The following is a transcript of the podcast Munib Ali, AlixPartners on navigating the crypto regulatory landscape between GRIP’s Commissioning Editor Jean Hurley and Senior Reporter Hameed Shuja with Munib Ali, partner at AlixPartners.
[INTRO]
Jean Hurley: Hello listeners, I’m Jean Hurley, Commissioning editor at GRIP. Today in the GRIP Podcast, we are joined by Munib Ali, partner at Alixpartners and my fellow Gripper, Senior Reporter, Hameed Shuja. Welcome to our GRIP Podcast.
Hameed Shuja: Thank you Jean, and thank you, Munib. Welcome to GRIP. Munib. You have a fascinating background. You have worked as a Chief compliance officer for a global banking institution, a former regulator, and now a consultant at Alixpartners. Now, to begin with, could you share a bit about your career journey and how these diverse experiences have shaped your perspective on financial regulation and emerging technologies like crypto?
Munib Ali: Well, firstly, thank you for having me here. It’s a pleasure to be here on your podcast. By way of background. I have worked in the field of financial services regulation for over 25 years now. I started my career as a regulator where I was supervising some of the larger global investment banks. So in the tradfi world, of course, since then my career has switched really between working for global banking organizations in the industry and working for consulting firms, advising organizations on risk and regulation.
So within the industry, I’ve worked and spent a bit of time at Barclays where I undertook various roles, all risk and regulatory related. And in the period of time post-financial crisis, I was the chief compliance officer for Santander’s investment bank and their markets business, which was a truly enlightening time for me, as a consultant, I’ve worked with a number of different organizations. I’ve worked with Ernst and Young, PwC, IBM consulting. And now, as you mentioned, Jean, I’m working with with AlixPartners.
And I’ve been very fortunate in that these experiences working across the regulator as a chief compliance officer and as a consultant, it’s given me a 360 degree view of regulation and regulated markets. So it’s it’s interesting to see, in the case of crypto, for example, a lot of familiarity in terms of how the regulation is developing, how firms are reacting to the regulations which are emerging. It’s interesting for me to be working with crypto firms now as part of my portfolio of client work to help them through this period of very early state of regulation, which is where we are.
Jean Hurley: Well, what a fantastic career journey you’ve had. And so, with your deep experience in financial services regulation, what do you see the most significant shifts or challenges firms face today, particularly regarding innovation?
Munib Ali: Well, one of the big challenges and the biggest risks which I speak to with my clients about is the the changing risk landscape. And that’s an important point to discuss, and I won’t talk about it in too much detail in today’s podcast, because I know it’s not the the topic of today. But it’s really important to understand how the risk landscape has already changed, in which the new industries like crypto are playing a part and how they must react to that risk landscape, and it’s a big challenge.
So the risk landscape has changed multifold, for example. In the new world, firms are placing significant reliance, more reliance than ever before on third parties, be that in terms of the resilience of third parties, third party code, or and of course black box decision making. So the control over risks which are further away from organizations is increasing and it’s changing.
Secondly, bad actors who are looking to commit crime in the industry are more empowered than ever before. Partially because of the advent of artificial intelligence. So you have more empowered bad actors who you are trying to protect your organization against as well.
Thirdly, fragmentation. The geopolitical environment is as fragmented as it has been. The regulatory environment is as fragmented as it has been as well, particularly in the world of crypto. And so that’s a new risk dynamic that firms are having to deal with. It’s really important for firms to understand. And on the other hand the other aspect of the changing risk dynamic is what consumers of these services are expecting. Consumers are now expecting firms to be able to control these emerging risks real time.
They expect resilience of organizations and they expect real time transparency. And that is important to understand, because that changes the way in which consumers give firms their trust. And ultimately trust is the critical, almost invisible infrastructure in any services industry. And so if the consumers are expecting trust to be built based on those dynamics, firms have to react to that. And that’s a big challenge that I often find myself speaking about with, with our clients.
Hameed Shuja: Thank you. Now let’s focus on the UK itself. You said you have first hand experience of working with firms and businesses who want to operate in the crypto sector in this country. Now the government has come up with a draft legislation. It calls for clarity for consumer protection. But what do you think are other key elements of this draft legislation, and how do you see it impacting businesses who want to operate in the UK crypto sector.
