Principles Based regulation is a regulatory approach that sets broad objectives and overarching principles rather than prescribing detailed, rigid rules. In the digital asset sector, this means regulators establish desired outcomes, such as market integrity or consumer protection, and allow firms flexibility in how they achieve these. This approach aims to foster innovation while still upholding essential standards. It contrasts with prescriptive rule-based systems by offering greater adaptability.
Context
The application of a principles-based approach to digital asset regulation is a widely discussed topic among policymakers and industry participants. Advocates suggest it can better accommodate the rapid technological changes inherent in blockchain and crypto. Critics sometimes express concerns about a lack of clarity or potential for inconsistent enforcement. Jurisdictions are evaluating this method to balance regulatory oversight with the need for innovation and adaptability in the evolving digital economy.
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