HTX Ventures: Challenges and Opportunities for Exchanges in Balancing Compliance and Innovation under a Clear Regulatory Framework

The globally leading cryptocurrency exchange Huobi HTX has ranked among the top three in euro-stablecoin trading volume in a recent report published by CoinDesk titled ++“MiCAR: The Institutional Playbook for Europe’s Digital Asset Market”++. The report analyzes the Markets in Crypto-Assets Regulation (MiCAR) and explores the key trends shaping the European digital asset market. According to the report, Huobi HTX's average monthly trading volume in euro-stablecoins reached as high as 48 million euros, with a trading volume of 33 million euros in November 2024, ranking third, behind only Binance and Coinbase.

As euro-dominated trading volumes surge, the regulatory environment is constantly changing, and regulatory clarity has become a key driver of institutional participation and market confidence. The full implementation of MiCAR is a significant milestone for the cryptocurrency industry, providing a unified regulatory framework across 27 EU member states. While simplifying compliance and promoting innovation, MiCAR also presents complex challenges that exchanges must face. HTX Ventures further explores the unprecedented opportunities and challenges brought about by this landmark regulation.

HTX Ventures Business Head Alec Goh stated: "The implementation of MiCAR is an important step in the right direction for the cryptocurrency industry. It not only provides the much-needed regulatory clarity for the industry but also creates an environment conducive to institutional participation. As countries around the world become increasingly friendly towards cryptocurrency-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 growth of compliant DeFi solutions, and bridge the gap between traditional finance and digital assets."

Opportunities

• Unified regulation reduces costs and enhances market confidence

MiCAR covers all 27 EU member states through a "single license," significantly reducing the compliance costs for exchanges operating across borders. This unified regulatory framework provides a clear and stable rule environment for the market, helping to enhance institutional investor confidence and participation, while promoting Europe to become the largest compliant digital asset market globally.

• Technological innovation drives the implementation of on-chain compliance tools

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

• Utilizing oracles to modularize AML rules and reserve monitoring for on-chain execution, ensuring real-time transparency of data;
• Adopting zk-SNARKs to build an on-chain regulatory data platform, achieving the desensitization of transaction data on-chain, satisfying regulatory transparency while protecting user privacy;
• Using account abstraction technology (ERC-4337) to integrate KYC processes into non-custodial wallets, lowering the barriers for traditional financial institutions to access DeFi.
• New opportunities for the integration of real assets and crypto assets

With platforms like Coinbase launching tokenized securities, exchanges can introduce trading of real-world assets (RWA), such as yield-bearing stablecoins based on US stocks or US Treasury bonds, allowing users to utilize assets like USDT for multi-asset allocation and global liquidity access.

Challenges

• Cost and technical complexity from strict compliance requirements

MiCAR imposes stringent requirements on stablecoin issuers and crypto asset service providers (CASPs), including sufficient reserves, regular audits, and anti-money laundering measures. Exchanges must invest significant R&D and operational costs in integrating oracles, data desensitization, and on-chain regulatory data platforms to ensure systems meet regulatory requirements without affecting market fluidity.

• Uncertainty from a dynamic policy environment

As regulatory policies evolve rapidly, exchanges need to establish multi-chain dynamic testing environments in advance and collaborate with regulatory-friendly regions (such as Lithuania, Malta, etc.) to conduct cross-border stress tests and regulatory scenario simulations. This proactive deployment requires ongoing investment and carries risks in policy interpretation and execution.

• Security risks and stringent requirements for custody systems

In light of the FTX bankruptcy and Bybit security incidents, the market's scrutiny of security compliance has intensified. MiCAR clarifies the responsibilities of digital asset custodians, requiring them to implement bank-grade security measures to prevent hacking and asset loss. Exchanges must address the challenges of technical vulnerabilities and security risks while integrating DeFi with traditional regulatory systems.

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 allocation, creating a win-win situation. Looking ahead, HTX Ventures will leverage its professional insights to actively explore on-chain compliance tools, expand real asset trading, and build dynamic testing environments to tackle complex regulatory challenges, ensuring that cryptocurrency innovation drives long-term institutional participation and sustainable market development.

++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 worldwide. As an industry pioneer, HTX Ventures has over 11 years of experience in blockchain development, specializing in 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 over 300 projects across various blockchain sectors, with some high-quality projects already trading on Huobi HTX. Additionally, as one of the most active FOF funds, HTX Ventures invests in 30 top global funds and collaborates with leading blockchain funds such as Polychain, Dragonfly, Bankless, Gitcoin, Figment, Nomad, Animoca, and Hack VC to build the blockchain ecosystem together. ++Visit us++.

++About Huobi++ ++HTX++

Huobi HTX was established in 2013 and has evolved over 11 years from a cryptocurrency exchange into a comprehensive blockchain business ecosystem, covering digital asset trading, financial derivatives, research, investment, incubation, and other businesses. As a leading global Web3 portal, Huobi HTX adheres to a development strategy of global expansion, ecological prosperity, wealth effect, and security compliance, providing comprehensive, safe, and reliable value and services for virtual currency enthusiasts worldwide.