Munib Ali: Well, first of all, the publication of the government’s draft legislation and with the FCA’s more recent publications of consultation papers and discussion paper as well. These are all good news for firms and for the UK industry. The industry has been waiting for the UK regulators to clarify and bring forth its regulatory framework.
From the conversations I’ve had in the roundtables that I’ve had the opportunity of chairing, a number of firms have held the view that the UK has been too slow. And a number of firms have strategically thought about whether they want their offices to be in London. A number of firms have already decided to take their headquarters elsewhere. So the timing of this is very important.
And so this is good news that now we’re seeing the draft legislation and we’re seeing the consultations from the regulators. So that’s the first point. The second point is that the framework that the UK authorities are pursuing is quite interesting in that, it’s quite different from the EU’s approach. The EU, which I’m sure we will talk about later today. The EU’s approach is to bring in a specific regulation, a regulatory framework and licensing regime for crypto asset service providers and other related firms, whereas what the FCA is looking to do is to expand its existing framework to capture the services that crypto firms will be offering.
Now, that doesn’t mean that there won’t be specific areas of the rules, which will be very specific to crypto, for instance, the market abuse regime in the UK that’s been proposed by the FCA will look quite different from the regime that is in place for for traditional finance. So there will be some of those areas, but largely it is looking to expand its existing areas of rules such as consumer duty, operations resilience and other business conduct requirements. It’s going to be expanding those existing rules. So that’s an important aspect of this in terms of the impact.
Just very quickly on this one. Well, firstly, I think firms have been waiting very keenly for this. So as soon as there is further clarification of the rules and the implementation of the rules, I think we will see a very quick turnaround from firms who are looking to obtain the relevant permissions to undertake the activities that they have been keen to do here.
The other impact will be, very importantly, is that the bar that these firms will have to put in place for compliance in terms of control frameworks will have to increase significantly. That will be a big impact. If we look at the the current regime in the UK, which is based on money -laundering regulations, most firms that have applied to the FCA to be registered under the MLRs have failed. They’ve not managed to obtain the licence, the registration. The wider regulatory framework is going to be far more broad than money-laundering regulations. And so firms will have to accept very quickly that if they are to achieve the permissions that they’re going to need, then they’re going to have to raise their game in terms of the control frameworks they’re developing and the way they interact and convince the FCA that they’re going to have appropriate controls to manage their businesses.
Hameed Shuja: Interesting. Thank you Munib. And beyond legislation, if we can talk about the broader ambition in the UK, they do have the ambition to become a global leader or a global hub in digital asset technologies. What are the strengths of the UK’s ambition? And I’m sure there are areas for improvement as well, if you could touch upon those as well briefly.
Munib Ali: Well, sometimes there is an advantage in not being the first mover. So in this case, the FCA can take its time to observe the reaction to those jurisdictions that have already implemented regulations. So they can take the time to have a look at the regulations, which are already in place in the Far East, such as in Singapore. They can observe the reaction to the regulation in the UAE and of course, the EU as well, and take a look at the reaction to MICA and whether that’s the outcomes that are being achieved. As a result of MICA for example, is what we want to achieve in the UK. So, that’s the first point about the benefit that the UK has at the moment in terms of where it is, notwithstanding the point I made about the need for speed. The other point about the UK is that it contains a very vibrant fintech industry. And it has always had a very strong legal framework that supports businesses. And that’s a very big attraction. That remains a big attraction for firms to come to the UK.
And this, I think, will play a big part in the goal of the FCA to create a hub for digital assets in the UK. But as I mentioned, it’s not going to be easy given the time it is taking for the UK regulators to come up with a regulatory framework. And the other aspect of this, which is unknown at this stage, is how the FCA is going to balance the need for strong regulation. I mentioned the fact that most firms are already failing to achieve registration under the money-laundering regulations. How they balance that with the need to create this hub, the need to have a competitive environment here in the UK? And that’s something I think, which will play out a bit further over the next few months.
