Crypto regulation: legislation and world practice
Description
Crypto regulation is one of the hottest issues on the legislative agenda in different countries. Approaches to law vary. However, one thing is clear: cryptocurrencies have left no country in the world indifferent.
The cryptocurrency market is a new type of financial relations that appeared outside countries' regulatory frameworks, being a superstructure over the classical financial world of fiat currencies. Due to the novelty of assets, lack of precedents, and centralized management, cryptocurrencies have been out of the official field of laws and regulations for quite a long time. However, the more the market grew, the broader and more active the development of regulatory norms available to different countries. Now, the regulation of cryptocurrencies is one of the important articles of discussion by most legislative bodies of other countries.
Regulation of cryptocurrencies in world practice
There is no single standard for cryptocurrencies. Each country chooses its path of development and norms of regulatory pressure on the crypto market. This process has only just begun to emerge, and countries are just starting to explore it. Today, there are several areas in which crypto regulators work. Cryptocurrency regulation in the world (data as of November 2021):
Countries with a direct ban on cryptocurrency
This strategy involves banning the circulation and use of cryptocurrencies in the country, accepting assets as illegal, and prosecuting the spread of cryptocurrency use.
China is a prime example of such a country. In September 2021, the government of this country signed a complete ban on mining and crypto transactions.
Cryptocurrency exchanges were forced to close their activities in China, and using cryptocurrencies in financial transactions became illegal.
Instead of private cryptocurrencies like Bitcoin, Ethereum, BNB, and others, the government has chosen to create its regulated digital currency of the central bank CBDC—the digital yuan.
Moderate regulation strategy
The strategy of moderate regulation of cryptocurrencies is the most common in the world and is followed by more countries. It consists of the fact that cryptocurrencies fit into the general financial system of the country: they are subject to taxation, reporting, legislation on combating illicit trafficking, sanctions restrictions, licensing of exchanges and trading applications, etc. Such countries include the United States, South Korea, the Russian Federation, Estonia, the European Union, and others.
USA
Cryptocurrency regulation in the U.S. entered an active development phase in 2022. By this point, the following general concepts of regulation have been identified:
- The regulators for cryptocurrencies are the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
- Providers of digital asset services, including cryptocurrency exchanges and non-swappable token platforms (NFT), must operate under the Bank Secrecy Act (BSA) and report suspicious user transactions.
- All income from cryptocurrencies is taxable and necessary for accounting purposes.
- Unregulated industry segments like transaction mixers and algorithmic unsecured Stablecoins are strictly prohibited.
- Cryptocurrencies received the status of securities with all the ensuing regulatory implications, and the first cryptocurrency, Bitcoin, is recognized as a commodity, as stated by the head of SEC, Garry Gensler.
Russian Federation
The Russian Federation has long resisted accepting cryptocurrencies into its official legal framework. However, in the last 2022, it also took a number of actions to determine the status of cryptocurrencies. Thus, private cryptocurrencies such as Bitcoin are prohibited in the country as a means of payment. At the same time, these assets are considered possible objects for participation in international settlements, and the parameters of regulation of cryptocurrency mining and the way of management of exchanges for trading the assets were introduced.
Estonia
Estonia was one of the first countries to recognize the status of crypto. It happened back in 2017. All exchanges and digital currency services must undergo the licensing process with the Estonian Police and Border Guard Board as a" Virtual Currency Exchange Service Provider for fiat money."
South Korea
South Korea's cryptocurrency inverters have a dynamic legal environment, constantly being supplemented and changed. For example, the authorities passed a law on the taxation of income from cryptocurrencies, which will take effect in 2025. All cryptocurrency exchanges must undergo a compulsory licensing process, and the country's officials are required to declare their cryptocurrency. There is a ban on anonymous cryptocurrencies like Monero and Zcash. The country is also working on the issue of legislative approval of the status of blockchain, Metaverse, NFT, and other crypto industry objects.
Countries that have adopted cryptocurrencies
These are the countries where cryptocurrency circulation is officially accepted and has equal legal status with other currencies. El Salvador remains the absolute leader in this segment.
The country has adopted Bitcoin as its official currency, equal in circulation to the U.S. dollar. The policy of cryptocurrency regulation encourages the use of BTC by the general public and businesses. At the state level, there are programs for education in the field of cryptocurrencies, industry support, and the distribution of environmentally friendly Bitcoin mining.
Thailand is garnering much attention as one of the first countries to develop rules that favor blockchain and cryptocurrencies. And Thailand has significantly changed its attitude in support of cryptocurrency investors, developers, and unique business opportunities in Bangkok, Pattaya, Phuket, etc.
The Kingdom of Thailand has seen many regulatory changes since 2017, and licenses have been issued for exchanges, brokers, dealers, and ICO portals. It marks Thailand as a potential blockchain and cryptocurrency hotspot in Southeast Asia.
Thailand is now a hub for blockchain-based entrepreneurship with 26 start-ups as of early 2019, and an estimated 10% of Thais own some form of cryptocurrency – the second-highest crypto share in the world, behind only South Africa in terms of percentage of ownership of 10.7%.
In Thailand, blockchain regulation is overseen by key regulators, including the Bank of Thailand (BOT) in Chiang Mai, the Office of the Securities and Exchange Commission (SEC), and the Office of the Insurance Committee (OIC) in Surat Thani.
Conclusion
As you can see, many countries are still on the way to establishing a clear regulatory framework and legislative approval of cryptocurrencies. Today, we can say that cryptocurrencies have not left any country indifferent, and most of them are trying to define their status in their legal field to use them in circulation.
