Results of the crypto year 2023: regulation
As we wrap up another dynamic year in the world of cryptocurrencies, it is important to reflect on significant past events and prepare for what lies ahead. The purpose of this series of articles is to analyze the multifaceted landscape of cryptocurrency, focusing on the various aspects that have shaped 2023. In this article, we focus on global regulation, a critical area that has undergone significant change over the past year.
→ Cryptocurrency: A Year in Review and a Look Ahead at Global Regulation
→ Main points affecting cryptocurrency regulation at the end of 2023
→ Regulation of cryptocurrency by country
→ USA
→ Japan
→ Russia
→ Great Britain
→ Germany
→ Australia
→ South Africa
→ Türkiye
→ Taiwan
→ Bahamas
→ Opinion of the AML Crypto team
→ Main points affecting cryptocurrency regulation at the end of 2023
→ Regulation of cryptocurrency by country
→ USA
→ Japan
→ Russia
→ Great Britain
→ Germany
→ Australia
→ South Africa
→ Türkiye
→ Taiwan
→ Bahamas
→ Opinion of the AML Crypto team
Cryptocurrency: A Year in Review and a Look Ahead at Global Regulation
The regulatory framework for cryptocurrencies has always been a hotly debated topic, walking a fine line between promoting innovation, ensuring investor protection and the stance of various regulators.
In this article, we delve into the complexities of global cryptocurrency regulation as of the end of 2023, interpreting PwC data and supplementing them with our experience and knowledge.
We aim to provide a clear picture of how different regions approach regulation, the impact of these policies on the cryptocurrency market, and what future trends we can expect as modern institutions adapt quickly enough to the ever-changing digital asset landscape.
In this article, we delve into the complexities of global cryptocurrency regulation as of the end of 2023, interpreting PwC data and supplementing them with our experience and knowledge.
We aim to provide a clear picture of how different regions approach regulation, the impact of these policies on the cryptocurrency market, and what future trends we can expect as modern institutions adapt quickly enough to the ever-changing digital asset landscape.
Main points affecting cryptocurrency regulation at the end of 2023
As we navigate the complex and evolving landscape of cryptocurrency regulation, it is critical to understand the key findings of PwC's 2023 report on the topic. This report sheds light on significant advances and challenges in the regulatory environment at the end of this year. Below, we dive into the report's key messages, covering global regulatory considerations, challenges and expectations that are reshaping the digital asset ecosystem.
Thesis 1: The regulatory framework in the financial services sector related to cryptocurrency is rapidly evolving. 2023 was no exception and rather became the most successful in this matter.
Thesis 2: Regulatory attention to digital assets has increased dramatically due to their growing popularity, adoption, market capitalization and volatility. High-profile failures and increased incidences of fraud in the crypto industry have highlighted the need for comprehensive global regulatory policies and frameworks for consumer protection and financial stability.
Thesis 3: Global standard setters insist on international cooperation. Various countries, including the European Union, UAE and Switzerland, are actively working to integrate digital assets into existing financial services systems.
Thesis 4: In turn, industry representatives expressed concern about the lack of transparency and urgency in making regulatory decisions.
In the context of cryptocurrency regulation, key regulators and institutions have made significant changes to their approaches and regulations. From the Basel Committee on Banking Supervision to the Financial Action Task Force (FATF) to the Markets in Crypto-Assets (MiCA) in the EU, each of these institutions has taken steps to adapt existing financial systems to the dynamics of the cryptocurrency market. Let's look at exactly what changes have been made and how they will affect cryptocurrency market participants:
The Basel Committee on Banking Supervision (BCBS) published final rules in December 2022, dividing crypto assets into two groups with specific requirements. This includes strict capital regimes for unbacked crypto assets and some stablecoins.
In October 2021, the Financial Action Task Force (FATF) updated its guidance on the risk-based approach to virtual assets and service providers, with a particular focus on AML/CFT obligations. The report also examines the regulation of systemically important stablecoins and the application of the “travel rule” for transactions.
Introduced in 2020 and expected to come into force in 2024, MiCA aims to create a comprehensive system for the regulation and supervision of crypto assets in the EU, focusing on legal clarity, consumer protection, market integrity, and financial stability. It covers a wide range of services and crypto assets, with specific rules for both EU and non-EU companies operating in the region.
