Global Crypto Regulation: An Exploration of Diverse Approaches
From speculative investment to a recognized asset class, cryptocurrency’s growth has led to worldwide governmental exploration of regulatory measures. While some governments have established protective frameworks for users, others are still assessing their strategies as of September 2024.
Despite the introduction of specific regulatory frameworks and the authority granted to regulators, the ongoing tussle between broker-dealers, investors, regulators, and the crypto sector in the U.S. signifies continuous evolution.
As articulated by SEC chair Gary Gensler, the struggle is set to endure. He states, “The approvals do not imply the Commission’s readiness to approve listing standards for crypto asset securities. Nor do they reflect the Commission’s stance on the status of other crypto assets under federal securities laws, or the non-compliance status of some crypto market participants. As reiterated previously, while we approved the listing and trading of certain spot bitcoin ETP shares today, bitcoin was neither approved nor endorsed.”
The SEC’s extensive list of filings against crypto-related companies, including Ripple, Coinbase (COIN), and Binance (BNB), illustrates that the sector is under its regulation through lawsuits and complaints over their crypto offerings.
In 2023, Ripple’s XRP sales were deemed securities offerings only when sold to institutions by a district court of appeals, not in exchanges. This was a partial triumph for the crypto sphere, followed by another judgment in November overturning the Commission’s rejection of Grayscale’s plea to transform its Bitcoin ETF Trust into an ETF holding bitcoin. The court mandated the Commission to reassess the application, which led to sanctioning the first Bitcoin Spot ETFs in January and July 2024.
Additional Insight
Central Bank Digital Currencies (CBDCs) have governmental backing and are issued by central banks. In contrast, cryptocurrencies are inherently decentralized and therefore are not discussed in this article.
With an all-out ban on cryptocurrencies enacted in September 2021, activity was severely curtailed, compelling numerous operators to either completely shut down or seek friendlier regulatory environments.
Canada has taken a proactive stance on crypto regulation, unlike others. It was the first nation to approve a Bitcoin ETF. The Investment Industry Regulatory Organization of Canada (IIROC) mandates that crypto trading platforms register with provincial regulators. Although crypto isn’t legal tender in Canada, this framework showcases its initiative.
In Canada, all crypto investment firms must register as money service businesses (MSBs). The taxation of cryptocurrency parallels that of other commodities.
October 2022 saw the British Parliament’s lower house acknowledge crypto assets as regulated financial instruments. The Financial Services and Markets Act, effective from June 2023, fortified laws pertaining to crypto assets, providers, and services.
There are detailed reporting mandates regarding tax on crypto trading profits, with taxability contingent on the participant’s activities.
Quick Insight
In the U.K., trading in crypto derivatives is prohibited.
The Office of Financial Sanctions Implementation (OFSI) enforces reporting obligations on crypto exchanges and wallet custodians. Any suspicion of sanction offenses or involvement of sanctioned individuals must be promptly reported to OFSI by crypto firms.
Japan, known for its progressive crypto regulations, recognizes crypto as legal property under the Payment Services Act (PSA). Exchanges need to register with the authority and fulfill AML/CFT duties. Trading gains from cryptocurrency are treated as miscellaneous income, taxed accordingly. Formed in 2020, all exchanges must belong to the Japanese Virtual Currency Exchange Association (JVCEA).
The Japanese government, pursuing regulation and taxation, revealed in September 2022 plans for introducing remittance rules by May 2023 to avert money laundering through crypto exchanges. The Act on Prevention of Transfer of Criminal Proceeds was updated, enabling customer data collection.
Like the U.K., Singapore classifies cryptocurrency as property but not as legal tender. The Monetary Authority of Singapore (MAS) regulates and licenses exchanges under the Payment Services Act (PSA).
In a 2022 advisory, Singapore cautioned digital payment token (DPT) providers against advertising to the general public.
August 2023 saw the introduction of a framework by MAS that regulates stablecoin issuers, demanding conformity to specific standards. To use the “MAS-regulated stablecoin” label, stablecoins must gain approval from MAS, distinguishing them from unregulated ones.
Singapore taxes companies that routinely engage in cryptocurrency transactions, treating resulting gains as income, while individual crypto gains remain untaxed, contributing to its crypto-friendly branding.
In South Korea, the Korea Financial Intelligence Unit (KFIU), part of the Financial Services Commission (FSC), mandates the registration of crypto exchanges and virtual asset service providers. Privacy coins were banned from exchanges in 2021.
With the 2023 enactment of South Korea’s Act on the Protection of Virtual Asset Users, the Financial Services Commission was appointed as the virtual assets regulator, defining both legal and illegal uses while ensuring issuer compliance for user protection.
In Australia, exchanges can operate freely provided they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and adhere to designated AML/CTF obligations. 2019 saw the introduction of plans for a licensing framework and potentially a central bank digital currency (CBDC). The Australian treasury, in October 2023, unveiled intentions to introduce a regulatory framework, with a draft by 2024 and a 12-month transition after approval.
India continues its ambivalence towards crypto regulation, neither legalizing nor outlawing it. A bill banning private cryptocurrencies circulates but remains unvoted. A 30% tax on crypto investments and a 1% TDS on trades prevail.
India’s hesitation persists on banning or regulating crypto. The 2022 Finance Bill, however, designated virtual digital assets as property, detailing tax protocols for related income.
Although not recognized as legal tender, Brazil’s November 2022 law recognized cryptocurrencies as payment methods nationwide. The approval of this framework on June 20, 2023, dubbed the “Legal Framework for Virtual Assets” under Law No. 14,478, empowered the Brazilian Central Bank to regulate crypto exchanges under Decree No. 11,563, dated June 13, 2023.
Most countries have legalized cryptocurrency, establishing explicit industry conduct rules and introducing fresh licensing prerequisites.
April 2023 marked Parliament’s authorization of measures obligating certain crypto service providers to obtain operating licenses. Provisional MiCA agreements from 2022 came into effect by July 2023, equipping regulators to monitor crypto fund misuse while safeguarding users.
Crypto Regulation Status
Across the globe, cryptocurrency regulations are in various stages of research, development, and implementation. While many nations formulate policies, others fall behind for an array of reasons.
Crypto-Friendly U.S. States
States like California, Florida, and Texas are known for their crypto-friendly environments.
Trading Crypto: Rules and Protections
Rules for crypto trading vary by jurisdiction and the specific regulations enforced. Ensuring protection from fraudulent activity and curbing illicit crypto uses are essential, although the progress toward these goals is gradual and contentious in many countries.
The insights shared online serve informational purposes. For further details, refer to our terms. The author, at the time of writing, holds no cryptocurrency.
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