HTX Ventures: Balancing the challenges and opportunities of compliance and innovation for exchanges under a clear regulatory framework

HTX, the world's leading cryptocurrency exchange, recently published a report titled "MiCAR: An Institutional Guide to the European Digital Asset Market" on CoinDesk It ranks among the top three in terms of euro stablecoin trading volume. The report explores the key trends shaping the European digital asset market by analyzing the Markets in Crypto-Assets Regulation (MiCAR). According to the report data, Huobi HTX's average monthly euro-stablecoin trading volume is as high as 48 million euros, of which the trading volume in November 2024 is 33 million euros, ranking third, behind Binance and Coinbase.

The surge in euro-led trading volume coincides with the evolving regulatory landscape, where regulatory clarity has become a key driver of institutional engagement and market confidence. The full implementation of MiCAR is a significant milestone in the cryptocurrency industry, offering a unified regulatory framework across 27 EU member states. While simplifying compliance and fostering innovation, MiCAR also presents complex challenges that exchanges must face. HTX Ventures further explored the unprecedented opportunities and challenges presented by this landmark regulation.

Alec Goh, Head of Business at HTX Ventures, said: "The implementation of MiCAR is a significant step in the right direction for the crypto industry. It not only provides much-needed regulatory clarity in the industry but also fosters an environment conducive to institutional engagement. As countries around the world become more friendly to crypto-related policies and regulations, a unified framework like MiCAR will accelerate innovation while ensuring robust compliance. HTX Ventures sees this as an opportunity to drive the development of on-chain compliance tools, support the development of compliant DeFi solutions, and bridge the gap between traditional finance and digital assets. ”

Opportunity

Unified supervision reduces costs and enhances market confidence

MiCAR covers all 27 member states of the European Union through a "single license", which allows exchanges to significantly reduce investment costs in cross-border compliance. This unified regulatory framework provides a clear and stable regulatory environment for the market, helping to increase institutional investor confidence and participation, while promoting Europe as the world's largest compliant digital asset market.

Technological innovation drives the implementation of on-chain compliance tools

To meet MiCAR's strict anti-money laundering (AML) and reserve monitoring requirements, exchanges can actively explore innovations in compliance tools:

The use of oracles to modularize AML rules and reserve monitoring and execute them on-chain to ensure real-time data transparency.
zk-SNARKs are used to build an on-chain regulatory data center to achieve desensitization of transaction data on the chain, which not only meets regulatory transparency but also protects user privacy.
Integrate the KYC process into non-custodial wallets using account abstraction technology (ERC-4337), lowering the barrier for traditional financial institutions to access DeFi.
New opportunities for the integration of real and crypto assets

With the launch of securitized tokens on platforms such as Coinbase, exchanges can introduce real world assets (RWA) trading, such as yield-bearing stablecoins based on US stocks or US Treasuries, allowing users to use assets such as USDT to achieve multi-asset allocation and global liquidity docking.

challenge

Cost and technical complexity associated with strict compliance requirements

MiCAR imposes strict requirements for stablecoin issuers and crypto-asset service providers (CASPs), such as sufficient reserves, regular audits, and anti-money laundering. Exchanges must invest huge R&D and O&M costs in technology integration oracles, data desensitization, and on-chain regulatory data centers to ensure that the system meets regulatory requirements without affecting market fluidity.

The uncertainty of the dynamic policy environment

With the rapid evolution of regulatory policies, exchanges need to establish a multi-chain dynamic testing environment in advance and cooperate with regulatory-friendly regions (such as Lithuania, Malta, etc.) to carry out cross-border stress tests and regulatory scenario simulations. This forward-looking deployment requires continuous investment and risks at the policy interpretation and implementation levels.

Security risks and strict requirements of custody systems

Affected by FTX's bankruptcy and Bybit's security incident, the market has become more and more strict in terms of security and compliance. MiCAR clarifies the responsibilities of digital asset custody, requiring custodians to implement bank-grade security measures to protect against hacking and asset loss. In the process of integrating DeFi with traditional regulatory systems, exchanges need to address the challenges of technical vulnerabilities and security risks.

HTX Ventures firmly believes that under a clearer regulatory framework like MiCAR, cryptocurrency exchanges can find a balance between compliance and market innovation through technological innovation and global asset layout, creating a win-win situation. Looking ahead, HTX Ventures will leverage its expertise to actively explore on-chain compliance tools, expand real-world asset transactions, and build dynamic testing environments to address complex regulatory challenges and ensure that cryptocurrency innovation drives long-term institutional participation and market sustainability.

About HTX Ventures

HTX Ventures is the global investment arm of Huobi HTX, integrating investment, incubation, and research to identify the best and brightest teams in the world. As an industry pioneer, HTX Ventures has over 11 years of blockchain construction experience and is adept at identifying cutting-edge technologies and emerging business models in the field. To drive growth within the blockchain ecosystem, we provide comprehensive support to projects, including financing, resources, and strategic advice.

HTX Ventures currently supports more than 300 projects covering multiple blockchain domains, and some high-quality projects are already traded on Huobi HTX. In addition, as one of the most active FOF funds, HTX Ventures invests in 30 of the world's top funds and collaborates with the world's top blockchain funds such as Polychain, Dragonfly, Bankless, Gitcoin, Figment, Nomad, Animoca, and Hack VC to build a blockchain ecosystem. Visit us.

About HTX

Founded in 2013, Huobi HTX has evolved from a cryptocurrency exchange to a comprehensive blockchain business ecosystem after 11 years of development, covering digital asset trading, financial derivatives, research, investment, incubation, and other businesses. As the world's leading Web3 portal, Huobi HTX adheres to the development strategy of global expansion, ecological prosperity, wealth effect, security and compliance, and provides comprehensive, safe, and reliable value and services for virtual currency enthusiasts around the world.

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