Cryptocurrency has become a significant asset class in the global investment landscape, prompting governments worldwide to explore ways to regulate it. The European Union was the first to adopt measures requiring crypto service providers to detect and stop illicit cryptocurrency uses. The U.S. is slowly approaching regulation, but users, issuers, businesses, and regulators are battling it out in the court system. In the U.S., the Securities and Exchange Commission (SEC) announced a new framework in 2022 that opened the door to further regulation. However, the ongoing fight between regulators, broker-dealers, investors, and the crypto industry shows that the U.S. is still evolving, regardless of the frameworks introduced and the powers given to regulators. Central Bank Digital Currencies (CBDCs) are issued by central banks and backed by governments, while cryptocurrencies are decentralized by definition and are not CBDCs.
Cryptocurrencies are not considered legal tender in China, Canada, the United Kingdom, Japan, Australia, Singapore, South Korea, India, Brazil, and the European Union. China’s People’s Bank of China (PBOC) bans crypto enterprises from operating, while Bitcoin mining is banned in May 2021. Canada has been more proactive about crypto regulation, becoming the first country to approve a Bitcoin exchange-traded fund (ETF). Crypto trading platforms and dealers must register with provincial regulators and classify all crypto investment firms as money service businesses (MSBs).
The UK recognizes crypto assets as regulated financial instruments, with the Financial Services and Markets bill becoming an act in June 2023. Cryptocurrency-specific reporting requirements relating to Know Your Client (KYC) standards, anti-money laundering (AML), and combating the financing of terrorism (CFT) are in place.
Japan takes a progressive approach to crypto regulations, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA). Crypto exchanges must register with the Financial Services Agency (FSA) and comply with AML/CFT obligations. The country has been working on several aspects when it comes to regulation, including taxation.
Australia classifies cryptocurrencies as legal property, subjecting them to capital gains tax. Exchanges are free to operate in the country, provided they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet specific AML/CTF obligations. In August 2023, the Monetary Authority of Singapore announced a framework that would regulate stablecoin issues in the country, requiring any issuers to conform to specific criteria.
India remains on the fence regarding crypto regulation, neither legalizing nor penalizing its use. Brazil passed a law legalizing cryptocurrencies as payment methods throughout the country, but the country continues to hesitate to ban crypto outright or regulate it.