In recent years, as the crypto market has become more mainstream, more and more countries have started to pay attention to and have introduced crypto regulatory policies, which will shape the crypto market at any time. Today, let’s take a look at the regulatory policies in the pipeline in several countries that have a big impact on the crypto sector and gain insight into what kind of changes the regulations will bring to the crypto market in 2022. ….
As of mid-February 2021, there were no new changes to U.S. crypto regulatory policy, but the implementation of cryptocurrency-related policies throughout 2021 shows that the regulatory situation tends to be tougher. The U.S. SEC and CFTC have repeatedly mentioned cryptocurrencies in their press releases, and fines against related industries have also combined to exceed $1.279 billion for the entire year of 2021. Sanctions against related industries are continuing to grow in strength.
The flip side of the strict regulation and increased fines is that the enforcement of the U.S. judicial system has resulted in more than 70% of cryptocurrency-related cases ending in settlements and payment of fines, with no real criminal involvement. The SEC’s case against Ripple did not progress substantially throughout 2021, and in this respect, the strict regulation and increased fines policy in the U.S. does not have a large impact on the global cryptocurrency space.
Another piece of information on U.S. regulation is the taxation bill on crypto assets. This bill, the Infrastructure Investment and Jobs Act, introduced by the U.S. Congress in April 2021, requires the IRS to investigate and tax information on transactions over $10,000. Miners, infrastructure equipment and infrastructure technology providers, and trading platforms are all included in the tax bill. However, after the bill was vetoed in June 2021, it was not until late 2021 that Biden re-signed the bill. A further vote on whether to implement the bill in 2022 is still required by the U.S. Congress.
From the US Coinbase listing to the entry of Bitcoin ETFs into the traditional capital space, US regulatory policies have not had much impact on the cryptocurrency market despite attempts to weaken the influence of cryptocurrencies, such as limiting the spot listing of ETFs. Cryptocurrency, which is a new way to make money, is still quickly becoming part of the US economic landscape.
Recently, Lee Jae-Myung, a candidate for the upcoming South Korean presidential election in March, has tried to attract young voters with a series of pro-cryptocurrency policies and talked about creating an international cryptocurrency hub through a pro-business strategy.
In fact, as early as the end of 2021, Lee Jae-Myung said at the “Youth Talk on Crypto Assets” event, “We need to create a basis for issuing and circulating virtual assets that are recognized worldwide.” This is a revolution, and it is similar to creating a new currency.
Another presidential candidate, Yoon Seok-yeol, promised to “create an environment where crypto-asset investors can invest with confidence.”
The cryptocurrency attitudes and promises of the two rival candidates can be interpreted as a bid to win the support of cryptocurrency investors. The real goals of both candidates may be to protect investors and to help the NFT and metaverse sectors grow, but it’s not clear which.
Cryptocurrency investors in South Korea want to postpone or remove the 20% tax on profits made from trading cryptocurrencies. This would allow cryptocurrency trading to return to peer-to-peer trading.
South Korea’s four major digital asset trading platforms are also seeking to loosen the policy, yet a candidate’s statement is, after all, still just a candidate’s statement. Whether or not they will be able to take office, and whether or not they will be able to deliver on their promises once in office, remains a concern for Korean cryptocurrency investors.
Singapore has introduced relatively friendly cryptocurrency regulatory policies, and large global trading platforms, including Coinan and Firecoin branches, as well as project labs, have now landed in Singapore. There have been a lot of investments in the cryptocurrency sector by Singapore’s sovereign fund, GIC, and other companies.
The Financial Supervisory Authority of Singapore (MAS) has issued regulations related to the Digital Token Issuance Guidelines as early as 2017, which stipulate the payment method, storage method, and transaction method of cryptocurrencies, require an RMO license to engage in a cryptocurrency service business, and identify bitcoin and Ethereum as electronic currencies for payment of goods and settlement of debts.
Starting in 2020, the Payment Services Act will come into effect. This law allows people in Singapore to buy and sell cryptocurrencies, and it also gives people a place to trade cryptocurrencies and make payments.