Hameed Shuja: And you spoke about a balance. You mentioned regulators. You have been a regulator yourself. I’ll put it bluntly. Do you think they are managing to strike that balance? Because there is a demand for innovation in crypto space, but there is also a primary objective of consumer protection and financial stability. How do you assess their position and their challenges?
Munib Ali: Yeah, I mean, this is as critical as it is challenging I would say. The regulations or the consultations that we’re seeing in the UK at the moment. They are very much, I think, looking to achieve that balance. They are quite, I would say the bar for compliance for crypto firms is going to be quite high. And so you might suggest that there are other regions which will potentially be more business friendly when it comes to the innovation that crypto firms are looking to achieve. What I would say is that this is not a specific challenge for crypto. This has been a challenge for the traditional financial industry as well.
So for example, at the moment the thinking is that the FCA, when it comes to, as an example, crypto exchanges, they will only allow those exchanges who have a UK license to be able to deal with UK based customers. Now, that may lead to a lack of competitiveness and lack of consumer choice when it comes to the use of exchanges. And the reason why this is so important is that, in other regions, that is not necessarily going to be the case. It is going to be possible, in other regions, for retail consumers to access exchanges that are outside their immediate jurisdiction as well. This is something which the FCA, I think is going to have to look at.
But as I mentioned, these sort of jurisdictional barriers. It’s not new and it’s not applicable just to crypto. When it came to traditional finance, and I expect the FCA to go this way for crypto as well, when it came to traditional finance, in the end with the regulators, globally got to is a regime around agreeing equivalence with other jurisdictions and the regulations in other jurisdictions, sections and registration regimes for overseas exchanges as well. I suspect the FCA will will go the same way when it comes to crypto exchanges over time as the industry matures.
Hameed Shuja: And when you speak to crypto investors, businesses, what are the attractions that bring them to the UK market? What are the opportunities that they can see and what are the challenges that you make them aware of?
Munib Ali: Yeah, so I mentioned the vibrant market here, the fintech market here in the UK. In addition to that, the UK market, just from a connectivity perspective globally is in a very strategically, very positive area. And I think that has a very inherent attraction for consumers, for firms rather. There’s a very active consumer market here, the consumer market here, the retail consumer market here is very tech educated. And so there is a big market and demand for innovative financial services, uh, financial services. So crypto falls very neatly into that demand. And so that’s very attractive for firms that we speak to that are looking, that are waiting for a regulatory regime in the UK that will give them legitimacy to do business here in the UK.
Hameed Shuja: And looking ahead, just the last question on the UK before we move to some global topics, what do you think the future holds for crypto regulation in the UK? I mean, are there any specific developments or trends that you are keeping an eye on Munib?
Munib Ali: Well, there’s a lot of work still to be done in terms of the UK regulations over the next year or so. The objective of the UK authorities is to implement the regulatory regime for crypto in the UK in 2026. Go live in 2026. There’s a lot to be done between now and the end of 2026 for that to be realised. So we will see a lot of activity from now until the end of 2026, both from regulators, also from the industry as well. So it’s definitely a time to be watching this space. In terms of how the regulatory framework is going to develop. I think there are certain parts of the industry which at the moment, because they’re challenging to regulate, they haven’t yet been covered.
So I suspect that the UK regulator in the near future, not just the UK regulator, but other regulators as well, will start to develop their thinking and the framework around decentralized finance, which at the moment isn’t really captured, although the FCA has begun to think about it already and they’ve begun to mention their thinking around DeFi. I suspect that regulatory frameworks overall, not just the UK, will begin to look at that in the near future, along with US along with DAOs. So decentralized anonymous organizations as well. So that’s something I think will come through quite quickly. I think after the the FCA has established its initial regime.
Jean Hurley: Moving to the European Union. MICA is seen as the benchmark legislation. How does MICA compare to the UK’s approach, would you say?