At the moment, the regulation of cryptocurrencies in the world is as follows:
In this article, we'll look at regulations in 10 countries, selected according to their market size, geographic scope, and distinctive regulatory measures. Our list includes the following countries:
1
USA
2
Japan
3
Russia
4
UK
5
Germany
6
Australia
7
South Africa
8
Türkiye
9
Taiwan
10
Bahamas
Cryptocurrency regulations by country
USA
Who regulates cryptocurrency and how:
The United States has a 'dual banking system', which means that digital asset services are regulated at both the state and federal levels. Regulation is carried out through existing legal rules, payment schemes and, in some cases, through the banking system using a non-deposit trust mechanism.
Status of cryptocurrency in the country:
There is no comprehensive regulatory framework for digital assets in the US, although there are clear registration requirements and jurisdictional statements from major regulators. The classification of cryptoassets depends on their legal status and may overlap in some cases.
What's coming next:
Interdepartmental guidance on managing liquidity risks and search engine activity, as well as legislation in the field of stablecoins, are expected. The US will continue its research and cautious approach before making any decisions to introduce a Central Banking Digital Currency (CBDC).
The United States has a 'dual banking system', which means that digital asset services are regulated at both the state and federal levels. Regulation is carried out through existing legal rules, payment schemes and, in some cases, through the banking system using a non-deposit trust mechanism.
Status of cryptocurrency in the country:
There is no comprehensive regulatory framework for digital assets in the US, although there are clear registration requirements and jurisdictional statements from major regulators. The classification of cryptoassets depends on their legal status and may overlap in some cases.
What's coming next:
Interdepartmental guidance on managing liquidity risks and search engine activity, as well as legislation in the field of stablecoins, are expected. The US will continue its research and cautious approach before making any decisions to introduce a Central Banking Digital Currency (CBDC).
Japan
Who regulates crypto assets and how:
Crypto assets are regulated in Japan through the Financial Services Agency (FSA) and the Payment Services Act (PSA) for crypto assets and the Financial Instruments and Exchange Act (FIEA) for security tokens. Sellers of crypto asset exchange services must be registered with the FSA.
Status of cryptocurrency in the country:
Crypto assets, depending on their structure, may be subject to financial regulations. Cryptocurrencies and stablecoins are regulated through the PSA, and security tokens are regulated through the FIEA.
What's coming next:
Specialized anti-money laundering (AML) and 'travel rules' legislation is planned.
Crypto assets are regulated in Japan through the Financial Services Agency (FSA) and the Payment Services Act (PSA) for crypto assets and the Financial Instruments and Exchange Act (FIEA) for security tokens. Sellers of crypto asset exchange services must be registered with the FSA.
Status of cryptocurrency in the country:
Crypto assets, depending on their structure, may be subject to financial regulations. Cryptocurrencies and stablecoins are regulated through the PSA, and security tokens are regulated through the FIEA.
What's coming next:
Specialized anti-money laundering (AML) and 'travel rules' legislation is planned.
Russian Federation
Who regulates cryptocurrency and how:
From the beginning of 2021, Law No. 259-FZ “On digital financial assets, digital currency” came into force. Although this law does not directly mention cryptocurrencies, it does provide a definition of digital currency.
In accordance with clause 10 of Article 4 of Law No. 259-FZ dated July 31, 2020, the law prohibits paying with cryptocurrency, so businesses cannot use it to pay for the services of performers or accept it as payment for their goods, work or services. At the same time, the Ministry of Finance plans to allow cross-border settlements in cryptocurrencies for any business sector.
Status of cryptocurrency in the country:
Based on the law of July 31, 2020 No. 259-FZ “On digital financial assets, digital currency”:
What's coming next: At the beginning of 2024, immediately after the end of the New Year holidays, the State Duma plans to resume work on a bill relating to cryptocurrencies. The Chairman of the Financial Market Committee, Anatoly Aksakov, announced his intention to actively discuss already developed proposals for their subsequent consideration in the State Duma. Aksakov mentioned that preliminary discussions with the Central Bank and the Ministry of Finance have already taken place, and the first reading of the bill is expected to take place in the first quarter of next year.