Although all cryptocurrency businesses have so far failed to apply for a license for crypto payment services from the Singapore government, more than 20 related businesses, such as Paxos, Coinbase, and Genesis, have been granted exemptions from Singapore’s crypto payment services.
So far, Singapore’s securitization token platform ISTOX is publicly listed and offers a range of secondary trading services. In 2022, we may see more marketplace operators join the cryptocurrency payment space in Singapore.
Japanese regulatory policy has toughened in the wake of the Mt. Gox platform bankruptcy case, and in 2016, Japan’s Funds Clearing Act clarified cryptocurrencies as a means of settlement and payment and recognized their value. However, only businesses that have been approved by the Japan Financial Services Agency can do things with cryptocurrency.
Around 2017, Japan issued licenses to 16 cryptocurrency trading platforms one after another, but then stopped issuing licenses due to the financial security of some platforms, and issued corrective warnings, fines, and even shutdowns to almost all platforms that got licenses.
Japan completed the registration of 31 crypto businesses in 2021, but cryptocurrency businesses including Coinan and Bybit were banned from engaging in cryptocurrency services in Japan. For cryptocurrency businesses that have already qualified for related services, Japan’s Funds Clearing Law also sets many restrictions, including that all cryptocurrency service providers (trading platforms or wallet providers) must have an equivalent amount of funds to secure the funds for crypto assets, and cryptocurrency service providers that have not obtained a trading license will be prohibited from engaging in related business.
Starting in 2022, the Japanese government has set up a detailed taxation mechanism in the regulations related to cryptocurrency investors, where individuals with an annual salary income of more than 20 million yen or an extra-salary income of more than 200,000 yen are required to declare their income from cryptocurrency trading profits at tax rates ranging from 15% to 55%. This, of course, adds to the costs of trading for traders. Japanese regulations, on the other hand, protect traders’ money to some extent in terms of compliance.
The UK Financial Conduct Authority (FCA) began overseeing how crypto-asset businesses manage money laundering and counter-terrorist financing risks in 2020, and since then, UK crypto-asset businesses have been required to comply with the Money Laundering Regulations (MLR) and register with the FCA.
As of February 2022, more than five crypto businesses have already qualified for registration, and more than 80 other crypto businesses are on the provisional registration list awaiting further regulatory review. More than six crypto businesses are expected to get permission to start up in March 2022.
The FCA has also published on its official website a list of hundreds of unregistered crypto businesses, including Cryptocurrency, which has been repeatedly warned.
The FCA’s regulatory policies will continue to restrict cryptocurrency service providers from conducting business around e-wallets, mobile payments, and global remittances. Many of the FCA’s policies will continue to restrict cryptocurrency providers from conducting business around e-wallets, mobile payments, and global remittances.
Thailand has one of the most lenient regulatory regimes for cryptocurrencies, with the Digital Assets Act enacted in 2018 dividing digital assets into cryptocurrency (cryptocurrency) and digital tokens (digital tokens), while encouraging technological innovation and supporting the development of cryptocurrency businesses.
The Act sets out detailed rules for licensing applications for any aspect of cryptocurrency issuance, trading, and storage, and as of 2022, Thailand has issued trading platform licenses to eight cryptocurrency service providers. Four ICO licenses were issued to four cryptocurrency issuers.
Among the regulations related to the trading of cryptocurrencies by individuals, the Thai SEC has established the relevant tax policies, which are 7% VAT and a 15% capital gains tax on returns. Its tax rate is lower than that of the UK.
Of course, under the seemingly lenient regulatory policy, Thailand is tougher on NFT, DEFI, and fantoken, explicitly banning such tokens from circulation and trading in the country.
On February 8, Kommersant said that the Russian government and central bank had agreed on how to regulate cryptocurrency and that the country is ready to start using crypto assets as money.
According to a report by CCTV News, the Russian government has approved the legislative concept for the regulation of digital currency circulation. The relevant departments of the Russian government will strictly regulate the market circulation of cryptocurrencies in the country and will further protect the rights of ordinary investors. The Russian Ministry of Finance and the Central Bank will formulate a relevant bill by February 18.
