Global crypto regulation and the challenges for crypto compliance teams
The world’s regulatory bodies haven’t yet achieved a universal legislative framework that optimally exploits the crypto industry’s opportunities while mitigating the risks. The continual shifts in legislative requirements and the absence of worldwide uniform standards are an ongoing challenge to compliance teams across the globe.
To help compliance teams understand the current regulatory requirements and how we anticipate these to change with new legislations and shifting appetite for crypto, we have summarized key developments across the globe in our latest report ‘Beyond Borders: Mapping the Global Digital Asset Regulatory Landscape’. Here are the key highlights:
Crypto compliance and regulation in the US, UK, and Europe
Recent legislative developments and their impact on crypto regulation in the USA, the EU countries (and EU candidate member country Georgia), and the UK include:
- The US Securities and Exchange Commission (SEC) announcement in January 2024 that some bitcoins were granted the same status as exchange-traded products (ETPs) both recognized their value in the traditional financial system and placed them more clearly in regulatory bodies’ sights, leading to the flurry of activity in the market.
- The EU’s approval of the Markets in Crypto Assets Regulation (MiCA) in April 2023 was groundbreaking for crypto regulation within the economic region and beyond. The EU started implementing MiCA in stages from June 2023 and the process is set to conclude at the end of 2024.
- The UK government implemented the Travel Rule, compulsory from September 1, 2023, touted as a best-in-class roadmap to achieving compliance for crypto asset businesses.
Crypto compliance and regulation in Georgia
The National Bank of Georgia (NGB), meanwhile, took a brave step forward when it issued its regulation for Virtual Asset Service Providers (VASPs):
The regulation strikes the balance between promoting innovation and ensuring safety. VASPs must implement regulations within a year of registering, but by no later than 2024, which demonstrates the EU candidate country’s resolve to be at the cutting edge of crypto.
Crypto compliance and regulation in APAC and the UAE
Here we assess the proactive and energetic regulatory approach of the UAE and APAC. Both regions temper their momentum with sound legislative practices that allow industry development without compromising consumer safety or destabilizing their economies and could attract mature, foreign crypto businesses who appreciate that balance.
Highlights include:
- The Australian government’s general proactive approach was demonstrated by the October 2023 public participation process on regulating digital assets, with a sensible twelve-month transition period after implementation and ongoing consultation between regulators, compliance officers, and investors. Meanwhile, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has made increased regulatory focus on digital currency exchanges a priority of its 2024 Regulatory Priorities Plan.
- Singapore pre-empted Australia’s pattern. An October 2022 public consultation about digital payment token (DTPs) services revealed concerns around the safety of customer funds and transparent declarations of financial risks faced. Arising from this, the Monetary Authority of Singapore (MAS) released new DTPSP regulations in July 2023 which better protected customers’ funds for a time if service providers went bankrupt.
- Hong Kong also harnessed the potential of the region to lead in the growing acceptance of digital asset currencies: The Securities and Futures Commission announced large-scale regulatory changes for centralized virtual asset trading platforms (VATPs) to follow in a circular on May 31, 2023, alongside a another circular explaining the new licensing regulations for transitional arrangements. VATPs were expected to implement the new changes on June 01, 2023.
- The United Arab Emirates (UAE) moved quickly to become a marketplace leader: It established the Virtual Assets Regulating Authority (VARA) in 2022, and the Virtual Assets and Related Activities Regulations 2023 quickly followed.
Crypto compliance and regulation in China and Egypt
We examine how the different regulatory stances of the governments of China and Egypt achieved the same result – prohibitively restrictive measures preventing their citizens, financial institutions, and businesses from trading in crypto, as well as outright bans.
Highlights include:
- The People’s Bank of China (PBC) along with other state agencies first banned Bitcoin trading in late 2013. A ban on Initial Coin Offerings (ICOs) followed in 2017 and was consolidated by a further ban on virtual asset trading in 2021. Among other reasons, The PBC most often cites virtual currency trading’s risks to the traditional financial system for the ongoing bans. However, at least one contemporary media report speaks to several grey areas whereby Chinese nationals can trade legally.
- The Central Bank of Egypt (CBE) first banned crypto trading in 2018 citing religious reasons and confirmed the ban with The Egyptian Banking Law No. 194 of 2020. Over this time span, the CBE issued periodic if infrequent warnings against dealing in virtual assets, the fourth of which was announced in March 2023.
Crypto compliance and regulation in the future
It’s up to industry players and regulators to collaborate and shape a future that’s both inclusive and secure, while also fostering growth.
In this section we compare the regulatory frameworks of the countries and regions we’ve looked at, explain what drives the differences and/or similarities in their approaches, assess their successes and challenges, and predict what the future holds for them.
Lastly, we explain our vision of what future best practices should be and how compliance and regulatory teams can achieve them in a way that balances nurturing innovation with mitigating associated risks, so that the crypto industry and all its participants can thrive safely, sustainably, and on the right side of the law.
