Government agencies, lawmakers, and business moguls are continuing to engage in crypto regulation. Today, we have at least 111 states all over the globe that recognize Bitcoin and other cryptocurrencies in their laws.

However, crypto regulation is quite ambiguous. In a recent interview with the Human and Machine Channel, Jonathan Bowman, Project Visionary at Sekuritance, and Farrukh Habib, the Co-Founder of Alif Technologies, helped shed some light on this intriguing topic.

It’s also worth noting that the debate on crypto regulation is coming at the right time when businesses want to safeguard their reputation. Consumers also want to transact in a safe place with guarantees that they won’t get scammed or aid the success of unscrupulous businesses. In other words, there is a wake-up call about crypto regulation across the board.

Crypto and the Sharia Islamic Law

Islamic finance, run by the Islamic Bank, has various financial products, including capital market, financing, deposits, and savings. But there is something common among all these products. The Islamic law disallows interest rates on any of them, not even 0.001%.

That said, there must be zero interest in cryptocurrencies for any token to be allowed in Islamic financial institutions, whether in DeFi or CeFi projects. On top of that, the crypto project should also comply with the basic Islamic trading rules and principles.

For instance, besides being Sharia-compliant, we must understand the underlying source and value of the token in question. “It’s basically the whole life cycle and a comprehensive approach towards the Islamic legal lifecycle and a comprehensive compliance of crypto assets,” says Farrukh.

‍

Crypto regulation across jurisdictions

Crypto regulation across jurisdictions is pretty challenging. For instance, companies rolling out DeFi projects often gamble on how they can onboard customers. The project might emanate from a country where it’s legal, but the customer’s tax jurisdiction forbids it.

In some cases, some jurisdictions have also banned the use of crypto. According to Jonathan, the industry needs a business enabler with tools for running background checks on customers and cross-border transactions to ensure regulatory compliance across the board. This allows users to know whether they are transacting with trustworthy people or buying legal goods/ services.

Jurisdiction compliance also calls for partnerships with like-minded individuals, such as lawyers, banks, and international regulators in the fintech.  Among the regions with a huge crypto user base and keen on adopting blockchain, DeFi products include the Middle East and North Africa.

Jonathan notes reputable players are facilitating this, including the Securities and Commodities Authority in UAE and the Dubai Financial Services Authority. We also have business centers, such as the Dubai Multi-Commodities Center and the Abu Dhabi Global Market. Worth mentioning, Dubai is already issuing OTC licenses for crypto trading, exchanges, and CeFi and DeFi projects.

Southeast Asian countries, such as India, Pakistan, and Bangladesh, also show positive aggression towards crypto regulation.

Regulatory concerns about security compliance

Security is such a challenging issue in the mass adoption of crypto. “There is fear as well because we always hear of the big white hacks,” notes Jonathan. Some hackers attack projects to prove the vulnerability of the underlying blockchain technology in crypto. For these hackers, they attack not to steal money from projects but to simply prove a point.

Although there are tools and protocols for bringing such perpetrators to justice, the industry needs more. We want a situation where the average consumer and business owner feels protected when transacting through crypto.

According to Jonathan, regulation is not a silver bullet for solving security challenges in crypto. Instead, players should approach the challenge through civic education on the blockchain. This entails educating the masses on investing in crypto, differentiating genuine and scam DeFi projects, and general in-depth insight into the underlying technology.

About Sekuritance

The Sekuritance RegTech platform provides a single platform for every eGRC need, including end-to-end AML/CTF, CECL, FCPA, vendor management, beneficiary onboarding, investor check, card processing MFA checks, blockchain wallet checks, cyber-risk assessments, and other RegTech or Business Process Management requirements.

About Alif Technologies

Alif Technologies is a professional firm with a regional presence and global focus & representation. Our spectrum of services covers various aspects of digital business in the United Arab Emirates (UAE), the Gulf Countries Council(GCC), and worldwide.

About Human and Machine

Looking for different ways to make complex knowledge available to the average person, Hikaru AKA The Very Boring Machine and Tlahui AKA The Very Average Human have joined forces to develop a podcast that simplifies various new DeFi Projects. Hikaru and Tlahui take advantage of their massively different personalities to try injecting a human touch and sense of humor to what is otherwise technical and challenging to understand. Through this 30-minute podcast, they interview CEOs or co-founders of DeFi projects and try to get simplistic answers. So simple that even Tlahui understands—sometimes.