HTX Ventures: Exchanges balancing the challenges and opportunities facing compliance and innovation under clear regulatory framework

Huobi HTX, the world's leading cryptocurrency exchange, ranked among the top three euro-stablecoin trading volumes in CoinDesk's recent report titled " MiCAR: Institutional Guide to the European Digital Asset Market" . The report explores the main trends shaping the European digital asset market by analyzing the Markets in Crypto-Assets Regulation (hereinafter referred to as MiCAR). According to the report data, the average monthly trading volume of Huobi HTX is as high as 48 million euros, of which the trading volume in November 2024 was 33 million euros, ranking third, second only to Binance and Coinbase.

While the euro-dominated trading volume surges, the regulatory environment continues to change, and regulatory clarity has become a key driving force for institutional participation and market confidence. The full implementation of MiCAR is an important milestone in 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 that this landmark regulation brings.

“The implementation of MiCAR is an important step in the cryptocurrency industry in the right direction. It not only provides the industry’s much-needed regulatory clarity, but also creates an environment that is conducive to institutional participation. As countries around the world become more friendly to cryptocurrencies, a unified framework like MiCAR will accelerate innovation while ensuring robust compliance. HTX Ventures sees this as an opportunity to drive on-chain compliance tools, support the development of compliant DeFi solutions, and close the gap between traditional finance and digital assets.”

opportunity

• Unified supervision reduces costs and enhances market confidence

MiCAR covers 27 member states across the EU through a "single license", which greatly reduces investment costs in cross-border compliance. This unified regulatory framework provides the market with a clear and stable rule environment, helps to enhance the confidence and participation of institutional investors, and at the same time promotes Europe to become the world's largest compliant digital asset market.

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

In order to adapt to MiCAR's strict anti-money laundering (AML), reserve monitoring and other requirements, the exchange can actively explore innovations in compliance tools:

• Use oracles to modularize AML rules and reserve monitoring and execute on the link to ensure real-time and transparent data;
• Use zk-SNARKs to build an on-chain regulatory data middle platform to achieve desensitization of transaction data on the chain, which not only meets regulatory transparency but also protects user privacy;
• Use account abstraction technology (ERC-4337) to integrate the KYC process into a non-custodial wallet, lowering the threshold for traditional financial institutions to access DeFi.
• New opportunities for the integration of real assets and crypto assets

With the launch of securitized tokens on platforms such as Coinbase, exchanges can introduce real-world assets (RWA) transactions, such as income stablecoins based on U.S. stocks or U.S. Treasury bonds, allowing users to use assets such as USDT to achieve multi-asset allocation and global liquidity connection.

challenge

• Cost and technical complexity caused by strict compliance requirements

MiCAR has put forward strict requirements on stablecoin issuers and crypto asset service providers (CASPs). The exchange must invest huge R&D and operation and maintenance costs in technical integration oracle, data desensitization, and on-chain regulatory data middle platform to ensure that the system meets regulatory requirements without affecting market fluency.

• Uncertainty in 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 testing and regulatory scenario simulation. This forward-looking deployment requires continuous investment, and there are risks at the policy interpretation and implementation level.

• Strict requirements for security risks and custody systems

Affected by FTX bankruptcy and Bybit security incidents, the market's supervision of security compliance has become increasingly strict. MiCAR clarifies the responsibilities of digital asset custody and requires custodians to implement bank-level security measures to prevent hacker attacks and asset loss. In the process of integrating DeFi and traditional regulatory systems, the exchange needs to deal with the challenges of technical loopholes and security risks at the same time.

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, and create a win-win situation. Looking ahead, HTX Ventures will give full play to its professional insights, actively explore on-chain compliance tools, expand real-world asset trading, and build a dynamic testing environment to meet complex regulatory challenges, and ensure that cryptocurrency innovation drives long-term participation and market sustainability together.

About HTX Ventures

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

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

About Huobi HTX

Founded in 2013, Huobi HTX has gone from a cryptocurrency exchange to a comprehensive blockchain business ecosystem 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, and security compliance, and provides comprehensive, safe and reliable value and services to virtual currency enthusiasts around the world.