Munib Ali: Well, MICA, of course, contains and delivers clarity compared to the UK regime. The UK regime is still in formation. So with MICA now being implemented, there’s a lot more clarity. We see that and we’ve seen the benefit of that already in the European markets where firms are now, you know, busy putting in their applications for licences. Many of them have made their decisions in terms of which jurisdiction within the EU they would like to hold their headquarters. And one of the big differences and advantages of MICA is that you get a passport to be able to do business in other parts of the European Union. So immediately, once you get your MICA licence, your jurisdiction in which you can do business is far greater than what you would get if under a UK licence, which would be limited to these shores alone. So that’s a big difference.
The other difference is that, under MICA, there’s a very specific, separate regime that’s been created for cryptoasset businesses, unlike the FCA, as I mentioned, which is looking to expand its existing regime to cover relevant services. And so that’s a big difference as well. One of the areas which is very interesting, and which we’re talking to our clients about, is the area, and going a little bit deeper, is the area of market abuse, for instance. There is quite a difference between the way MICA is approaching market abuse regulations or requirements for crypto firms compared to the UK regime. The MICA market abuse regime under title six is still quite similar to its wider EU MAR regime which the traditional finance industry has to comply with. There are differences, of course, but if you read one and you read the other, you can see a lot of similarity.
The UK regime that is being proposed for market abuse and contains some significant differences, particularly for exchanges. And so that’s a big area of difference between MICA and the UK regulatory regime, which firms are going to have to navigate through as they begin to think about their UK regulated businesses.
Jean Hurley: So with regards to the crypto asset service providers and issuers operating across the EU, what are the significant implications of MICA?
Munib Ali: So the previous registration regimes, which existed within individual countries within the EU, were focused on anti-money laundering regulations. They were particularly focused on that. MICA now covers a far broader scope of regulatory requirements, stretching from governance requirements to specific control requirements which impact all parts of the value chain of a business. And so even, for example, the governance requirements where you are required to assess the fitness and propriety of your controllers and your board members.
That’s a big change for crypto firms, where if you think about historically, where they’ve come from, a lot of the controllers of crypto firms, they didn’t necessarily have the sort of background which the regulators might be expecting of controllers, and of those who are governing the organization. So the governance area is quite a big one, a big impact area. And as I mentioned, the areas of the businesses impact by regulations go across the organization.
One of the benefits, however, of all of this, is that rather than looking to obtain registrations in individual countries, now firms can do away with this strategy of which countries they want to be seeking individual registrations in. They can focus on getting one MICA license in a jurisdiction of choice, and then use the passport to undertake business in other countries within the EU. And that’s a major impact, strategic impact, a positive impact on firms of the MICA regulations.
Jean Hurley: So we’ve looked at the positive impacts. But what would you say be the practical challenges or opportunities you anticipate for firms?
Munib Ali: There are a lot of challenges. It’s not easy to get a MICA license and it’s not easy to comply with MICA. So first of all, the paperwork itself, which needs to be compiled and submitted to the regulator to obtain a MICA license, is quite substantial. We’re talking about a lot of paperwork. It will take months. It is taking months for for crypto firms to be able to be prepared to submit the application for a MICA license. So the paperwork itself, in terms of the policies, the procedures, the risk frameworks, the forms which have to be completed, that’s a big exercise. So that’s a big challenge.
Then secondly, the uplift in the control frameworks. So I mentioned that previously firms had to, I wouldn’t say simply because it wasn’t simple, only had to comply really with AML regulations. The control framework that needs to be uplifted to comply with all of the different areas of MICA now is again very substantial, requires a lot of time, a lot of investment from all parts of the organization, including the leaders of the organization, the front office, the technology departments, etc. That’s a that’s a big challenge for firms to comply with, MICA.
The third thing is the expectations of regulators. Because this regulation is new, there are many, many areas which require interpretation and some guidance and to understand the expectations of regulators in terms of what they’re expecting to comply with certain rules. That is challenging because there are no cases, there’s no history that firms can rely upon. And secondly, different countries in Europe are interpreting the rules in different ways. And so that’s a challenge for firms as well.
And lastly I would say, and this is something which I don’t think firms have thought about too much at the moment, but I’m encouraging my clients to think about this now, is it’s one thing to be able to put in place a compliance framework to obtain the approval of a regulator and obtain the license. It’s another thing to make sure that that compliance framework is effectively embedded and is actually operating effectively in practice, so that you avoid breaches of the regulations and get into trouble.
