Cryptocurrency Regulations: Inside the Global Landscape
Cryptocurrencies have evolved from a niche technology known mostly among technology enthusiasts to a burgeoning global financial industry.
The first cryptocurrency, bitcoin (BTC), was created in 2009 as a decentralized digital currency, and it has since paved the way for tens of thousands of other cryptocurrencies, each with various features and use cases. With the rise of cryptocurrencies, governments and regulatory bodies around the world have had to grapple with how to manage and regulate this rapidly evolving landscape.
The high volatility in cryptocurrency prices and the potential for a broad spectrum of investors, from retail traders to institutional players, to make outsized returns, as well as the potential for coins and tokens to facilitate illegal activities, has implications for tax law, consumer protection, and cybersecurity.
Navigating the global crypto regulatory landscape has become a complex and crucial task for crypto developers, enthusiasts, investors and policymakers.
Diverse Approaches to Regulation
Cryptocurrency regulations vary significantly from one country to another, reflecting the range of opinions and concerns surrounding widespread adoption. Some countries have embraced cryptocurrencies and blockchain technology, fostering innovation and investment in the sector with the aim of becoming technology hubs.
Others have taken a more cautious approach, and a few have banned crypto-related activities completely.
Cryptocurrency-friendly countries: Nations like El Salvador, Estonia, Malta and Switzerland have positioned themselves as cryptocurrency hubs, offering a supportive environment to attract blockchain and crypto businesses. They aim to strike a balance between fostering innovation and maintaining investor protection.
Regulation-heavy countries: Countries like Algeria, Bolivia, China and Nepal have taken a strict stance against cryptocurrencies, banning activities such as initial coin offerings (ICOs) and trading, citing concerns about speculative bubbles and financial instability.
Balanced approaches: The European Union (EU) and other jurisdictions have adopted a balanced approach. They recognize the potential benefits of blockchain technology and cryptocurrencies while implementing regulations to address risks, such as Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) and Know Your Customer (KYC) requirements.
The EU’s Markets in Crypto Assets Regulation (MiCA) came into force in June 2023. The regulation has introduced uniform market rules for crypto assets across all member states, which are now working to bring their domestic legislation in line with its requirements by mid-2024 to 2025.
The new legal framework covers crypto assets that are not currently regulated by existing financial services legislation, setting out rules for transparency, disclosure, authorization and supervision of transactions. It aims to “support market integrity and financial stability by regulating public offers of crypto-assets and by ensuring consumers are better informed about their associated risks.”
The Role of International Bodies
The global nature of cryptocurrencies poses a unique challenge for regulators. Transactions occur across borders without the need for traditional banking intermediaries. This makes international coordination and cooperation essential in addressing regulatory issues effectively.
International organizations like the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision are working to establish global standards. These organizations aim to create a level playing field, reduce the risk of regulatory arbitrage, and ensure that cryptocurrencies do not become a haven for illicit activities.
Challenges in Crypto Regulation
Navigating the global crypto regulatory landscape is a complex endeavor for several reasons:
Rapid technological advancements: Cryptocurrencies and blockchain technology are evolving rapidly, making it difficult for regulators – which can take years to implement legislation – to keep pace with new developments.
Diverse approaches: Different countries have adopted widely different regulatory approaches, creating inconsistencies that can hinder innovation and cause compliance difficulties for businesses operating internationally.
Lack of clarity: Regulatory frameworks are often vague or subject to interpretation, creating uncertainty for businesses and investors and a lack of confidence.
Borderless technology: Blockchains and the cryptocurrencies that run on them are inherently global, making it difficult to enforce regulations internationally and ensure compliance across borders.
What Cryptocurrency Regulations Exist Around the World?
Some countries have brought cryptocurrencies under their existing anti-money laundering (AML) legislation and taxation systems, while others have gone further and introduced specific laws governing crypto use.
Many countries are in the process of making changes to their regulatory framework, which can be hindered by the involvement of multiple government and financial regulatory bodies, such as in the US and UK.