From the beginning of 2021, Law No. 259-FZ “On digital financial assets, digital currency” came into force. Although this law does not directly mention cryptocurrencies, it does provide a definition of digital currency.
In accordance with clause 10 of Article 4 of Law No. 259-FZ dated July 31, 2020, the law prohibits paying with cryptocurrency, so businesses cannot use it to pay for the services of performers or accept it as payment for their goods, work or services. At the same time, the Ministry of Finance plans to allow cross-border settlements in cryptocurrencies for any business sector.
Status of cryptocurrency in the country:
Based on the law of July 31, 2020 No. 259-FZ “On digital financial assets, digital currency”:
- Cryptocurrency has no material embodiment and is not a monetary unit.
- Cryptocurrency, like other digital currencies, is recognized as property.
What's coming next: At the beginning of 2024, immediately after the end of the New Year holidays, the State Duma plans to resume work on a bill relating to cryptocurrencies. The Chairman of the Financial Market Committee, Anatoly Aksakov, announced his intention to actively discuss already developed proposals for their subsequent consideration in the State Duma. Aksakov mentioned that preliminary discussions with the Central Bank and the Ministry of Finance have already taken place, and the first reading of the bill is expected to take place in the first quarter of next year.
UK
Who regulates cryptocurrency and how:
Cryptoassets are regulated in the UK by the Treasury (HMT) and the Financial Conduct Authority (FCA). HMT is given powers to include crypto assets in financial instruments under the Financial Services and Markets Act 2000. The FCA is responsible for registering and licensing firms dealing in crypto assets, as well as monitoring compliance with anti-money laundering requirements.
Status of cryptocurrency in the country:
At the moment, some crypto assets, such as security tokens and electronic cash tokens, are already regulated. Other types of tokens, including utility tokens and non-collected exchange tokens, may be included in the regulatory framework in the future.
What's coming next:
The Financial Services and Markets Act 2022 is expected to be enacted, which will expand the regulatory scope to include stablecoins and establish a regulatory environment for cryptoassets used for payments. Consultations and final regulations regarding the financial promotion of cryptoassets and the management of the transition away from systemic stablecoins are also expected.
Cryptoassets are regulated in the UK by the Treasury (HMT) and the Financial Conduct Authority (FCA). HMT is given powers to include crypto assets in financial instruments under the Financial Services and Markets Act 2000. The FCA is responsible for registering and licensing firms dealing in crypto assets, as well as monitoring compliance with anti-money laundering requirements.
Status of cryptocurrency in the country:
At the moment, some crypto assets, such as security tokens and electronic cash tokens, are already regulated. Other types of tokens, including utility tokens and non-collected exchange tokens, may be included in the regulatory framework in the future.
What's coming next:
The Financial Services and Markets Act 2022 is expected to be enacted, which will expand the regulatory scope to include stablecoins and establish a regulatory environment for cryptoassets used for payments. Consultations and final regulations regarding the financial promotion of cryptoassets and the management of the transition away from systemic stablecoins are also expected.
Germany
Who regulates cryptocurrency and how:
Regulation of cryptoassets in Germany is carried out by the Federal Financial Supervisory Authority (BaFin). BaFin regulates the issuance, trading, custody, reporting and disclosure of information to clients related to digital finance activities.
Status of cryptocurrency in the country:
Crypto assets that meet the legal definition are regulated and considered financial instruments. Different types of tokens and business models are subject to varying degrees of capital markets, banking, financial sector, and anti-money laundering laws.
What's Expected Next:
Changes are expected to be implemented in the future due to the adoption of MiCA. The implementation of EU legislation is also expected, including the Digital Operational Resilience Regulation and changes to the German Cryptocurrency Transfer Act. It is expected that there will be further changes affecting cryptoasset service providers, given the revision of the EU Payment Services Directive and the Electronic Money Directive.
Regulation of cryptoassets in Germany is carried out by the Federal Financial Supervisory Authority (BaFin). BaFin regulates the issuance, trading, custody, reporting and disclosure of information to clients related to digital finance activities.
