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January 17, 2025

DORA: The Future of Cryptocurrency Trading

DORA: The Future of Cryptocurrency Trading

The Digital Operational Resilience Act (DORA) is about to shake things up for crypto currency exchange trading in the EU. With the new regulations rolling out, crypto businesses are facing strict compliance requirements that may pose a challenge to the concept of decentralization. So, how’s this going to play out for MiCA-licensed firms and the smaller startups out there? Let’s dive into the good, the bad, and everything in between.

What is DORA and Why Does it Matter?

DORA brings a new set of cybersecurity and operational resilience standards that are going to affect financial entities in the EU, including cryptocurrency companies. Its aim? To make the financial sector more secure and stable by enforcing solid risk management practices and compliance measures. For crypto, this marks a significant shift towards a more regulated environment, which could be a blow to its decentralized roots.

What Does DORA Mean for MiCA-Licensed Firms?

A Heavy Load of Compliance

DORA’s requirements are especially daunting for MiCA-licensed firms, like crypto asset service providers (CASPs). These companies are now required to keep detailed records of their contracts with third-party IT service providers, ensuring that their infrastructure is safe and their risk management is up to scratch. We’re talking regular tests of operational resilience, incident reporting, and solid cybersecurity protocols.

As Matt Sullivan from MoonPay points out, complying with DORA isn’t a walk in the park. MoonPay, which got its MiCA license from the Dutch Authority for the Financial Market, has had to mobilize a lot of internal resources to stay compliant. This includes diving into their vendor relationships and preparing a DORA-compliant registry.

Building Operational Resilience

Mark Jennings from Gemini highlights that DORA is crucial for fortifying the operational resilience of the financial sector against ICT-related risks. To prep for DORA, Gemini has put in place a Digital Operational Resilience Strategy, an ICT risk management framework, and adopted best practices. This just goes to show how much work is needed to stay afloat in this new regulatory sea.

The Struggles of Smaller Startups

Compliance Costs

Smaller crypto startups are feeling the pinch more than anyone else. The compliance costs and admin overload from DORA are going to be significant. They need to have top-notch cybersecurity, conduct regular stress tests, use advanced risk management methods, and report incidents, all of which can be expensive and time-consuming. This could be a hurdle for new entrants in the market, and we may see a lot of them merging or exiting.

Cathy Yoon from Wormhole Foundation mentions that while many CASPs already have strong cybersecurity measures in place, smaller service providers might struggle due to financial constraints. The fallout could be a consolidation of service providers to meet DORA’s expectations.

Agility and Adaptability

On a brighter note, smaller cloud-first organizations might actually find their nimbleness to be an advantage. Many of them could already be complying with some of DORA’s requirements simply because they’re digital-first. Tools like unified communications can help them break down silos and improve compliance efficiency, making it easier to deal with the new regulations.

Consumer Costs and Innovation

Compliance Cost Increases

Expect DORA to add some extra weight to the costs for companies in the crypto market. These costs will stem from the need to ramp up cybersecurity, enhance risk management, conduct regular resilience tests, and manage third-party providers more rigorously. Estimates suggest that maintaining DORA compliance could add around 10% to an organization’s cybersecurity costs, which will likely affect IT budgets in the long run.

Impact on Consumers

The companies will foot the bill for compliance, but consumers might end up seeing some of that cost reflected in higher fees or charges. However, it’s not mandated by DORA, and companies may find a way to absorb these costs. On the flip side, the improved security and reliability of crypto transactions could encourage greater trust and adoption in the crypto market.

Innovation Under DORA

While DORA might slow down new entrants or smaller players, it could also stimulate innovation by creating a more secure environment. The regulation gives fintech firms and traditional financial institutions a clearer path to innovate around security solutions and resilience protocols. A well-defined regulatory framework can help businesses better navigate the landscape and foster healthy competition.

Summary: The Road Ahead

DORA marks a major shift towards a more regulated cryptocurrency industry. While the immediate challenges include higher compliance costs and regulatory burdens, the long-term benefits are expected to be more positive. The regulation sets the stage for better standards and stronger resilience, which could help fuel growth in the digital asset ecosystem, leading to more stable and secure services.

As the industry adapts to this new regulatory reality, striking a balance between decentralization and compliance will be vital. The future of cryptocurrency trading will hinge on how well the industry can manage these challenges and seize opportunities presented by DORA.

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Egor Romanov
About Author

Egor Romanov is an experienced crypto analyst, professional trader, and author of trading strategies and the Cryptorobotics blog, where he shares his knowledge about cryptocurrencies and financial markets.

Alina Tukaeva
About Proofreader

Alina Tukaeva is a leading expert in the field of cryptocurrencies and FinTech, with extensive experience in business development and project management. Alina is created a training course for beginners in cryptocurrency.

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