What are some examples of regulatory approaches to crypto?
Canada was the first country to enact legislation related to cryptocurrency assets, which come under the jurisdiction of the Canadian Securities Administrators (CSA) as well as provincial authorities. In 2014, the Proceeds of Crime and Terrorist Financing Act (PCA) and its AML/CFT framework were amended to cover cryptocurrencies. In 2017, the CSA issued guidance for initial coin offerings (ICOs) and initial token offerings (ITOs). Additional regulations to the AML/CFT framework were put in place in 2020 and 2021, requiring companies to register with local regulators, keep records of all cross-border crypto transactions and report suspicious activity.
Australia also began bringing crypto into its existing taxation, licensing and consumer protection regulations in 2014. Legislation passed in 2017 expanded the country’s AML/CFT rules to cover cryptocurrency asset exchanges and service providers, and the Securities and Investments Commission introduced new licensing regulations in 2019. In September 2023, Australia’s Senate Economics Legislation Committee rejected the Digital Assets (Market Regulation) Bill introduced by the opposition Liberal party. Prime Minister Anthony Albanese introduced a consultation in February with a view to proposing a new licensing and custody framework for crypto asset service providers, but this has yet to be introduced.
As one of the world’s most prominent offshore financial centers, Bermuda has enacted one of the first comprehensive regulatory regimes governing digital assets, emphasizing its business-friendly governance approach. Gibraltar has also implemented a comprehensive regulatory framework. The Gibraltar Financial Services Commission approved the sale in 2022 of the Gibraltar Stock Exchange (GSX) blockchain company Valereum to allow investors to trade securities using cryptocurrencies as well as fiat currency.
Famously, El Salvador became the first country in the world to pass legislation declaring Bitcoin as legal tender. The Bitcoin Law was approved in August 2021 and came into effect the following month. It declared Bitcoin must be accepted as a form of payment and the state guarantees automatic convertibility of BTC to US dollars. The legislation establishes rules for virtual asset service providers and the prevention of money laundering.
Estonia’s approach to regulation is evolving. It became the first country to start issuing cryptocurrency licenses in 2017, permitting hundreds of companies to receive an Estonian license and operate anywhere. This made it one of the leading crypto hubs, hosting more than half the world’s registered virtual-asset service providers (VASPs). But it has since toughened up its rules for digital assets under its Prevention of Money Laundering and Terrorist Financing Act (2022), revoking hundreds of licenses.
Cryptocurrency Regulations in Effect Worldwide
Country
Regulation
Key Provisions
Albania
On financial markets based on distributed ledger technology (2020)
Contains 107 articles, regulating the issuance of digital tokens and/or virtual currencies, licensing, monitoring, and supervision of entities that distribute, trade, and store them, as well as service providers and collective investment schemes.
Andorra
Digital Assets Act (2022)
Approves the tokenization of digital assets in closed ecosystems and requires the government to draw up a regulating the issuance and provision of services linked to digital assets, blockchain and cryptocurrencies that may be considered financial instruments.
Anguilla
Utility Token Offering Act (2018)
Requires any initial or secondary token offering issuer to be registered. Defines and regulates utility tokens while avoiding the burdens of securities regulations.
Bahamas
Digital Assets and Registered Exchange Bill (2020 and 2023)
Provides for the regulation of the issuance and sale of digital tokens, as well as the conduct of issuers and intermediary service providers. The 2023 version expands the scope of digital asset activities captured under international standards.
Bahrain
Crypto Asset Module (2019 and 2023)
Covers licensing requirements and conditions, minimum capital requirements, measures to safeguard customer interests, and technology standards, including cybersecurity risk management and prevention of market abuse and manipulation. The 2023 update expanded the scope to include digital token offerings.
Belarus
Decree No. 8 “On the Development of Digital Economy,” 2018
Permits buying, selling, exchanging, and mining cryptocurrency. The exchange of cryptocurrency for fiat money must be approved by the National Bank. Legalizes token releases and distribution for business funding purposes. Crypto platforms have minimum capital and other regulatory requirements.
