The regulation of cryptocurrencies captured the attention of governments and authorities around the world during 2023. While some countries continue without creating clear regulatory frameworks for cryptocurrencies, more and more jurisdictions are committed to designing standards and laws that guarantee requirements and rules for providers. of services, companies and platforms related to the world of cryptocurrencies.
Cryptocurrency regulation in the world
2023 could be described as one of the key years in the area of regulation of the cryptocurrency industry since its emergence more than a decade ago. Over the past year, different measures focused on regulation took shape around the world, making clear the short and medium-term direction regarding regulations for the sector.
International coordination
International organizations and multilateral organizations played a leading role in the enforcement of crypto regulations.
G20
In 2023, the G20, an intergovernmental body that brings together the world's main economic nations, took a more active stance to highlight the need for global and coordinated regulations for cryptocurrencies, promoted by the leadership of India, in charge of the presidency of the organization in the year. India's Economic Affairs Secretary Ajay Seth emphasized that G20 countries needed to establish clear consensual and coordinated arrangements to address regulation.
FMI
The G20 works with other international organizations, such as the International Monetary Fund ( #FMI ) and the Financial Stability Board (FSB), who also deployed measures for the crypto sector in 2023. The IMF published a document focused on the key elements for the development of policies for cryptoassets. In said document, he highlighted the risk of crypto from a tax point of view. He also rejected the idea of cryptocurrencies receiving official currency and legal tender status in countries. In this sense, the IMF added that this is due to the need to guarantee the "sovereignty and financial stability of the countries."
FSB
The Financial Stability Board ( #FSB ) published its first two high-level recommendations related to cryptocurrencies. One dedicated to the activities and market of crypto assets and another to stable currencies or stablecoins. These recommendations serve as a starting point for countries to choose the path to follow in regulating cryptocurrencies. Ultimately, the Council's recommendations are adopted by the world's major countries and set the course for the rest of the nations.
Regarding the supervision of cryptocurrency activities and market, the FSB detailed among its recommendations the need for cross-border cooperation, the creation of a general regulatory framework, the requirement of requirements and guarantees for service providers, among other proposals. Regarding stablecoin oversight, recommendations focused on guiding jurisdictions to require decentralized governance structures and reserve transparency from providers. Demands for risk management and policies against money laundering (AML), financing of terrorism (CFT) and information disclosure, among others.
FATF
The Financial Action Task Force ( #GAFI ) drew up a roadmap with the intention of accelerating the implementation of its Travel Rule, designed with requirements for service providers linked to AML and CFT policies. Travel Rue is still foreign to more than 70% of the organization's member countries. FATF President T. Raja Kumar called this situation “unacceptable” in a mid-2023 message to G7 leaders.
IOSCO
The International Organization of Securities Commissions (#IOSCO ), made up of 135 jurisdictions that bring together 95% of securities regulators around the world, also published recommendations related to cryptoassets. On the one hand, it published 18 recommendations associated with the cryptocurrency and digital asset market, where it detailed guidelines to follow to create policies focused on investor protection and market integrity. The recommendations address key premises to guarantee standards on conflict of interest, market manipulation and fraud, operational and technological risks, among others.
Separately, IOSCO also published a set of recommendations dedicated to the regulation of decentralized finance or DeFi. In them he suggests the need for analysis and understanding of DeFi products and services. The identification of those responsible for the protocols, the development of common and coordinated standards locally and internationally, as well as the understanding of the connection between traditional finance and DeFi, before designing any type of political framework regarding the sector.
MiCA in Europe
Europe became the first major jurisdiction in the world with a regulatory framework for the cryptocurrency sector, following the approval and sanction of the #MICA law. The regulation establishes a set of parameters for digital asset service providers and the cryptocurrency market. It also outlines standards related to the issuance and supervision of stablecoins. The rules for stablecoins are expected to come into effect in June 2024. The provisions for service providers will come into effect at the end of the year. The execution deadline for the entire MiCA is July 2026, although European countries can go ahead. Furthermore, the European Securities and Markets Authority (ESMA) published its first regulatory regulation following the approval of MiCA.
