Regulations Associated with Cryptocurrencies: A Look Within the Global Community
From being a specialized technology used mostly by computer enthusiasts, cryptocurrencies are now a rapidly expanding worldwide financial sector. Tax law, consumer protection, and cybersecurity are all affected by the high price volatility of cryptocurrencies and the opportunity for a wide range of investors—from individual traders to institutional players—to earn astronomical returns. Additionally, there is a risk that coins and tokens will be used to support illicit activity. Regulating the cryptocurrency industry on a worldwide scale has become a difficult but necessary endeavor for investors, developers, enthusiasts, and governments.
Regulations pertaining to cryptocurrencies differ greatly between nations, which reflects the diversity of viewpoints and apprehensions around their broad adoption. In an effort to become IT hubs, certain nations have embraced blockchain technology and cryptocurrencies, encouraging investment and innovation in the field. Some have adopted a more circumspect stance, while a few have outright outlawed any activity connected to cryptocurrencies.
ROLE OF INTERNATIONAL BODIES
The worldwide reach of cryptocurrencies presents a distinct obstacle for regulatory bodies. Cross-border transactions happen without the need of conventional financial middlemen. This facilitates efficient handling of regulatory issues requiring international coordination and collaboration.
Global standards are being established by international organizations such as the Basel Committee on Banking Supervision and the Financial Action Task Force (FATF). These groups want to prevent illegal activity from using cryptocurrency as a shelter, level the playing field, and lower the possibility of regulatory arbitrage.
CRYPTO REGULATIONS WORLDWIDE
Legislation pertaining to cryptocurrency assets was first passed in Canada, where they are governed by both provincial and national regulators, the Canadian Securities Administrators (CSA). The AML/CFT framework and the Proceeds of Crime and Terrorist Financing Act (PCA) were modified in 2014 to include cryptocurrency regulations. Guidelines for initial token offers (ITOs) and initial coin offerings (ICOs) were released by the CSA in 2017. In 2020 and 2021, new rules were added to the AML/CFT framework, mandating that businesses register with local authorities, maintain records of all cross-border cryptocurrency transactions, and report suspicious activities.
In 2014, Australia also started incorporating cryptocurrency into its current licensing, taxes, and consumer protection laws. The country’s AML/CFT laws were widened in 2017 to include bitcoin asset exchanges and service providers, and in 2019, the Securities and Investments Commission unveiled new licensing guidelines. Australia’s Senate Economics Legislation Committee defeated the opposition Liberal party’s Digital Assets (Market Regulation) Bill in September 2023. In order to propose a new licensing and custody framework for crypto asset service providers, Prime Minister Anthony Albanese launched a consultation in February, however it hasn’t been adopted yet.
Bermuda, one of the leading offshore financial hubs globally, has implemented one of the first all-encompassing regulatory frameworks for digital assets, highlighting its approach to business-friendly governance. Additionally, Gibraltar has put in place a thorough regulatory system. The Gibraltar Stock Exchange (GSX) blockchain business Valereum was cleared for sale by the Gibraltar Financial Services Commission in 2022. This will enable investors to exchange assets using both fiat cash and cryptocurrencies.
Notoriety has it that El Salvador was the first nation in history to enact laws designating Bitcoin as lawful money. August 2021 saw the approval of the Bitcoin Law, which took effect the following month. It stated that Bitcoin must be recognized as payment and that the state will automatically convert BTC to US dollars. The law sets forth guidelines for companies that provide virtual asset services as well as measures to stop money laundering.
Estonia is changing the way it approaches regulations. In 2017, it became the pioneer nation to begin granting licenses for cryptocurrencies, enabling hundreds of businesses to get an Estonian license and conduct business elsewhere. As a result, it became one of the top cryptocurrency centers, housing over half of all registered virtual asset service providers (VASPs) globally. However, under the Prevention of Money Laundering and Terrorist Financing Act (2022), it has recently tightened regulations on digital assets and revoked hundreds of licenses.