Bermuda
Digital Asset Business Act (2018)
Digital Asset Business (Prudential Standards) (Annual Return) Rules (2018)
Digital Asset Business (Client Disclosure) Rules (2018)
Digital Asset Business (Cybersecurity) Rules (2018)
Digital Asset Business Account Rules (2021)
Digital Asset Business Exemption Order (2023)
Regulate digital asset businesses in Bermuda and require businesses to obtain a license from the Bermuda Monetary Authority.
Botswana
Virtual Assets Bill (2022)
Requires any company offering crypto services or digital tokens to obtain a license from the Non-Bank Financial Institutions Regulatory Authority.
Cryptoassets Act provides guidelines for providing services with virtual assets and regulating providers.
Decree No. 11,563 authorizes the central bank to regulate and supervise VASPs and ensures token projects classed as securities will remain under the oversight of the Brazilian Securities and Exchange Commission.
British Virgin Islands
Guidance on the Regulation of Virtual Assets in the Virgin Islands (2020)
Provides clarity on the application of existing legislation to virtual asset-related activities and makes clear that some activities do not come under Financial Services Commission (FSC) regulation.
Central African Republic
Law n°22.004 governing cryptocurrency in the Central African Republic (2022)
Provides a legal framework and the procedures for implementing and securing these crypto transactions, as well as offenses. The law adopted cryptocurrencies as legal tender, but this was repealed in April 2023.
Cyprus
Circular 268 – Introduction of new rules governing derivatives on virtual currencies (218)
Circular 417 – Prudential treatment of crypto assets and enhancement of risk
management procedures associated with crypto assets (2020)
C2018 clarifies rules regarding trading in virtual currencies.
C417 aims to ensure that Cyprus Investment Firms (CIFs) adequately cover their crypto investments in and adequately manage risks.
El Salvador
Bitcoin Law (2021)
Bitcoin Law recognises Bitcoin as a legal tender that must be accepted for payments and creates VASP register. Establishes rules for the prevention of money laundering for service providers.
Digital Securities Law regulates the issuance of other digital assets. Establishes the creation of the National Commission for Digital Assets and the Bitcoin Funds Administration Agency, which will be responsible for managing the funds from government public offerings of digital assets.
Estonia
Money Laundering and Terrorist Financing Prevention Act (2017 and 2022)
The 2017 Act introduced regulations for crypto businesses, including strict reporting and KYC rules. The 2023 amendment targets VASPs, including crypto exchanges and wallets,
crypto transfer providers,
and services-related issuance. It expands the definition of virtual currency services, increases license fees and application requirements, and details grounds for license refusal.
European Union
Markets in Crypto-assets (MiCA) 2023
– Finland – Act on Virtual Currency Providers (2019)
– Germany – Law on the Introduction of Electronic Securities (2021) and Crypto Asset Transfer Ordinance (2021)
– Italy – Legislative Act No. 90 (2017)
– Portugal – Digital Transitional Action Plan (2020)
The EU-wide MiCA outlines comprehensive regulations for cryptocurrency markets in all member states. It defines cryptocurrency assets and introduces new rules to prevent money laundering, protect consumers, and address environmental impacts.
Individual countries have previously introduced their own regulations.
Georgia
Organic Law of Georgia No 1676 on the National Bank of Georgia (2023)
Define virtual assets and service providers, and require registration with the National Bank of Georgia
Gibraltar
Digital Ledger Technology (DLT) Regulatory Framework (2018)
Aims to establish an efficient and secure regulatory environment for companies utilizing DLT for value transmission or storage on behalf of others.
Hong Kong
Guidelines for Virtual Asset Trading Platform Operators (2023)
Guidelines set out safe custody of assets, segregation of client assets, avoidance of conflicts of interest and cybersecurity standards and requirements expected of licensed trading platforms.
