190+ global jurisdictions have adopted crypto regulation at varied speeds and approaches
Technological innovation ushers in a new era of opportunity and prosperity. The development of the internet gave rise to e-commerce, which has changed the way people do business. The advent of blockchain technology is now doing the same for the financial world.
The crypto ecosystem continues its rapid growth, offering opportunities and challenges for businesses and investors. As the industry expands, so does the number of jurisdictions enacting cryptocurrency regulations. According to an analysis by BanklessTimes.com, 190+ global jurisdictions have adopted crypto regulation at different speeds and approaches.
Jonathan Merry, CEO of BanklessTimes, said:
The jurisdictions that have been the most welcoming of cryptocurrency and blockchain technology are Malta, Germany, Switzerland, Singapore and Canada. These countries have adopted friendly regulations that have attracted many businesses in the crypto space.
Conversely, jurisdictions such as China, the Netherlands, Japan, India and Algeria have taken a more aggressive approach, banning cryptocurrency exchanges and initial coin offerings (ICOs).
Cryptocurrency regulations around the world
Regulatory approaches to cryptocurrency vary from one jurisdiction to another. The most common regulatory approach has been to treat cryptocurrencies as goods or property subject to taxation.
The US, for example, does not consider crypto as legal tender, but cryptocurrency exchanges as money transmitters. The Internal Revenue Service (IRS) taxes cryptocurrencies as property. In contrast, El Salvador has classified specific cryptocurrencies as legal tender.
The US Treasury Department has emphasized crypto regulations to combat global and domestic criminal activities. FINCEN (Financial Crimes Enforcement Network) has a new cryptocurrency regulation requiring data collection from crypto exchanges and wallets. The rule requires exchanges to file suspicious activity reports (SARs) for transactions over $10,000. Wallet owners must identify themselves when sending $3,000 worth of cryptocurrency in a single transaction.
Globalizing regulation
Financial experts believe cryptocurrency needs a global regulatory system. Like financial service providers, they need a guide that cuts across nations. For example, critical providers of cryptoactive services should have licenses.
In addition, cryptoassets and stablecoins should have specific requirements. In addition, investment services and products should be regulated as securities brokers and dealers. Also, there should be a procedure that clarifies licensing and authorization standards.
Many analysts suggest that regulated financial institutions should have defined crypto exposure and involvement criteria. If regulated undertakings offer custody services, the requirements should cover the risk.
Some emerging markets face significant risks of currency substitution by crypto-assets. Cryptoization requires fine-tuning of capital flow management.
Cooperation across national borders is crucial to solving technological, legal, regulatory and supervisory problems. Creating a coherent, coordinated cryptoregulatory framework is challenging.
International organizations on the front line
International organizations play a role in the development of global crypto regulations. The Financial Action Task Force (FATF) is one such organization. It has published guidance on a risk-based approach to the regulation of virtual assets and virtual asset service providers (VASPs).
The Bank for International Settlements (BIS) is another. It has published a report assessing the state of central banks’ approaches to cryptoassets.
The G20 is also active on the regulatory front. In October 2019, it endorsed the FATF standards and committed to implementing them by June 2020. The group also encouraged relevant standard-setting bodies (SSBs) to develop global standards for cryptoassets.
The 2020 G7 summit reaffirmed the group’s commitment to global stablecoin regulation. It also called on the FATF to provide an interim report on its work by April 2021 and a final report by October 2021.
The coronavirus pandemic has highlighted the importance of digital finance in the global financial system, including cryptoassets. In response, the G20 asked the FATF to accelerate its work on cryptoassets and deliver an interim report by July 2020 and a final report by October 2020.
The OECD is also active in this area. It has published a discussion paper assessing the challenges and opportunities of cryptoassets.
The Basel Committee on Banking Supervision (BCBS) has also published a report assessing the supervisory risks and opportunities of crypto-assets.
Thus, there is a growing recognition of the need for global crypto regulation, and it is only a matter of time before a more coordinated and comprehensive regulatory approach emerges.