And, you know, this is something which we have seen, you know. Over decades of experience in the tradfi world, which has been heavily regulated. But yet we see misdemeanors and issues and breaches and enforcement regularly. And that is about embedding effective embeddedness of the compliance framework. So that’s a big challenge, which I think crypto firms haven’t yet faced when it comes to MICA.
Jean Hurley: Absolutely, yes. And embedding culture, they’ll have to be very careful with that one as well, won’t they? So can I ask you then, what’s going to happen with ESMA, because they’re going to have a crucial role in trying to harmonize and bring all these countries in the EU together, putting through all the developments from MICA.
Munib Ali: I think ESMA is going to, has to play a crucial role over the next period of the implementation of MICA. I mentioned that as understandably, the MICA regulations are now being road tested for the first time. A lot of areas are unclear and require clarification. So one example is that the definition of market making is unclear at this stage. That’s one example where firms are waiting for clarification and that will come from ESMA.
I expect that ESMA will be publishing a number of guidance notes and Q&As and technical standards over the next year or so, maybe the next 18 months, 24 months, even, in order to provide further clarity and guidance in terms of the expectations of compliance with certain rules. They already have, they’re doing that. There has been guidance that has been published by ESMA earlier this year to clarify certain things. I expect there’ll be a lot more of that coming over the next period.
Jean Hurley: So how do you think MICA will evolve and what opportunities might it present for businesses operating in the crypto space within the EU? And also what about extraterritoriality of MICA?
Munib Ali: Yeah, very interesting question. So as we saw in the formation of regulation in the traditional finance industry, I think, within the EU, with MICA, I think we will see another version of it. So I think we can expect MICA 2 at some point. When that will come is difficult to say. But this industry is innovating very quickly. And so MICA 2nd may come relatively quickly actually. I expect that MICA 2 will do a few things. Number one, it will try to provide further clarity around the areas where there will be lack of harmonization across Europe. So I mentioned that different regulators, different competent authorities in Europe are providing their guidance or opinions on how to comply with regulations in different ways at the moment.
I suspect MICA 2 will be needed to bring some of that together and provide harmony. I suspect MICA 2 will also then begin to contain some refinements to capture areas like DeFi and DAOs and NFTs. So that will begin to be captured under MICA 2. It’s interesting to speak about MICA 2 so early after the implementation of MICA itself, but I suspect it will be needed given how quickly it’s going. And in terms of extraterritoriality, I think very soon, when the other global hubs begin to implement their regulatory frameworks such as the UK, such as the US, there will be discussions and agreements around interoperability and equivalence. And I think that will then help determine what extraterritoriality is going to look like from the regulatory perspective.
Hameed Shuja: Thank you Munib. Very interesting, very comprehensive. But if we can take you a bit further away from the UK and the EU as well, the US remains the top market in crypto globally, but the regulatory approach is a bit fragmented. There is a lot of calls for deregulation. It’s a bit political in nature as well. How do you see it? The current trajectory of crypto regulation in the US. And do you think all this call for deregulation might change with the potential change in regime, in government in four years time? How do you see it?
Munib Ali: Yeah, I mean, the US is a very interesting market, a very important market because of the size, first of all, of that market. It’s a critical player in terms of how crypto industry is shaped now and in the future. So it’s a really important one to understand. And also because when it comes to stablecoins, the majority are pegged to the US dollar. So it’s a very important market when it comes to watching how the regulation is developing. The US market is being shaped through political desires of course. But then, in which region is it not? You know, you might say it can be a bit more volatile in the US, but, you know, political agendas do influence regulatory frameworks across the globe. So that is not really new. It’s important in this crypto space that it’s one to watch.
I think it’s interesting that recently the US Senate managed to pass the Genius Act which I think will pave the way. It looks like it’s going to pave the way for a regulatory framework to emerge for dollar-pegged stablecoins. So that’s a positive development when it comes to the global market, the industry as a whole. So that’s quite interesting. But overall, the landscape I would say in the US is still fragmented. You know, apart from the federal regulatory regimes, you have your individual state licensing requirements, etc. it’s still quite fragmented and we require, the industry requires, clarity still on what the medium to longer-term framework is going to look like.