Japan
Payment Services Act (2016, 2019 and 2022)
Amendments regulate cryptocurrency and utility tokens as crypto assets. Governs crypto exchanges and requires registration with the Financial Services Agency (FSA)
Lichtenstein
Act on Tokens and Entities Providing Services Based on Trusted Technologies (Blockchain Act) (2020)
Establishes a comprehensive regulatory framework to protect investors, combat money laundering, and establish regulatory transparency.
Lithuania
Guidelines for ICOs (2018)
Established a comprehensive regulatory framework for ICOs, subjecting them to AML/CFT laws and detailing taxation policy.
Malta
Virtual Financial Assets Act (2018)
Innovative Technology Arrangements and Services Act (2018)
Digital Innovation Authority Act (2018)
Regulations on the Prevention of Money Laundering and the Financing of Terrorism (2018)
Provide comprehensive strategic and regulatory framework for DLTs such as cryptocurrency businesses, including exchanges and virtual assets, with the aim of creating new business opportunities.
Malaysia
Capital Markets and Services Order (2019)
Regulates crypto assets as subject to Malaysia’s securities laws, enforced by the Securities Commission Malaysia (SCM)
Mauritius
Financial Services Act (2007)
Virtual Asset and Initial Token Offering Services Act (2021)
Regulate cryptocurrencies as digital assets. Provide a legislative framework for VASPs and ICO issuers.
Mexico
Law to Regulate Financial Technology Companies (2018)
Defines virtual assets and regulates electronic payment institutions and crowdfunding institutions.
Peru
Crypto Asset Marketing Framework (2023)
Regulates crypto businesses, defines crypto assets and VASP duties, and outlines tax provisions and licensing guidelines.
Philippines
Circular No. 944 (2017)
Guidelines for Virtual Asset Service Providers (2021)
Circular No. 944 acknowledges virtual currencies as a valid payment method.
The guidelines establish a comprehensive regulatory framework. VASPs must obtain a license before starting operations, implement effective KYC and AML/CTF measures, collect customer identification information, and actively monitor transactions to detect and report suspicious activities.
Russia
Digital Financial Assets law (2020)
Regulates issuance and circulation of digital assets. Legalizes crypto transactions but prohibits their use as payments for goods and services.
Serbia
Law on Digital Assets (2021)
Governs the issuance and trading of digital assets, provision of services, and roles of the Securities Commission and National Bank of Serbia in providing oversight.
Singapore
Payment Services Act (2019 and 2021)
Allows the Monetary Authority of Singapore (MAS) to oversee cryptocurrency exchanges, distribute licenses, and issue AML/CFT requirements.
Slovenia
Act on Payment Services and Systems (2018)
Defines cryptocurrencies as virtual currencies rather than financial instruments or monetary assets but permits their use as a means of payment
South Africa
Financial Advisory and Financial Intermediary Services Act (2022)
The Act was amended in 2022 to define crypto assets as financial products. Outlines licensing, AML/CFT, and consumer protection obligations for crypto-asset providers.
South Korea
Electronic Financial Transactions Act (2017)
Act on Reporting and Use of Specific Financial Information (2020)
Virtual Asset User Protection Act (2023)
Provide a regulatory framework for the use of cryptocurrencies and digital assets.
The March 2020 amendment requires all VSPs to be licensed, registered, and report their activity. The 2023 bill, which comes into effect in 2024, aims to protect users’ assets and prevent unfair trade practices.
Switzerland
ICO Guidelines (2018)
Federal Act on Financial Services (2018)
Federal Act on Financial Institutions (2018)
Guidelines detail a supervisory and regulatory framework for ICOs. The federal acts provide a progressive regulatory framework for blockchain and cryptocurrencies
Taiwan
Money Laundering Control Act amendment (2018)
Allow the government to regulate virtual currency platforms and aim to protect consumer rights and interests.
Thailand
Payment System Act (2017)
Emergency Decree in Digital Asset Businesses (2018)
Royal Decree on Digital Asset Businesses (2018)
Guidelines for Digital Asset Business Operators (2022)
Baht-pegged stablecoins are considered e-money under the Payments Act. The 2018 decree sets out the licensing, disclosure and legal requirements for issuing, distributing or providing crypto services. Digital assets can be issued, traded, and exchanged through digital assets business operators, which are licensed by the Thai Securities and Exchange Commission. The 2022 guidance bans crypto as a payment method but allows investment and trading.
