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In the 1990s and early 2000s, we witnessed the explosive rise of computer and console games. Titles like The Sims, World of Warcraft, and Grand Theft Auto revolutionized gaming, captivating millions around the world. By 2000, the gaming industry had already become a multi-billion-dollar market, reaching $31 billion globally. Fast forward to today, and the gaming industry is now valued at over $200 billion, with the global number of gamers surpassing 3 billion—a staggering increase from around 200 million in the 1990s. This represents a phenomenal 1,445% growth in just three decades.
While video games became a cultural and economic powerhouse, they were also at the center of intense public and political scrutiny. One of the most debated topics, which even reached the U.S. Congress, was whether violent video games led to aggressive behavior. In response to these concerns, the Entertainment Software Rating Board (ESRB) was established in 1994 to moderate game content and provide age-appropriate ratings, a model that remains influential today. Despite the uproar, research from reputable institutions like the Oxford Internet Institute has found no conclusive evidence linking video games to violent behavior. In fact, recent studies have highlighted the positive effects of gaming, such as enhancing cognitive skills, problem-solving, and social interaction among children and young adults.
The societal and political apprehension towards new technologies is not unusual. Just as video games faced skepticism, cryptocurrency is now encountering similar regulatory challenges. Since Bitcoin’s inception in 2009, introduced as a response to the 2008 financial crisis, the cryptocurrency market has expanded exponentially. By 2024, there will be over 10,000 actively traded cryptocurrencies. The total market value of crypto assets surged significantly, peaking at around USD 1.18 trillion in late 2023, according to Coinbase ’s 2024 Crypto Market Outlook . This growth reflects a steady increase in adoption across various sectors, even though the market has experienced periodic volatility. Global ownership rates are on the rise, with a broader institutional investment and growing acceptance of digital assets as an integral part of the financial system.
However, rapid growth often brings regulatory uncertainty. International bodies such as the Financial Action Task Force (FATF) have taken cautious steps, while individual countries have implemented stricter measures. For example, People’s Bank of China (PBoC) implemented a total ban on all cryptocurrency transactions, citing concerns about financial stability and market speculation. In Australia, fears over money laundering have led banks to engage in “de-banking”—closing accounts of cryptocurrency exchanges, which can push crypto activities into less transparent channels, complicating law enforcement’s ability to monitor suspicious transactions.
These regulatory debates are reminiscent of the 1990s video game controversies. Just as the ESRB was created to address concerns and enable responsible innovation within the gaming industry, today’s regulators face a similar task in the digital asset space. With thoughtful oversight and adaptive frameworks, new technologies—whether in gaming or cryptocurrency—can thrive without compromising societal safety. The lessons from gaming’s regulatory evolution can serve as a guide for shaping a balanced and forward-looking approach to cryptocurrency regulation, fostering growth while protecting consumers and financial systems.
Innovation in Check: Malaysia’s Balanced Formula for Digital Asset Growth
Malaysia is a fascinating case study of how a balanced regulatory approach can promote innovation without compromising on oversight and consumer protection. In Malaysia, the Securities Commission Malaysia (SC) plays a pivotal role in shaping the regulatory landscape for digital assets. Under the SC’s Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, digital currencies and tokens are classified as securities, and therefore digital asset business operators are regulated by the SC and subject to the same regulatory standards as capital market intermediaries, including strict Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT) and Countering Proliferation Financing (CPF) measures.
This balanced approach has helped Malaysia foster a growing digital asset industry. By ensuring that digital assets undergo thorough risk assessment before they are made available to investors, the SC has managed to build a regulatory framework that prioritizes both innovation and investor protection. Malaysia is one of the few jurisdictions where digital asset exchanges (DAXes) must obtain approval from the SC before listing any new digital assets, ensuring that regulatory oversight keeps pace with technological advancements.
In my (Razin) previous role, I had the opportunity to establish the Digital Asset Business Operators Compliance Officers’ Networking Group (DCONG) under the Malaysian Digital Asset Platform Association (MDAPA). Championed by the Compliance Officers in the DAX industry, this initiative created a platform for collaboration between the private sectors and regulators, strengthening the regulatory framework and promoting responsible growth in Malaysia’s digital asset space.
The introduction of Malaysia’s SC’s Regulatory Sandbox in October 2024 further underscores the country’s commitment to fostering responsible innovation. By providing a controlled environment where fintech and digital asset firms can test new technologies, the SC enables the digital asset industry to grow while ensuring that new products are safe for consumers. This approach strikes a delicate balance between encouraging innovation and maintaining regulatory oversight—a lesson that other jurisdictions could learn from.
Blockchain Oasis: How the UAE Became a Global Leader in Digital Assets
While Malaysia takes a balanced approach, the UAE has positioned itself as a global hub for fintech and digital asset innovation by adopting a flexible, experimental regulatory model. The UAE’s success in the digital asset space can largely be attributed to the use of regulatory sandboxes, which allow companies to experiment with emerging technologies in a controlled, compliant environment.