Status of cryptocurrency in the country:
Crypto assets that meet the legal definition are regulated and considered financial instruments. Different types of tokens and business models are subject to varying degrees of capital markets, banking, financial sector, and anti-money laundering laws.
What's Expected Next:
Changes are expected to be implemented in the future due to the adoption of MiCA. The implementation of EU legislation is also expected, including the Digital Operational Resilience Regulation and changes to the German Cryptocurrency Transfer Act. It is expected that there will be further changes affecting cryptoasset service providers, given the revision of the EU Payment Services Directive and the Electronic Money Directive.
Australia
Who regulates cryptocurrency and how:
Crypto-asset regulation in Australia is carried out by several authorities. ASIC focuses on consumer protection and market integrity, AUSTRAC requires digital currency providers to register and comply with KYC and AML standards. APRA is developing approaches to risk management and is expected to consult on prudential regulation of crypto assets in 2023.
Status of cryptocurrency in the country:
Australia currently does not have a dedicated regulatory framework for cryptoassets other than those covered by existing financial products and general consumer law rules.
What's coming next:
Upcoming regulatory announcements include consultations on token mapping, new corporate structures including DAOs, licensing and custody requirements for crypto assets, and next steps on the Digital Assets Regulations Bill, which affects stablecoins and CBDCs.
Crypto-asset regulation in Australia is carried out by several authorities. ASIC focuses on consumer protection and market integrity, AUSTRAC requires digital currency providers to register and comply with KYC and AML standards. APRA is developing approaches to risk management and is expected to consult on prudential regulation of crypto assets in 2023.
Status of cryptocurrency in the country:
Australia currently does not have a dedicated regulatory framework for cryptoassets other than those covered by existing financial products and general consumer law rules.
What's coming next:
Upcoming regulatory announcements include consultations on token mapping, new corporate structures including DAOs, licensing and custody requirements for crypto assets, and next steps on the Digital Assets Regulations Bill, which affects stablecoins and CBDCs.
South Africa
Who regulates cryptocurrency and how:
Crypto assets are regulated in South Africa by the Financial Conduct Authority (FSCA) and the Prudential Authority (PA). The FSCA has declared cryptoassets a financial product requiring licensing to offer advisory or intermediary services. PA has published guidance for banks on AML/CFT controls in relation to crypto assets and CASP.
Status of cryptocurrency in the country:
Crypto assets are recognized as a “financial product” under the Financial Advisory and Intermediary Services Act 2002.
What's coming next:
Further regulatory requirements are expected as part of the broad regulatory framework for crypto assets, including legislative changes to govern various aspects of crypto assets, such as guidance on the "travel rule" and the inclusion of crypto assets as "capital" in the Regulations currency control.
Crypto assets are regulated in South Africa by the Financial Conduct Authority (FSCA) and the Prudential Authority (PA). The FSCA has declared cryptoassets a financial product requiring licensing to offer advisory or intermediary services. PA has published guidance for banks on AML/CFT controls in relation to crypto assets and CASP.
Status of cryptocurrency in the country:
Crypto assets are recognized as a “financial product” under the Financial Advisory and Intermediary Services Act 2002.
What's coming next:
Further regulatory requirements are expected as part of the broad regulatory framework for crypto assets, including legislative changes to govern various aspects of crypto assets, such as guidance on the "travel rule" and the inclusion of crypto assets as "capital" in the Regulations currency control.
Türkiye
Who regulates cryptocurrency and how:
Regulation of crypto assets in Turkey is carried out by the Central Bank of the Republic of Turkey (CBRT) and the Capital Markets Board of Turkey (CMB). The CBRT has prohibited the direct or indirect use of certain cryptoassets in payments, and the CMB has indicated that cryptoassets that qualify as capital market instruments are subject to appropriate regulation.
Status of cryptocurrency in the country:
Direct or indirect use of crypto assets in payments is prohibited. There is no specific regulation for stablecoins or specific registration requirements for companies operating in the cryptoasset sector.
What's coming next:
The government and regulators have established joint working groups to explore potential future regulatory changes. Capital Markets Law No. 6362 may be amended to include regulation of cryptoassets.