Ukraine
Virtual Asset Bill (2022)
Permits legal market for virtual assets. Authorizes the National Commission on Securities and Stock Market to regulate policy in the field of virtual assets, issue permits to virtual asset service providers, and carry out supervision and financial monitoring.
United Arab Emirates
The Chairman of the Authority’s Board of Directors’ Decision No. (23/Chairman) of 2020 Concerning Crypto Assets Activities Regulation (2020)
Establishes a regulatory framework for the offering, issuance, listing, and trading of crypto assets. Crypto assets providers must be incorporated onshore within the UAE.
Venezuela
Constituent Decree on Cryptoassets and the Petro Sovereign Cryptocurrency (2018)
Decree No. 3,355 (2018)
Decree No. 3,353 (2018)
Administrative Guidelines No. 084-2020 (2020)
Decree No 4,788 (2023)
Cryptoassets Constituent Decree creates the overall legal framework permitting the creation, circulation, use, and exchange of cryptocurrencies.
Decree No. 3,355 creates and regulates the Office of the Venezuelan Superintendent on Cryptoassets of Venezuela and Ancillary
Activities and Decree No. 3,353 creates the Cryptoassets Treasury.
The 2020 guidelines Venezuela legalized bitcoin mining, although this was suspended in the 2023 decree.
Proposed Regulations
Several countries that currently have restrictions or bans in place on cryptocurrencies have indicated that they intend to introduce regulation.
Ecuador initially banned crypto in 2014, but the country’s central bank issued a statement in 2018 indicating that while cryptocurrencies are not regulated or a legitimate means of payment, they are legal to use. In 2022, the central bank stated that it would pursue regulation, particularly to address money laundering and financial crimes.
The Turkish government’s position has also evolved, having banned cryptocurrencies as a means of payment in 2020 and then drafting regulations in 2022 that have yet to be implemented. The law would implement tax regulations and give authority over the crypto market to financial regulators. Economic instability and a rapid devaluation of the Turkish lira have driven a high crypto adoption rate in the country despite the regulatory uncertainty.
The Israeli Securities Authority (ISA) and the Ministry of Finance have both proposed guidelines for new regulations, as a growing number of investors in Israel have exposure to digital assets, and as a technology hub, the country has attracted crypto-related businesses.
In southeast Asia, where unofficial crypto use is high, both Cambodia and Vietnam in 2022 began discussing overturning their bans by passing regulatory frameworks. In June 2022, the Securities and Exchange Regulator of Cambodia (SERC) signed an agreement with cryptocurrency exchange and infrastructure provider Binance “to support the development of the legal framework for regulating and bolstering the digital asset businesses in the country”.
And in Pacific island nations such as Fiji, Palau, Tongo and Tuvalu, governments are enthusiastic proponents of cryptocurrencies, supporting the use of Bitcoin as legal tender and taking steps to launch their own central bank digital currencies to promote economic development.
The Path Forward
Governments and regulators need to work together to find common ground and successfully develop clear and balanced regulatory frameworks. Areas for focus include:
Innovation and growth: Regulation should encourage responsible adoption of blockchain technology and cryptocurrencies and avoid stifling innovation.
Consumer protection: Regulatory frameworks need to include safeguards to protect consumers from scams and fraud.
Transparency: Clear and comprehensive regulations can help reduce uncertainty and foster trust in the sector.
International cooperation: Given the global nature of cryptocurrencies, international cooperation is necessary to create consistent regulations.
The Bottom Line
The global crypto regulatory landscape is a dynamic and evolving space. While challenges exist, regulation provides an opportunity to bring cryptocurrencies into the mainstream financial system.
By collaborating to develop clear, balanced, and globally coordinated regulations, the cryptocurrency industry can continue to grow while addressing the legitimate concerns of governments and regulators.
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