Introduction
In the ever-evolving world of cryptocurrencies and blockchain technology, staying informed about global crypto policies is crucial for investors, businesses, and policymakers alike.
The “Global Crypto Policy Review & Outlook 2023/24” report by TRM provides a detailed analysis of the regulatory developments shaping the crypto landscape. Let’s delve into the key elements of this report, highlighting the significant milestones and trends that have emerged in the past year.
G20 and International Standards
The G20, with India at the helm, sought support from the IMF to align discussions towards international standards. The IMF-FSB policy synthesis paper emphasized the importance of aligning policies with global standards. This collaboration underscores the growing recognition of the need for consistent regulatory frameworks across borders.
Financial Action Task Force (FATF)
The FATF’s targeted update on the implementation of standards for virtual assets and service providers reflects a proactive approach to combatting illicit activities in the crypto space. The plan to list jurisdictions with significant virtual asset sectors highlights the push for enhanced compliance and transparency in the industry.
Financial Stability Board (FSB) Recommendations
The FSB’s high-level recommendations for regulating crypto asset markets and global stablecoin arrangements emphasize the importance of consistent and effective regulation. The “same activity, same risk, same regulation” approach aims to promote financial stability and innovation while mitigating risks associated with digital assets.
International Monetary Fund (IMF) Insights
The IMF’s dedicated policy paper on crypto assets outlines the monetary and fiscal implications of crypto adoption. Emphasizing comprehensive regulation over bans, the IMF advocates for policy levers that remain effective amidst increasing crypto adoption. IMF Managing Director Kristalina Georgieva’s call for “good rules” to balance stability and innovation sets a guiding principle for global policy discussions.
Jurisdictional Developments
From Singapore’s crackdown on money laundering linked to Chinese organized crime to South Korea’s efforts to combat crypto-related criminal activities, jurisdictions worldwide are ramping up their regulatory efforts. The focus on consumer protection, market abuse, and illicit finance underscores the need for robust regulatory frameworks to safeguard investors and maintain financial integrity.
United States
In the United States, key regulators in the crypto space include the Financial Crimes Enforcement Network (FinCEN), the New York Department of Financial Services (NYDFS), and ongoing discussions regarding whether the Commodities and Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC) will become the primary regulator under a federal regime. Since March 2013, virtual currency administrators and exchangers have been required to register for anti-money laundering (AML) purposes, with licensing for virtual currency businesses in New York state mandated since June 2015.
Throughout 2023, the US witnessed increased enforcement activities and legislative progress in the crypto sector. The SEC targeted cryptocurrency services for alleged misconduct, including fraud and the listing of unregistered securities. Notable enforcement actions were taken against Terraform Labs, FTX CEO Samuel Bankman-Fried, and other executives for various violations. The SEC also cracked down on firms offering unregistered securities through crypto asset lending/staking programs and issuers of non-fungible tokens (NFTs) conducting illegal offerings.
Deputy Secretary Wally Adeyemo of the US Department of the Treasury emphasized the need to prevent illicit activities in the digital asset ecosystem. Requests were made for expanded powers to target cryptocurrency exchanges facilitating payments to terrorist groups like Hamas. The Office of Foreign Assets Control (OFAC) sanctioned and enforced actions against crypto businesses involved in illicit activities, targeting non-compliant exchanges and darknet markets.
US authorities focused on combating illicit activities involving mixers, particularly concerning North Korea and other threat actors. Following previous sanctions, the Department of Justice led operations against mixer services like ChipMixer, while OFAC targeted Sinbad, a service linked to North Korea. FinCEN proposed a new rule requiring financial institutions to monitor and report transactions involving mixers, underscoring the US government’s commitment to combating financial crimes in the crypto space.
European Union
In the European Union (EU), the main regulators overseeing the crypto sector are the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). Since January 2020, AML registration has been mandatory for virtual currency exchanges and custodian wallet providers in member states.