Of course, when it comes to very important regulators such as the SEC and the CFTC, they’ve gone through quite a substantial change now in terms of their leadership. And that leadership has committed to working closely together to establish what the new regime is going to look like. It’s very clear that the US is moving away, or scaling back its historic regulation by enforcement stance, and is now going to come up with a more formal framework for how it’s going to regulate crypto services. So I would say that the uncertainty is still there. They’re working towards addressing that. The passing of the Genius Act goes a long way to providing clarity as to where it’s going to go, but it still remains fragmented, and we need to watch it.
Hameed Shuja: You said something very interesting earlier, Munib. You said trust is the critical, invisible infrastructure with digital assets. Now, I promise I don’t want to make this too political, but when politicians get over-involved or too much involved in crypto, does that trust factor also impact crypto and digital assets? The US is a perfect example.
Munib Ali: To some extent, I think, from what we can, what we see, and my view of this is that there is an element of caution when it comes to very important political leaders who are playing in the space of crypto and people are worried about conflicts of interest and so forth. However, I think, more generally speaking, when you look at the trends in the crypto market, it does look like it really matters to the wider public when it comes to the overall dynamics of how the crypto market is being formed, how it’s developing. It hasn’t really impacted that despite, you know, these concerns which form around the involvement of political leaders. And so I don’t think, although certain doubts can form and some criticism can rise, I don’t think, at least at the moment, it has damaged the trust in the system as a whole.
Hameed Shuja: And if we can move beyond the US, towards the east, probably. What are the other important markets in the East specifically that we need to keep an eye on? Where is crypto developing in other major parts of the world?
Munib Ali: Yeah. So this is also very interesting to watch as well. So I can, to mention the few. So Singapore is an interesting one. So Singapore, I would summarize it as a, it’s a cautious, but a proactive regulatory framework there. So Singapore has quite a clear licensing regime. And over the last few years it’s been tightening its rules as well as it learns about the market and seeks to increase protection for consumers. So it’s been tightening its rules around cyber. It’s been tightening its rules around business conduct. And very recently it clarified certain rules in terms of the need for licensing, even if you are only dealing with consumers outside Singapore. And that had a bit of a bit of a reaction in the market as well. So Singapore is quite proactive. It has been quite proactive in terms of its development of a regime that can be understood. So Singapore is an interesting one.
Then you’ve got UAE which you cannot ignore. UAE, I would categorize as, in terms of regulatory framework, as being fast and pro-business. It has a tailored rules for digital assets. It is, particularly in Dubai and Abu Dhabi, working very quickly. It is responsive to organizations. It is very happy to have direct dialogue with institutions, and it offers you quicker licensing compared to many other jurisdictions. And so that’s why I categorize it as fast and pro-business. And it’s not ignoring the way regulatory standards are increasing around the world. So you know, whereas like others focus very much so on money laundering standards, it has expanded that and is looking to expand that further as well. So the UAE is very attractive for crypto firms at the moment.
The other one I would mention as one to watch is India. So India has been very cautiously observing the regulatory market globally. It hasn’t banned crypto, but it also hasn’t encouraged crypto so much either. It hasn’t got yet a formal regulatory framework which firms can lean into. It’s quite heavily taxed. And only in the very recent past it was pushing out crypto firms from India. However, more recently it looks like the stance is softening somewhat. And we’ve seen, you know, a number of exchanges that have gone back to India registering with the Financial intelligence unit, as a result of which they have to comply with money laundering regulations in the main. So there is some softening there.
Jean Hurley: Thank you. It’s fascinating. Hameed, I know you’ve written extensively about crypto in these jurisdictions. What’s your thinking on this?
