Inventory of Cryptocurrency Regulations in Various Countries
With the rise of cryptocurrencies worldwide, this emerging asset class has not only attracted the attention of investors but also caught the interest of governments and regulatory agencies in different countries. Since the birth of Bitcoin in 2009, the cryptocurrency market has experienced explosive growth, gradually transitioning from a speculative tool to a new means of investment and payment.
However, this transformation has also brought about numerous challenges, including market volatility, fraud risks, and potential issues related to money laundering and financing of terrorism. To address these challenges, governments around the world have started to discuss and develop their own regulatory frameworks for cryptocurrencies, aiming to strike a balance between fostering innovation and protecting consumers.
Taiwan
Based on the regulatory development schedule for the cryptocurrency industry published by the Financial Supervisory Commission (FSC) in Taiwan, the four stages include the regulation of Virtual Asset Service Providers (VASPs), establishment of associations and self-regulatory norms, differentiated management and legal enhancement, and the formulation of special laws.
Stage 1: Regulation of VASPs
The first stage begins by implementing anti-money laundering regulations and regulating Virtual Asset Platform and Trading Business operators (VASPs). According to information provided on the FSC’s official website, a total of 25 cryptocurrency businesses, including exchanges, trading platforms, physical stores, Bitcoin ATMs (BTMs), and custody system providers, have completed the declaration of compliance.
Stage 2: Associations and Self-regulatory Norms
The focus of the second stage is to encourage the establishment of associations for VASPs and the formulation of self-regulatory norms. The Taiwan Crypto-Asset Exchange Association was officially established in June, following the guiding principles set by the FSC to develop industry self-regulatory norms.
Stage 3: Differentiated Management and Legal Enhancement
In the third stage, the FSC plans to add “VASP registration system” to the Anti-Money Laundering Act, clearly defining VASPs and imposing criminal penalties on illegal operators. VASPs that engage in business operations without proper registration can face imprisonment of up to two years and a fine of up to 5 million NTD.
Next, the FSC plans to implement differentiated management for registered VASPs in subsidiary laws, based on the complexity of their business operations. For instance, exchange operators are required to comply with comprehensive internal control regulations, including clear description of trading rules, compliance with ISO27001 information security requirements, cold wallet ratio requirements for wallet management, and segregation of platform and customer assets.
Stage 4: Formulation of Special Laws
The final stage involves the establishment of special laws. In January of this year, the FSC outsourced a study on the establishment of special laws for managing VASPs, taking into account regulations or recommendations from the European Union, Japan, South Korea, Hong Kong, the United Kingdom, the Financial Action Task Force (FATF), and the International Organization of Securities Commissions (IOSCO). The research team plans to submit the final report by the end of September and present the draft law for public hearings by the end of this year, with the goal of submitting the draft law to the legislature before June 2025.
North America
United States
In 2022, the United States granted greater regulatory power to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Currently, the SEC is actively regulating the cryptocurrency industry and has filed lawsuits against multiple cryptocurrency companies such as Ripple, Coinbase, and Binance.
With the approval of a Bitcoin spot ETF by the courts in 2023, the US seems to have eased its stance on cryptocurrencies. On May 22, the US House of Representatives passed the Financial Innovation and Technology Act of the 21st Century (FIT21), aiming to establish a more comprehensive regulatory framework for the US cryptocurrency market. This includes the implementation of consumer protection measures, granting the Commodity Futures Trading Commission new jurisdiction over digital commodities, and clarifying the Securities and Exchange Commission’s jurisdiction over certain digital assets in investment contracts.
However, SEC Chairman Gary Gensler emphasized that these approvals do not mean the SEC’s endorsement of cryptocurrency assets. Regulatory agencies are still actively overseeing the industry, and it is emphasized that most cryptocurrencies need to comply with federal securities laws.
It is evident that while the US is pushing for cryptocurrency regulation, it is also seeking a delicate balance between innovation and market stability.
Canada
Although Canada does not recognize cryptocurrencies as legal tender, it has been actively regulating them and became the first country to approve a Bitcoin spot ETF.
All cryptocurrency investment companies in Canada are classified as Money Services Businesses (MSBs) and are required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). All cryptocurrency investment companies and trading platforms must also register with regulatory agencies and comply with anti-money laundering and counter-terrorism financing regulations.
Europe
European Union
In 2023, the European Union introduced the first comprehensive cryptocurrency regulation, the Markets in Crypto-Assets Regulation (MiCA), which establishes clear standards for market participants, providing consumer protection, financial stability, and innovation.
