Let’s look at how some countries have approached their regulations one after the other and how crypto is regulated.
.jpg)
CRYPTO REGULATIONS IN THE UNITED STATES OF AMERICA:
While it’s difficult to find a level of consistency in the approach towards crypto assets regulation at the state level, the U.S., as of 2021, started drafting a framework for cryptocurrency legislation on the federal level.
There are two significant factors to consider here: Firstly, the IRS (Internal Revenue Services) created a tax guideline as they do not consider cryptocurrency as legal but said, “digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value”.
Secondly, the Financial Crime Enforcement Network (FinCEN) does not also consider crypto assets as legal tender but considers cryptocurrency exchanges to be money transmitters on the basis that cryptocurrency tokens are “other value that substitutes for currency.” This means all transactions on the blockchain via exchanges or personal storage must be registered with FinCEN, implement an AML/CFT (Anti Money Laundering/Combating the Financing of Terrorism ) program, maintain appropriate records, and submit reports to the authorities.
Also, the U.S. Securities and Exchange Commission (SEC) regards crypto assets as securities and applies all securities law to them. Notably, SEC has to lead ‘targeted attacks’ towards Ripple (raised more than $1.3 billion after selling its native token in unregistered securities law), Coinbase and Binance over their crypto products.
CRYPTO REGULATIONS IN ASIA
JAPAN
Japan is progressively minded regarding cryptocurrency regulations and policies, in easy terms, ‘pro-cryptonians’. For example, in December 2017, the National Tax Agency ruled that cryptocurrency gains should be categorised as “miscellaneous income” and that investors should be taxed accordingly. Meanwhile, most crypto exchanges in the country must be registered with the FSA and obey all AML/CFT rules.
Exchanges enjoyed a less strict climate till one of the biggest heists of the decade in 2018 when CoinHeck lost $530 million in crypto assets. Since then, regulators have pushed for stricter amended regulations for exchanges. In 2020, Japan established the Japanese Virtual Currency Exchange Association (JVCEA) and the Japan STO Association.
Cryptocurrency is still growing massively in the country amid growing concerns with AML. In November 2022, FSA drafted a new regulation that will address risks with customers and limit the extent to which funds are lost.
CHINA
The strict environment China created for cryptocurrency comes as no surprise. In June 2021, The People’s Bank Of China (PBOC) permanently banned cryptocurrency. It also prohibited exchanges in the country, citing public funding without government approvals. Furthermore, China banned crypto mining of any kind and advised all companies and persons involved to close operations entirely or relocate to other jurisdictions with a more favourable regulatory environment.
China has a reputation for being harsh towards crypto, and no indication shows the ban is getting lifted anytime soon. Although banned, some citizens have a way around transactions by using some foreign exchanges the China firewall misses.
It’s important to note that China has also followed the most powerful countries in the world to create a digital currency. In September 2021, it announced that e-CNY digital currency in several cities would be tested nationwide. According to the announcement, it’s intended to replace cash and coins and will be accepted as payment for goods, bills, transport fares, and tolls.
CRYPTO REGULATIONS IN EUROPE
UNITED KINGDOM
Safe to say, the United Kingdom has been taking fragile steps regarding crypto assets. The U.K. is yet to establish any specific laws that guide the use of cryptocurrency across the country. In fact, the U.K. qualifies crypto as a property rather than a currency. This means the exchanges are registered under unique regulations and requirements. Taxing a crypto asset in the U.K. depends on the activities done on the crypto platform; therefore, it varies.
Since the U.K. left the E.U. in 2020, it has added more domestic regulations to its rules, such as how all exchanges are registered under the FCA and must comply with all AML/CFT. Crypto exchanges across the country must notify OFSI (Office of Financial Sanctions Implementation) when they reasonably suspect a person or organisation is subject to sanctions or has committed a financial sanctions offence.
Most likely, the U.K. will follow the E.U.’s crypto regulations for the foreseeable future. In January 2022, the government announced plans for legislation to address “misleading crypto asset promotions” to bring cryptocurrency adverts “into line with other financial advertising”. Also, in late October 2022, the British Parliament’s lower house recognised crypto assets as regulated financial assets.
EUROPEAN UNION (E.U.)
In January 2022, the E.U.’s Fifth Anti-Money Laundering Directive (5AMLD) came into effect. By the end of that year, in December, the Sixth (6AMLD) followed. These tightened KYC and AML/CFT obligations and standard reporting requirements around the continent.
There’s no regional supervision of crypto exchanges across Europe. For an exchange to perform under uniformity in Europe, they must sign a pact with some European organisations, such as Germany’s Financial Supervisory Authority (BaFin), France’s AutoritĆ© des MarchĆ©s Financiers (AMF), or Italy’s Ministry of Finance.
But the E.U. is actively looking to adopt more crypto regulations. In July 2021, for example, it released draft legislative proposals with consequences for virtual asset service providers (VASP) across the region.
CRYPTO REGULATIONS IN AFRICA
NIGERIA
As an archetype for Africa, let's look at Nigeria.
So much uncertainty guides the regulation of crypto assets in Nigeria. In February 2021, the CBN (Central Bank of Nigeria) banned all national commercial banks from performing any crypto transactions. CBN noted that the ban protects its citizens from criminals and fraudulent activities because of the anonymity of crypto transactions. But the commercial banks in the country were not having it. They argued that cryptocurrency aims to improve financial inclusion and monetary transparency in the near future.
When it seemed the ban wasn’t going to work, the Security and Exchange Commission (SEC) drafted a regulation for crypto exchange companies—a 54-page regulation document titled New Rules on Issuance, Offering Platforms and Custody of Digital Assets. This regulation opened the door for crypto exchanges to grow in the country.
This regulation made the peer-2-peer method of trading popular in the country. Peer-to-peer (P2P) trading is the direct buying and selling of cryptocurrencies among users without intermediaries. For example, Busha, a crypto exchange in Nigeria, has over 400k verified users and confirmed over 2 million plus executed trades.
Amid growing inflation and continuous naira depreciation, CBN may draft new regulations that officially guide the inclusion of cryptocurrency as a potential legal tender. Nigeria is on the verge of a governmental change, and there’s much to consider
Comments