Regulation of cryptocurrencies in the main European jurisdictions:
Spain
Spain brought forward the entry into force of MiCA by six months. This means that its adoption will take place in December 2025. Similarly, the Tax Agency published a model for declaring virtual assets abroad, which indicates that Spaniards will have to declare their cryptocurrency holdings abroad starting in March. 2024. The National Securities Market Commission (CNMV) opened a file against the technology company Miolos, for failure to comply with regulations on the promotion of cryptocurrencies. The Financial Client Defense Authority, created last year in the country, included cryptoassets in its system of protection and service to users.
France
France pushed for a licensing regime for crypto service providers, ahead of MiCA, which came into effect on January 1, 2024. The country banned influencers from promoting crypto assets. The Autorité des Marchés Financiers (AMF) and the Bank of France showed their willingness to bring global regulation to the DeFi world, including a related public consultation.
Germany
The German financial regulator, the Federal Financial Supervisory Authority (BaFin), doubled the licensing regime granted to financial entities, banks or companies, in general, associated with cryptocurrency services. Like crypto custody. In this sense, the institution showed a proactive approach with the intention of bringing greater trust and transparency to the crypto sector.
United Kingdom
Under the framework of the Financial Markets and Services Act, the United Kingdom recognized cryptocurrency trading as a regulated financial activity in British territory. The law integrated a number of regulatory provisions for the industry, including the need for licenses granted by the Financial Conduct Authority (FCA) and the implementation of risk assessments and financial tests for users by cryptocurrency exchanges. The provisions came into effect on January 8, 2024. From now on, users who did not complete the forms through crypto exchanges would not be able to continue trading with their accounts on the platforms.
Similarly, the FCA published a guidance guide for companies related to the promotion and marketing of cryptoassets on British soil, detailing examples of good and bad practices associated with cryptocurrency advertisements. The United Kingdom also approved the Economic Crimes and Corporate Transparency law, under which the confiscation of crypto assets involved in illicit activities is facilitated.
SEC Lawsuits and Enforcement
In the United States, the Securities and Exchange Commission (SEC), the local securities regulator, maintained a rather hostile attitude towards the cryptocurrency industry. The lawsuits filed against crypto exchanges Kraken, Coinbase and Binance stand out. The regulator also filed accusations against SafeMoon, which filed for bankruptcy at the end of last year.
The regulator was questioned for delaying the approval of a spot Bitcoin exchange-traded fund (ETF) on US soil, after receiving an avalanche of requests that have not yet received a response.
Cryptocurrencies and NFTs as securities
As part of the judicial processes led by the SEC against Binance, Coinbase and Kraken, the regulator expanded the list of cryptocurrencies and crypto tokens considered securities. It included almost 70 cryptoassets, including some popular ones in the market, such as BNB ($BNB ), Solana ($SOL ), Cardano ($ADA ), Polygon (MATIC ), Axie Infinity (AXS), Cosmos (ATOM), Algorand (ALGO), Internet Computer (ICP), among others. As a result, platforms such as Revolut, Bitstamp or eToro stopped trading with different cryptocurrencies for users in the United States.
On the other hand, non-fungible tokens or NFTs were also classified as securities by the SEC on two occasions. The SEC charged and fined the company Impact Theory for conducting a sale of unregistered securities through its NFTs. It also imposed a second fine on Mila Kunis and Aston Kuscher's animated series project, Stoner Cats.
Countries and laws
Likewise, throughout 2023 different countries presented initiatives related to the regulation of cryptocurrencies. A report from the consulting company, PriceWaterhouseCoopers (PwC) highlighted that in 2023 more than 40 countries worked in one way or another on the discussion or approval of laws involved with the regulation of cryptocurrencies.
At the end of last year, 23 countries have complete regulation for cryptocurrencies, focused on different areas. Such as an established regulatory framework, licensing and registration regime, application of the Travel Rule with AML and CFT parameters and standards for stablecoins.
Source: Observatorioblockchain.com