Dubai’s Virtual Assets Regulatory Authority [VARA] has created one of the world’s most advanced regulatory sandboxes, enabling fintech and blockchain companies to test new products before they reach the broader market. This has turned Dubai into a global hub for blockchain technology, attracting major players like Binance, crypto.com, Animoca Brands and Bybit to set up shop. In fact, Dubai’s Blockchain Strategy, which aims to shift all government transactions on blockchain by 2025, is one of the most ambitious initiatives of its kind globally. As of 2024, the country hosts over 2,040 blockchain-related organizations and more than 10,600 professionals, reflecting a vibrant and diverse industry.
Yet, as innovative as the UAE’s approach is, it is not without challenges. One of the key hurdles that the UAE faces is the fragmentation of its regulatory landscape. Free zones like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) each have their own regulatory authorities, which can lead to inconsistencies in how digital assets are governed. For example, while ADGM’s Financial Services Regulatory Authority (FSRA) has created comprehensive frameworks for virtual assets and initial coin offerings (ICOs), these regulations differ from those applied by VARA in Dubai. This regulatory fragmentation presents challenges for companies seeking to operate across the different zones.
Nonetheless, the UAE’s flexible approach has been widely praised for enabling innovation while maintaining consumer protection. By embracing a sandbox model and encouraging real-world experimentation, the UAE has solidified its position as a leading hub for digital assets and blockchain technology.
MiCA’s Mission: Bringing Order to the EU’s Digital Asset Landscape
In contrast to the UAE’s flexible, sandbox-driven approach, the European Union has opted for a more structured regulatory framework through the Markets in Crypto-Assets (MiCA) regulation. MiCA is designed to harmonize digital asset rules across all 27 EU member states, creating a consistent regulatory environment for businesses and consumers alike.
Got sometime? Learn more in details how MiCA works.
MiCA focuses heavily on consumer protection and market integrity. Crypto-asset service providers (CASPs) must adhere to strict transparency and compliance requirements, including robust Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols. MiCA’s structured approach provides much-needed legal clarity and stability for businesses operating in the digital asset space, making it easier for them to navigate regulatory requirements across the EU.
However, MiCA is not without its critics. Some industry players argue that its stringent requirements could stifle innovation, particularly for smaller companies and startups that may struggle to meet the high compliance costs. Additionally, MiCA’s exclusion of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) has raised concerns about regulatory gaps that could leave parts of the market unregulated. These omissions could pose risks to consumer protection and market stability as DeFi and NFTs continue to gain prominence in the digital asset space.
Despite these concerns, MiCA represents a significant step forward in creating a consistent and structured regulatory framework for digital assets in the EU. It strikes a balance between fostering innovation and protecting consumers—an approach that other regions are likely to follow in the future.
Innovation vs. Protection: Striking the Balance in Digital Asset Regulation
The global effort to regulate digital assets reflects the complexity of balancing innovation with consumer protection. Malaysia’s balanced regulatory framework, the UAE’s flexible sandbox model, and the EU’s structured approach under MiCA each highlight the different ways jurisdictions can approach digital asset regulation.
What is clear is that no single approach will work for every country. Each jurisdiction must navigate its own economic priorities, risk appetites, and local challenges to find the right regulatory balance. Malaysia’s success shows that responsible innovation and strong oversight can go hand-in-hand. The UAE’s rapid growth in blockchain and digital assets demonstrates how regulatory flexibility can attract global talent and investment. And the EU’s MiCA regulation offers a stable foundation for businesses, albeit with concerns about its potential to stifle innovation in some areas.
As digital assets continue to evolve, regulators around the world will need to remain adaptive and collaborative. By learning from each other’s successes and challenges, jurisdictions can create regulatory environments where digital assets thrive—contributing to economic growth without compromising financial stability.
Just as the ESRB once shaped the future of video game regulation, today’s regulators have the opportunity to shape the digital asset industry in a way that fosters innovation while ensuring the safety and protection of consumers.
Authors
Razin Nizar (Associate - AICB, ACRC, ACAML, CAML) is the founder of Pragmax Consulting, specializing in risk and compliance.
Sanad Karkar, JD is a business and legal strategy consultant and the founder of Moonrock Consultancy, with expertise in Business, Technology and international law.
Bridging Technology, Compliance and Law
This series of articles, blogs, and webinars will focus on highlighting the latest developments in regulatory compliance, legal frameworks, and the technological advancements shaping the blockchain industry. It brings together two former college friends from Bond University —Razin Nizar and Sanad Karkar—who, after diverging into different professional paths continents apart, have reunited at the forefront of digital assets more than 14 years later. As experts in risk management, compliance, business, and legal strategy, our collaboration is dedicated to exploring how the intersection of law, technology, and compliance can address the challenges of this rapidly evolving ecosystem.
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