The Evolution of Cryptocurrency Regulation: A Perspective from Joey Garcia of Xapo Bank
In a recent interview, Joey Garcia, director and head of regulatory affairs and public affairs at bitcoin-focused Xapo Bank, shared his journey and insights into the evolution of digital asset regulation. Together with CryptoSlate senior analyst James Van Straten, Garcia detailed the challenges and milestones in shaping the regulatory framework for digital assets.
The early days of cryptocurrency regulation
Joey Garcia's journey with Xapo Bank began in 2014 when he met digital asset industry luminary Wences Casares, who approached Garcia with the idea of establishing a regulatory framework for cryptocurrencies in Gibraltar. Garcia recalls:
“Wence came to me in 2014 and said there are no laws or regulations in this entire universe. If we can convince smaller jurisdictions to act quickly and adapt, that's a great opportunity.”
Despite initial skepticism and resistance from authorities, Garcia and his team persevered. Their efforts culminated in the development of a regulatory framework that came into effect at the end of 2017, making Gibraltar one of the first jurisdictions to establish a comprehensive approach to digital asset regulation.
Building a robust framework
Garcia emphasized the importance of building a sound regime that goes beyond basic compliance: “We have built a framework that is a year and a half ahead of the FATF recommendations,” he explained. This forward-thinking approach has positioned Gibraltar as a leader in the regulatory field and attracted major players in the digital asset industry.
The framework was designed to address the complexities of the evolving cryptocurrency industry. Garcia shared his experience working with various countries, conducting gap analyses and providing training to regulators. “I've done gap analyses and assessments in countries like Singapore, Cambodia and Thailand,” he said. This wealth of experience has given Garcia a unique perspective on the global regulatory environment.
Xapo's Unique Value Proposition
Xapo Bank's commitment to security and compliance stands out in the cryptocurrency industry. Garcia highlighted Xapo's transition from being the largest bitcoin wallet provider to a fully licensed bank. “We've always been a bitcoin wallet provider, but we wanted to offer more, so we obtained a full banking license to provide safe and reliable financial services,” Garcia said.
Xapo's focus on security is evident in how it operates: the bank maintains high liquidity ratios to ensure that client assets are fully collateralized. “At Xapo, we require 100% liquidity coverage, but our actual coverage is about 3,000%,” Garcia said, highlighting the bank's strong financial position.
Overcoming global regulatory challenges
Garcia's role extends beyond Xapo Bank. He serves as an expert consultant to the United Nations, providing training and assessments to regulators around the world. He spoke about the importance of understanding the local context and addressing each country's unique regulatory challenges. “For example, in Vietnam, the authorities initially thought DeFi didn't exist. But when I showed them the data, they were number one in DeFi adoption,” he said.
This field experience shapes Garcia's approach to regulation: he advocates a pragmatic, informed approach that takes into account both global standards and local realities. He emphasized:
“It's a matter of time and education. We need to let people know about the difference between regulated custodians and other platforms.”
The Future of Cryptocurrency Regulation
Looking to the future, Garcia envisions a future where regulatory frameworks will continue to evolve in response to the dynamic nature of the cryptocurrency industry. He believes trust and reliability will be key factors in the adoption of cryptocurrency services. He said:
“A long-standing reputation within the industry is one of the most important things. Especially in this industry, it takes time to figure out who the real winners are and who are telling the truth.”
Xapo Bank aims to become a secure pillar of the financial ecosystem with a unique offering that bridges the gap between traditional finance and digital assets.
“We want to give you safe and secure access to your USD accounts and Bitcoin. Protecting and growing your assets in a banking environment is something you can't get any other way.”
Joey Garcia's insights provide a compelling narrative about the challenges and opportunities in the world of cryptocurrency regulation. His work with Xapo Bank and various regulators highlights the importance of a proactive and informed approach to shaping the future of digital finance.
