Over the past decade, the cryptocurrency world has grown by leaps and bounds. It has captured the imagination of millions of investors and tech enthusiasts around the globe. However, this unprecedented growth has not gone unnoticed by governments and regulatory bodies. They have become increasingly concerned about digital currency’s potential risks and challenges.
From special crypto permits to outright bans, crypto is in the crosshairs of regulators worldwide as they explore ways to regulate crypto and ensure its safety and legitimacy. This write-up provides a quick overview of some of the recent and most interesting global regulatory developments in cryptocurrency, highlighting the key policy changes shaping the future of this rapidly evolving industry.
Crypto Regulations in the Americas
In the United States, the Biden administration is exploring the idea of a digital currency for the nation to help bolster its role as a global financial leader. In September 2022, the administration released a regulatory framework outlining digital assets management, including cryptocurrency and other valuable digital items. The framework is designed to make handling digital assets easier and ensure the digital asset space resists fraud. Since the release of Biden’s Executive Order 14067 in March 2022, government agencies have been working on the framework designed to create a safer environment for investors in digital assets.
Authorities in Canada have taken steps to protect Canadian cryptocurrency investors in the aftermath of the FTX collapse. The Canadian Securities Administrators (CSA), the council of Canada’s provincial and territorial securities, recently updated the terms for crypto trading firms operating in the country. The expanded terms ban such firms from providing margin or leverage trading services to Canadian clients and mandate that they segregate custody assets from the platform’s proprietary business.
In Brazil, digital currencies are not legal tender, but the country passed a nationwide law in December 2022 that legalizes their use as payment methods. The bill defines digital currencies and air mileage programs as payment methods, although they are not legal tender. The government’s executive branch will enforce the law after it is enacted. Tokens that are considered securities will continue to be under the jurisdiction of the Brazilian Securities and Exchange Commission. The new law boosts the adoption of digital currencies in the country, signaling a growing trend towards crypto-friendly regulation in the region.
The Regulatory Landscape of Crypto in Europe
Europe has witnessed significant changes in the regulation of crypto assets. In Estonia, Striga, a crypto banking company, has received the first crypto license, which significantly toughened Estonia’s legal regime last year. It’s pertinent to mention that Estonia and Curacao already offer special crypto licenses for the casino industry, which is why we saw a steep uprise in online crypto casino websites. In particular, the Curacao Gaming Commission has also granted permits for many cryptocurrencies, including Ethereum, Dogecoin, and Litecoin, so players can get their bitcoin baccarat games going without needing to swipe their debit cards.
Switzerland is home to a crypto valley in Zug, near Zurich. It hosts an active community of enterprises, developers, and service providers in the cryptographic space. While it may not be a pioneering leader in the global crypto community yet, Switzerland’s crypto-friendly nature makes it a significant contributor to the crypto ecosystem. It accepts all the crypto exchanges and virtual currency platforms as equivalent to financial institutions and requires compliance with local AML/CFT and consumer protection obligations.
Meanwhile, the UK government has launched open consultation for crypto asset regulation to mitigate risks and enhance consumer protection. The treasury consultation will close on 30 April 2023, in line with traditional finance. The proposals assign responsibility to crypto trading venues for defining content requirements for admission and disclosure documents while strengthening rules around financial intermediaries and custodians responsible for transactions and asset storage.
Asia’s Ongoing Struggle with Crypto Regulations
China’s approach to crypto regulation has been unpredictable, with the government vacillating between a complete ban and exploring blockchain’s potential. Recently, local authorities have implemented a 20% personal income tax on crypto investment profits. Several Bitcoin miners and crypto whales have been audited by their local tax departments over personal income tax, with the results yet to be announced. Despite China’s restrictive measures, the country ranks among the top ten in crypto adoption. In fact, after the FTX crash, it was revealed that mainland China was its third largest customer after the Cayman Islands and the Virgin Islands.
Japan has taken a progressive stance on crypto regulation, recognizing crypto as legal property under the Payment Services Act (PSA). Crypto exchanges must register with the FSA (Financial Services Agency) and follow AML/CFT guidelines. Japan taxes crypto trading gains as “miscellaneous income” and regulates aspects like taxation. It’s also introducing new remittance rules set to take effect in May 2023 to prevent criminals from using cryptocurrency exchanges for money laundering. Similarly, a revision of the Act on the Prevention of Transfer of Criminal Proceeds is also on the cards.
India’s government has been working on crypto legislation for several years. A draft crypto bill was unveiled in 2019 but has yet to be taken up in parliament. The Reserve Bank of India (RBI) has already recommended banning cryptocurrencies like Bitcoin and Ethereum, as they undermine the central bank’s authority. RBI Governor Shaktikanta Das recently warned that if crypto is allowed in India, the RBI will lose control over monitoring transactions. At the same time, the RBI is testing its digital rupee, India’s central bank digital currency (CBDC).
Australia’s Crypto Regulations and Developments
In 2021, Australia announced its plans to develop a licensing framework for cryptocurrency, with the potential to launch a central bank digital currency (CBDC). The new framework aims to regulate and provide greater oversight of the country’s growing cryptocurrency market, promoting consumer protection and addressing the risks associated with crypto assets. The proposed licensing regime will require all cryptocurrency exchanges to be registered with ASIC and ensure they meet certain prudential standards. The Reserve Bank of Australia (RBA) has also begun researching the benefits and risks of issuing a CBDC.
The growing popularity of decentralized finance (DeFi) and non-fungible tokens (NFTs) has presented new challenges for regulators worldwide. While some countries have been more receptive to cryptocurrencies and have established legal frameworks to govern their use, others have taken a more restrictive approach, with outright bans or stringent regulations. As the industry evolves, it will be crucial for regulators to strike a balance between safeguarding the public interest and fostering innovation in the cryptocurrency space.