Hameed Shuja: I mean, Munib had some very interesting points. I’m just going to add a few things to that. We mentioned the UAE. It’s quite impressive. I mean, just to give you some stats Jean. 27% of the population owns crypto in the UAE. That’s the highest adoption per capita in the world. In 2024 it saw 15 million app downloads in the UAE. That was a 41% increase on the previous year. It just shows the amount of interest in the general public. Crypto friendly legislation, as Munib mentioned. VARA, the Virtual Assets Regulatory Authority. It’s a comprehensive, impressive piece of legislation. $30 billion investment in 2024. And then MGX, Abu Dhabi-based, they invested $2 billion in binance earlier this year in March 2025. So some impressive figures. But if you take that and compare that with, let’s say India, which has a “let’s see how it goes” approach towards towards crypto.
And I think it’s an interesting one to watch because I think India seems to be following the deregulatory stance that the US have taken following the election of Trump. We are expecting a discussion paper in India around the regulatory framework to be proposed, shortly, potentially even this month. And so there is activity happening there. But it has a long way to go, I think, in terms of, you know, developing a framework which provides some clarity as to where it wants to go with crypto overall.
There is no crypto regulation in India. It’s not legal as you said, but it’s not illegal either. So you are at your own risk. Crypto is not recognized as a legal tender. You’re free to buy and sell crypto. What’s interesting, Munib mentioned the heavy tax. There is a 30% income tax in India on crypto incomes, despite the fact that is no legislation. Which is why the Supreme Court earlier this year intervened and said if you are charging people with 30% tax, then you need to put together some sort of a legislation in India as well. So two very different approaches. But the UAE, I think, is obviously the more impressive one in terms of legislation and adoption rates.
Jean Hurley: Fascinating facts. Absolutely. Would you like to add anything Munib?
Munib Ali: No, I think it’s, as mentioned, it’s a really fascinating area. I think the differences that the different regulators have taken in their approach to how tough they want the regulations to be is very interesting. Because if you look at the crypto market, the consumers require crypto to remain a global service. More global than any of the traditional finance services that we have. And so how this plays out in terms of the different regulators.
There are sort of competing levers in which they’re using regulatory burden is a really interesting one, because consumers want the choice. They want to be able to trade with different exchanges. They want to be able to trade directly using exchanges. They want to be able to take advantage of the latest innovations in crypto, wherever they might be. Those firms might be offering those services around the world. That’s what the demand is. One of the reasons why we’ve seen such great innovation using crypto. And so with different regulatory regimes and different stances that the different countries are taking, it is very interesting how that coincides with that consumer demand.
Jean Hurley: Great. So what we’re doing now, we’re leading to the end of our podcast. And with everything you’ve said, I think one of the things, if we gaze into the crystal ball, what do you think is going to be the most significant regulatory developments in the crypto space over the next 12 to 18 months? I think global harmonization, I mean, will there be issue over, say, talent? I mean, where’s everyone going to go? Which hub will they go to? So if you can give me your views and where you think they’ll go, and it’d be great Hameed if you could pop in as well on that. You go first, please Munib.
Munib Ali: Yeah. So I think over the next 12 to 18 months, firstly I would say that we will see clarity of regulatory frameworks in some of the very important hubs where we haven’t seen it yet. So the UK and the US in particular. So I think we will see that, very soon. I mentioned that we will also see the capture in some shape or form of DeFi and DAOs as well. We will begin to see that, crystallize the capture of that. I think we will see move towards global alignment and interoperability, which you mentioned as well. We spoke about just now how complicated that’s going to be. So that’ll be an interesting one to watch. The one area which I haven’t mentioned, which I think is going to be a key area of development and focus over the next 12 to 18 months, is cyber risk and operational resilience. Now they are being captured through regulation.
So one of the big challenges, which I should have mentioned as part of your earlier question, one of the big challenges under MICA is the need to comply with DORA. It’s not an easy regulation to comply with. It’s quite substantial. But more generally, in terms of cyber and operational resilience, these are key risks in the world of crypto. We’ve seen some high profile incidents such as the Bybit hack, which was a substantial hack and caused significant harm. These risk areas, cyber risk and operator resilience, I think the regulators and therefore firms will place very heavy focus on over the coming 12 to 18 months. Right now, we’re seeing the implementation of the regulations and firms falling into compliance with regulations, getting their licenses. But I think cyber risk and operational resilience is going to be key area of focus over the next 12 to 18 months, which we haven’t. You know, it’s not that it’s not been an area of focus, but I think we will see a real lot of light being shown on firm cyber risk capabilities.
