financial ecosystem and the growing interest in crypto ETFs.

The regulatory landscape

Marca Wosoba, COO at gaming solutions company ZBD, expects 2024 to be another year of excitement, change and truth for fintech startups and scale-ups.

“Following the year of the global crypto crisis, inflationary pressures and rising interest rates, fintechs will face challenges as well as opportunities. There is always a need to adapt to and prepare for regulatory change and 2024 will be no different with new rules – e.g. Markets in Crypto-Assets Regulation (MiCAR) offering firms the opportunity to operate on a pan-EU basis.

“Further, as regulatory fines and penalties impact fintechs with poor compliance, others can set the standard and adhere to best practices building transparency and trust with customers, partners and regulators. In a year where interest rates will likely remain higher and fintech multiples lower, expect to see further consolidation with more established fintechs and tradfi seeking to buy – rather than build – product capability and market share. For those that aren’t ready to acquire or be acquired, the focus will remain on cost efficiency and building a cashflow-positive business.

“At ZBD, our business is built on Bitcoin. As the regulatory landscape becomes more clear in regions such as the EU, the scrutiny of the sector and its persistent perception as high-risk creates unique challenges – including the high cost of banking. However, as investment and trust in Bitcoin and the technology it relies on grows, we expect to see even more growth and opportunities. To navigate 2024, fintechs will need to be compliant, focus on costs and drive toward profitability.”

Regulation continues to solidify

Ilya Volkov, CEO and co-founder of Web3 fintech platform YouHodler, saw 2023 as a game-changing year, not just in terms of asset prices and capitalisation, but in terms of structural changes to the industry.

“While some see these changes as a sign to stay away from the risky world of blockchain, I see them as healthy growing pains as Web3 technologies continue to mature: regulatory advancements like the MiCA framework, traditional institutions’ increasing interest in crypto ETFs, and some tech giants’ adoption of the blockchain technology.

Regulators are understanding more about crypto and how it coexists with traditional financial markets. In some aspects, they are tightening their grip on crypto with new rules and policies, which I believe is good for the entire financial ecosystem. New frameworks like MiCA and the recently published new FINMA Guidance on Staking Services in Switzerland will help make the industry healthier and more sustainable.

Obviously, there are still challenges as governments around the world look for ways to keep the industry innovative while also in compliance. However, I’m confident that we will figure out some better solutions in 2024.”

Turning the page

“While 2023 began with the battle of the crypto winter, 2024 signals the beginning of a new era for crypto – one that is transparent, secure, and regulated,” says Jean-Baptiste Graftieaux, CEO of crypto exchange Bitstamp. “As an industry, we’re turning the page on bad actors and setbacks for the industry that have slowed progress and shaken trust.“

“Looking ahead, the EU MiCA regulation will fully come into play in 2024, revolutionising the crypto landscape by providing clarity to institutional investors who are looking to embrace digital assets.

“Additionally, the approval of a Bitcoin ETF will offer a familiar entry point to crypto for those who have been watching from the sideline, helping to support our goal of mainstream adoption. Furthermore, the upcoming Bitcoin Halving and expanding use cases of blockchain technology further serve as a testament to the promising landscape and opportunities ahead.“

More proactive push

Julian Deschler, co-founder of Elusiv, a universal encryption layer for Web3, suggests increased regulatory clarity is one of the biggest challenges faced by the blockchain industry.

“It is something we predict will slowly begin to resolve in 2024,” he says. “To strike a balance between innovation and compliance, governments and regulatory agencies will offer more precise standards for blockchain technology and cryptocurrencies.

“We’ve already seen leading financial institutions such as BlackRock and Fidelity push for Bitcoin and Ethereum spot ETFs. Additional regulation and compliance in the space might result in more large financial institutions and companies following suit and adopting it. As the IMF chief urges for a more proactive push for central bank digital currencies, Web3 companies will keep a close eye on the overall approach of these institutions and regulatory bodies, particularly monitoring how their actions will affect the industry as a whole.

“In light of this, we will see more and more Web3 and crypto-adjacent companies flock to sprouting cryptocurrency hubs throughout Europe and Asia as regulators seek to foster the use of cryptocurrency and related services. As we get closer to the full application of legislation like EU’s Markets in Crypto-Assets (MiCA) on 30 December 2024, the resounding negative impact of US regulation and recent decisions from the SEC will be essential to observe as regulatory clarity progresses elsewhere.”

Spotlight on crypto regulation

Greg Waisman, co-founder and COO at the global payments infrastructure platform Mercuryo, anticipates two primary trends that the fintech industry will closely monitor throughout 2024.

“The first is the bull run expected to coincide with the Bitcoin halving event in April 2024. Coupling this with the highly anticipated launch of Bitcoin ETFs and several other significant events, we can expect a considerable surge in activity within the crypto market.

“The second significant trend is going to be crypto regulation, with the MiCA framework fully coming into effect being a major event on this front. And with the recent shocks around Binance and Bittrex adding fuel to the same pyre of uncertainty that FTX had lit a year ago, we can expect that there will be an even greater push for stronger regulation, monitoring practices, compliance processes, and overall market stability.

“I, for one, view these changes positively, because this is how the market will become more mature.”

Thawing of the crypto winter

2023 was a year when the implications of many high-profile corporate collapses, such as SVB and FTX highlighted the importance of business fundamentals across the industry, says John Salter, chief customer officer at clearing bank ClearBank.

“Safe, trusted, well-regulated and profitable businesses have become more attractive to clients, investors and regulators. There is a demand for greater transparency over where and how consumer funds are held and this has started to highlight certain key differences – being a bank and an EMI, safeguarding compared to FSCS protection, or the clarity of ownership and control of funds held in a bare trust compared to traditional bank accounts through embedded banking solutions. More transparency and education are always important for sustainable long-term industry growth.

“2024 will see the ripple effects continue to play out. Mergers will likely occur to address some of these. There will be more new entrants in the market, but they will probably have to demonstrate stronger and clearer business cases to attract investment and achieve regulatory approvals. One segment that could see strong development is digital assets.

“There are signs that the “crypto winter” is thawing as regulators and central banks start to provide more regulation and guidance into the industry.