Special Economic Zones are the future of cryptocurrency exchanges

Many of the world’s largest exchanges are incorporated into special economic zones (SEZs), such as Binance in the Labuan Special Economic Zone in Malaysia or Bitfinex in the Astana International Financial Center in Kazakhstan.

Special Economic Zones (SEZs) are business parks or cities with unique regulatory frameworks that differ from those of their countries of origin. re are more than 7,500 SEZs located in 70 countries.

companies or organizations that manage the zones usually have a certain degree of regulatory autonomy. This allows companies operating in the SEZs to deal directly with the authorities in the area. Instead of inefficient regulatory agencies associated with the central government.

Throughout 2021, SEZs have increasingly started to use their regulatory autonomy to attract cryptocurrency exchanges. Many new areas are targeting cryptocurrencies when their main sector has appeared.

In January, the Dubai Financial Services Authority unveiled a new regulatory framework for cryptocurrency exchanges. This new framework gave SEZs such as the Dubai International Financial Center and the Dubai Multi-Product Center the right to regulate exchanges themselves.

Several weeks later, Belarusian First Deputy Prime Minister Nikolai Snopkov made a similar announcement. He said that SEZ regulators would now have the right to directly regulate cryptocurrency exchanges, bypassing the central government.

This means that exchanges located in SEZs, such as Belarus Hi-Tech Park, can now work directly with authorities in the area to obtain regulatory approval instead of going through the central government.

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This summer a similar plan was announced in Iran. This was officially announced by the ICT Minister, Muhammad Javad Azari Jahromi. plans to create a crypto-centric EEZ on the island of Kish in the Persian Gulf. Since cryptocurrencies are illegal on the mainland, the zone will have a single regulatory margin to handle officially authorized exchanges.

A double edged sword

Regulatory independence is a double-edged sword that can sometimes lead to corruption. A government regulator in the Cagayan SEZ in the Philippines has been arrested for allegedly taking bribes in exchange for granting cryptocurrency trading licenses.

re are also serious corruption issues surrounding the development of a casino project in a Laos SEZ, which seeks to establish itself as a hub for cryptocurrency-enabled online gambling.

SEZs are at the heart of the regulatory revolution surrounding cryptocurrency adoption. road to adoption will inevitably be bumpy and bumpy.

Once various SEZs are successful in hosting exchanges, other areas are sure to follow. SEZs have the potential to ease regulatory burdens associated with cryptocurrency exchanges, alleviating investor concerns.

One of the main reasons for this trend is the increase in working from home after the global pandemic. Many SEZs that relied on renting traditional office space have seen their business caral turned upside down. Cryptocurrency offers a plausible alternative for these areas. Work from home will last, but so will cryptocurrencies.

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