This regulation requires companies issuing or trading cryptocurrencies to obtain licensing requirements. Starting from January 2026, all service providers must obtain information from both sides of the transaction. It also strengthens anti-money laundering (AML) and counter-terrorism financing (CTF) regulations for cryptocurrency asset service providers.
In addition, ownership verification is required for self-hosted wallets holding more than 1,000 euros. These regulations were partly prompted by the bankruptcy of FTX, emphasizing the need to protect investors and prevent money laundering.
United Kingdom
In June 2023, the United Kingdom classified cryptocurrencies as regulated financial instruments and required any company offering digital currencies to obtain authorization from the Financial Conduct Authority (FCA). The Treasury of the United Kingdom stated that any company dealing directly with retail investors in the UK, regardless of their location, should be required to obtain authorization.
Furthermore, the Bank of England has proposed regulations for stablecoins, aiming to leverage their potential for payments while protecting consumers and financial stability.
Asia
Japan
Japan has adopted a progressive approach to cryptocurrency regulations, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA) and managing cryptocurrency-to-yen transactions through the Financial Services Agency (FSA). Cryptocurrency exchanges must register with the Financial Services Bureau (FSA) and comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
In 2020, Japan established the Japan Virtual Currency Exchange Association (JVCEA), of which all cryptocurrency exchanges are members. Recently, regulations on sharing customer information between cryptocurrency exchanges have been strengthened to address the increasing problem of money laundering.
South Korea
Cryptocurrency exchanges and other virtual asset service providers in South Korea must register with the Korea Financial Intelligence Unit (KFIU), a subsidiary of the Financial Services Commission (FSC).
In 2023, South Korea passed the Virtual Asset User Protection Act, officially appointing the Financial Services Commission as the regulatory authority for virtual assets. This act strengthens user protection and plans to release guidelines for listing virtual assets by the end of April or May 2024. Issuers or service providers are required to comply with regulations to ensure user safety.
China
China has implemented a comprehensive ban on domestic cryptocurrency trading, mining, and operations since issuing the cryptocurrency ban, making it one of the strictest countries in terms of cryptocurrency regulation.
However, with Hong Kong actively embracing the cryptocurrency industry, many investors believe this could be the beginning of a change in China’s attitude.
On June 1, 2023, the Hong Kong government officially opened the application for Virtual Asset Service Provider (VASP) licenses, requiring VASPs to submit license applications. Institutions that fail to comply with the requirements must cease their operations in Hong Kong by May 31. Surprisingly, 12 exchanges, including OKEx, failed to meet the requirements or withdrew their license applications.
Singapore
Singapore considers cryptocurrencies as property but not legal tender. The Monetary Authority of Singapore (MAS) licenses and regulates exchanges under the Payment Services Act (PSA) and requires stablecoin issuers to meet specific standards.
In 2022, Singapore issued regulations warning Digital Payment Token (DPT) providers to avoid publicizing their services.
In August 2023, MAS announced a regulatory framework that allows only stablecoin issuers meeting all the requirements of the stablecoin regulatory framework to use the label “MAS-regulated stablecoin,” distinguishing them from unregulated stablecoins. Unauthorized tokens using the label will be punished and listed on an investor alert list.
According to a report released by Singapore’s law enforcement agencies on the 20th of this month, cryptocurrency-related activities were marked as “high risk,” with an “increase” in suspicious transaction reports involving digital tokens. Assistance requests related to criminal cases involving virtual assets received from overseas are also on the rise. Therefore, the financial sector will be more vigilant in preventing money laundering activities.
Australia
In 2019, the Australian Securities and Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and prohibited exchanges from offering privacy coins with untraceable transaction records. In 2021, Australia announced plans to establish a clear legal regulatory framework for cryptocurrencies and intends to launch a central bank digital currency (CBDC).
Currently, Australia considers cryptocurrencies as legal property and imposes capital gains tax on them. Cryptocurrency exchanges must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and comply with anti-money laundering and counter-terrorism financing obligations. Australia also plans to introduce a regulatory framework for cryptocurrencies in 2024.
Conclusion
Although cryptocurrencies have been around for 15 years since the birth of Bitcoin in 2009, governments and regulatory agencies around the world are still exploring how to effectively regulate and utilize them. While fostering industry development and innovation, it is also necessary to protect consumers and businesses, prevent fraud activities, and take measures to combat the illegal use of cryptocurrencies.
Although many countries are striving to move towards a legal and compliant environment while preserving space for innovation, this remains a challenging path.
References:
Investopedia
World Economic Forum