This means that Russia’s previous policy of a total ban on cryptocurrencies is no longer valid, and a comprehensive regulatory framework advocated by the financial sector, led by the Russian Ministry of Finance, is taking shape. Cryptocurrency transactions will be secured in Russia, while the relevant tax and regulatory policies will not affect the use, exchange, and circulation of digital currencies in Russia.
According to Russian media outlet The Bell, citing a Russian government analysis, the country’s cryptocurrency share is growing much faster than traditional finance, with its cryptocurrency share accounting for 12 percent of the global total and totaling more than $240 billion in Russia at the peak of the global cryptocurrency market in 2021, according to a Russian government analysis. With a more liberal regulatory framework for cryptocurrencies, Russia will be able to collect up to 10,000 billion rubles (about $13 billion) in taxes from the crypto market each year.
In addition, the Russian State Duma is working on a tax policy for crypto miners, and there are reports that Russia will charge at least 15% tax on crypto miners in the future after the cryptocurrency tax framework is in place.
There is no doubt that the real purpose of Russia’s move is entirely for taxation, whether it is to treat crypto assets as currency or to tax crypto miners. The core basis of its policy is actually the more critical “development of cryptocurrencies far exceeds that of traditional finance.” If we look at the macroeconomy, Russia has just experienced restrictions on its resource exports from the EU and the US. Due to global energy price volatility and the political environment, Russia’s GDP in 2021 will be $1.23 trillion, a figure that is $460 billion less than the $169.88 billion in 2019. That’s the equivalent of two years of an economy that has not only stagnated but even plummeted, with a third of GDP “disappearing” in two years.
Therefore, it is not difficult to guess that Russia itself is in dire need of more tax revenues and financial dynamism to boost its economy. It is therefore easy to understand why Russia has broken the policy line of a total ban on cryptocurrencies and adopted a more permissive regulatory and taxation attempt to industrialize and standardize cryptocurrencies.
The aspect of Russia’s treatment of crypto assets as a currency that may have the greatest impact on the digital asset market lies with the foundation of cryptocurrencies—miners. Even though the Russian Duma’s tax policy for crypto miners is likely to raise the price of cryptocurrencies, it will also be able to finish building large-scale mines thanks to Russia’s strong energy support. This will lay the groundwork for the steady growth of the digital asset market in 2022.
In the short term, positive news about Russia will help the mainstream market move up, but it’s hard to say how much this boost will help the overall negative market sentiment.
In addition, the government draft implementing the Revised EU Money Laundering Directive No. 4 came into effect. Coinbase was the first company to get a license from Germany’s Federal Financial Supervisory Authority.
El Salvador has legally recognized Bitcoin as its legal tender.
In Canada, amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act came into effect, including one that recognizes the asset properties of cryptocurrencies such as Bitcoin, bringing cryptocurrency trading platforms, payment processors, and other cryptocurrency companies into legal recognition as money services businesses (MSBs) and thus into regulation.
The Australian Securities and Investments Commission (ASIC) has said it will seek market comment on a series of proposals to regulate the crypto market, and there is still no effective regulation of cryptocurrency-related businesses in Australia. The relevant regulatory policy also remains unclear and in an unregulated state.
Financial Action Task Force 2021 (FATF) data shows that of the 128 countries and territories that make up the world, 58 now say that they have implemented the new FATF standards. 52 countries regulate virtual asset service providers and six countries don’t allow them to run.
A number of governments have issued warnings to some cryptocurrency trading platforms, mainly for offering derivatives trading and not being registered in their countries, also reflecting that more and more countries are no longer taking a laissez-faire approach to cryptocurrency trading and are starting to take the initiative.
As of now, crypto assets are becoming more and more important in global financial markets, so more and more countries are coming up with ways to regulate them. Most countries are likely to push for more regulations based on anti-money laundering and anti-terrorist financing risks as a way to protect themselves.
The trading of crypto-asset tokens, issuance mechanisms, and cryptocurrency trading platforms for the issuance of security-based tokens have gradually replaced traditional financial securities.
With the rapid development of new things such as DeFi and NFT, countries, and regions around the world are facing increasingly complex regulatory issues in the crypto market, and the regulation and development of cryptocurrencies will test the governance ability of national governments.
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