In June 2023, the EU finalized the Market in Crypto-Assets Regulation (MiCA) after years of debate, establishing a comprehensive framework for the region’s crypto asset market. Following MiCA’s passage, authorities began defining requirements and technical standards. EBA and ESMA released consultations on the regulation’s implementation, with deadlines for stablecoin-like assets in June 2024 and for crypto asset service providers in December 2024.
Additionally, June 2023 saw the approval of the Transfer of Funds Regulation (TFR), known as Europe’s Travel Rule, set to be enforced by December 30, 2024. While progress was made on other aspects of the EU’s AML package, a political agreement on anti-money laundering regulation was postponed to 2024. The EU established the Anti-Money Laundering Authority to coordinate consistent implementation of AML and counter-terrorism financing rules.
In 2023, the EU also introduced DAC8 for unified tax information sharing on crypto assets, the Data Act mandating “kill switches” for smart contracts, and the Payment Services Directive 3 to enhance the bloc’s resilience against payments fraud.
The European Central Bank (ECB) advanced its work on the digital euro, entering a two-year preparation stage in November. This phase includes finalizing the digital euro rulebook and selecting providers for developing a digital euro platform and infrastructure.
Looking ahead, the European Parliament will hold elections in June 2024, followed by the appointment of a new college of Commissioners later in the year, indicating ongoing developments and potential changes in EU crypto regulations and policies.
United Arab Emirates (UAE)
In the United Arab Emirates (UAE), various regulators oversee the crypto sector, including the UAE Securities and Commodities Authority (SCA), Dubai’s Virtual Assets Regulatory Authority (VARA), Abu Dhabi Global Market’s (ADGM) Financial Services Regulatory Authority (FSRA), and Dubai International Financial Centre’s (DIFC) Dubai Financial Services Authority (DFSA). Licensing for different classes of virtual assets is available at the federal level and across various emirates and free trade zones since 2018.
In 2023, significant developments took place in the UAE’s crypto landscape. VARA, the world’s first standalone crypto regulator, issued comprehensive guidance for Virtual Asset Service Providers (VASPs) in Dubai. The SCA, the UAE’s federal securities regulator, began accepting license applications from VASPs looking to operate across the UAE following the introduction of a national-level regulatory regime for virtual assets in late 2022, with the SCA appointed as the federal regulator.
Throughout 2023, there was a surge in licensing activity in the UAE. VARA granted 15 approvals, and the DFSA received over 100 inquiries regarding crypto licensing in the DIFC free trade zone since its crypto regime was established in November 2022. The ADGM free trade zone, which introduced crypto regulation in 2018, also saw several new approvals in 2023.
The Central Bank of the UAE launched a new Central Bank Digital Currency (CBDC) strategy in March, including the soft launch of the mBridge, a multi-CBDC platform with China, Hong Kong, and Thailand. The UAE also initiated proof of concept work on a CBDC bridge with India and domestic CBDC issuance.
In June 2023, the Financial Action Task Force (FATF) recognized the UAE’s progress in enhancing Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF) measures, leading to an upward revision of compliance with three FATF recommendations. As the UAE aims to improve AML/CTF reforms further, there may be increased oversight and enforcement in 2024 in preparation for a potential FATF assessment.
Conclusion
In conclusion, the “Global Crypto Policy Review & Outlook 2023/24” report paints a dynamic picture of the evolving regulatory landscape in the crypto industry. From international collaborations to jurisdiction-specific initiatives, the push for regulatory clarity and consistency is evident. As we look ahead to 2024, the emphasis on innovation, growth, and combating illicit activities will continue to shape global crypto policies.
In summary, the report highlights the importance of aligning regulatory frameworks with international standards, enhancing transparency and compliance, and fostering innovation while mitigating risks. By staying abreast of these developments, stakeholders can navigate the complex world of crypto regulations with confidence and foresight.
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