Regulation of crypto assets in Turkey is carried out by the Central Bank of the Republic of Turkey (CBRT) and the Capital Markets Board of Turkey (CMB). The CBRT has prohibited the direct or indirect use of certain cryptoassets in payments, and the CMB has indicated that cryptoassets that qualify as capital market instruments are subject to appropriate regulation.
Status of cryptocurrency in the country:
Direct or indirect use of crypto assets in payments is prohibited. There is no specific regulation for stablecoins or specific registration requirements for companies operating in the cryptoasset sector.
What's coming next:
The government and regulators have established joint working groups to explore potential future regulatory changes. Capital Markets Law No. 6362 may be amended to include regulation of cryptoassets.
Taiwan
Who regulates cryptocurrency and how:
Regulation of cryptoassets in Taiwan includes the Taipei Exchange rules for the issuance of security tokens by exchange-traded companies. There are no specific registration requirements for virtual assets.
Status of cryptocurrency in the country:
Taiwan does not have a specific legislative or regulatory framework regarding the general status of cryptocurrencies. The government has set AML/CFT expectations for the virtual asset sector.
What's coming next:
There are no plans to release a Central Bank Digital Currency (CBDC) in the near future, but research, testing and pilot projects in this area are actively ongoing. There are currently no specific requirements for prudential regulation, stablecoins or the sale and promotion of crypto assets.
Regulation of cryptoassets in Taiwan includes the Taipei Exchange rules for the issuance of security tokens by exchange-traded companies. There are no specific registration requirements for virtual assets.
Status of cryptocurrency in the country:
Taiwan does not have a specific legislative or regulatory framework regarding the general status of cryptocurrencies. The government has set AML/CFT expectations for the virtual asset sector.
What's coming next:
There are no plans to release a Central Bank Digital Currency (CBDC) in the near future, but research, testing and pilot projects in this area are actively ongoing. There are currently no specific requirements for prudential regulation, stablecoins or the sale and promotion of crypto assets.
Bahamas
Who regulates cryptocurrency and how:
Crypto assets are regulated in the Bahamas through the Digital Assets and Registered Exchanges Act 2020 (DARE). The Bahamas Securities Commission is responsible for regulating, monitoring and supervising the issuance of digital assets and persons engaged in the digital asset business.
Status of cryptocurrency in the country:
DARE creates a legal framework to regulate the issuance, sale and transfer of crypto assets within or from the Bahamas. This law includes measures to combat money laundering and terrorist financing.
What's coming next:
The regulatory framework is expected to evolve and improve in the future, including possible amendments to DARE and the Rules, to address issues related to stablecoins and cryptoasset derivatives. Additionally, the Central Bank of the Bahamas released a CBDC called Sand Dollar, which is one of the first CBDCs implemented in the world.
Crypto assets are regulated in the Bahamas through the Digital Assets and Registered Exchanges Act 2020 (DARE). The Bahamas Securities Commission is responsible for regulating, monitoring and supervising the issuance of digital assets and persons engaged in the digital asset business.
Status of cryptocurrency in the country:
DARE creates a legal framework to regulate the issuance, sale and transfer of crypto assets within or from the Bahamas. This law includes measures to combat money laundering and terrorist financing.
What's coming next:
The regulatory framework is expected to evolve and improve in the future, including possible amendments to DARE and the Rules, to address issues related to stablecoins and cryptoasset derivatives. Additionally, the Central Bank of the Bahamas released a CBDC called Sand Dollar, which is one of the first CBDCs implemented in the world.
Opinion of the AML Crypto team
Global cryptocurrency regulation in 2023 highlights that different countries are taking different approaches. Some countries, such as Russia and Turkey, are introducing more stringent restrictions, while others, including the US and EU, are focusing on creating a structured and comprehensive regulatory framework.
Central elements such as AML/CFT, investor protection and transparency are key in all countries reviewed.
There is further development and improvement in regulatory frameworks ahead, particularly in the context of stablecoins, CBDCs and cross-border financial flows. This indicates continuous development and adaptation in response to the changing digital asset market.
Central elements such as AML/CFT, investor protection and transparency are key in all countries reviewed.
There is further development and improvement in regulatory frameworks ahead, particularly in the context of stablecoins, CBDCs and cross-border financial flows. This indicates continuous development and adaptation in response to the changing digital asset market.
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