Principles-based regulation establishes broad objectives and desired outcomes rather than prescribing detailed rules for compliance. This regulatory approach provides flexibility for regulated entities to determine the best methods for achieving compliance, fostering innovation while still meeting overarching policy goals. It contrasts with rules-based regulation, which specifies explicit actions. In nascent industries like digital assets, a principles-based approach can adapt more readily to evolving technologies and market structures.
Context
Principles-based regulation is frequently discussed in the context of governing the rapidly changing digital asset market, as it offers a flexible alternative to rigid rules. Debates often weigh the benefits of adaptability against concerns about potential lack of clarity and enforcement challenges. Observing how jurisdictions implement this approach will be key to understanding the future regulatory landscape for cryptocurrencies.
The Dubai Financial Services Authority's consultation transfers the burden of non-fiat token classification and suitability to regulated entities, fundamentally altering compliance architecture in the DIFC.
This staff relief operationalizes crypto custody for RIAs and RICs, formalizing state-chartered trust companies as qualified custodians under the Custody Rule.
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