Jean Hurley: Yeah. And it’ll be really interesting because some governments have been talking about banning payments over ransomware and fines. Something to see how that goes forward. Hameed?
Hameed Shuja: I agree with what Munib said earlier. Crypto is about trust. And because it’s about trust, crypto by nature, I think is very political as well. And we have seen from the past that where governments take the front foot, crypto is booming in those markets. The US is a good example. Now, whether they’re moving in the right or the wrong direction, that’s a separate debate. But the regimes, the administrations are on the front foot on crypto. Singapore, for example, the government is heavily involved. The UAE is very crypto friendly. That’s why those markets are booming.
In other markets comparatively, it’s about who would be responsible if something goes wrong. The UK, I think is a very good example. Perhaps there is always that fear of what if. Perhaps the EU as well. But I think there are other things involved looking at the future, cyber security, trust, consumer protection, I think a good way to move forward would be for the regulators and the governments to come together and work together. And I think that will generate more trust, more investment. And that’s the way forward.
Jean Hurley: So final words to you Munib. I think what would be your key piece of advice for firms?
Munib Ali: Well, so I have the benefit of looking at how regulations develop in crypto space, having worked with so many different firms as they went through the development of regulation in the traditional finance world. And two key things that I normally advise clients of in terms of what they need to be keeping an eye on and what they need to be focusing on.
Number one is they need to treat compliance as a strategically important initiative. That’s important because firms who are able to navigate what is currently quite a fragmented regulatory environment globally, the firms that were able to navigate that successfully and the ones that will be successful in the future, those are the firms that will be able to build the most effective and efficient compliance frameworks for their organizations. They will be the ones who’ll be able to build sustainable businesses that will be able to withstand the threats to the resilience. For example, they will be the ones that will remain trusted by these consumers who are willing to move very quickly. And also, those are the firms for whom the path will be clearer by the authorities to be able to expand their businesses, to continue innovating, bring about new products and go after new types of markets and jurisdictions and clients. And so it’s very important to treat compliance not as a tick box exercise, but as a very important strategic initiative. So that’s the first one, which I’m advising clients on.
The second one, and again, this is learning from the TradFi experience of maturing regulation and markets and industries, is that it’s really important to lay the foundations now for a strong culture. Jean, you mentioned culture earlier in this in this podcast. Lay the foundations now for a business with strong culture, with an agile and risk based control framework where risks are identified and addressed before they materialize. That’s something which we have learned from the TradFi world, where management is on the front foot when it comes to dealing with regulatory issues and regulators themselves remaining on the front foot rather than reacting to issues and regulatory trouble.
And also, this is going to be really important to make sure that crypto firms do not experience the cycle that we’ve seen in the TradFi world of firms doing well, but then falling prey to some very huge risk failure, getting into trouble with regulators, spending a lot of money and capital and reputational damage to remediate, and then having a few years of, you know, not having risk issues materialize and doing well and growing and then suffering the same again once they start to loosen up their focus on risk and compliance. So it’s really important to lay the foundations now for these for crypto firms, for that, the type of culture and risk management framework so that they have a very sustainable business model for the medium to longer term. Because ultimately, we’re right at the beginning of the journey at the moment.
It looks like we’ve been in crypto for quite some time, but really, we are right at the beginning of the journey where the industry is forming, the demand from consumers is forming. The innovation is on its way. And the regulatory framework that’s going to support that is just forming as well. And so we need to make sure that firms are implementing getting on the front foot now from a risk and regulation perspective to make sure that they can have a sustainable business model in the longer term, not just at the beginning of the journey.
Jean Hurley: That’s excellent advice. Thank you very much. Munib, it’s been great having you on the podcast. Thank you for your time and sharing your insight. And thanks to Hameed for joining me on this. And most importantly, thank you to our listeners. If you’re hearing this, you probably know about us, but please tell your friends about GRIP. You can find us at grip.globalrelay.com and you can follow us on LinkedIn. Until our next podcast or article, I bid you farewell.
