Technological innovation is ushering in a new era of opportunity and prosperity. The development of the Internet gave rise to electronic commerce, which has transformed the way people do business. The advent of blockchain technology is now doing the same thing for the world of finance.
The crypto ecosystem continues its rapid growth, presenting opportunities and challenges for businesses and investors. As the industry expands, so does the number of jurisdictions adopting regulations around cryptocurrencies. According to an analysis of banklesstimes.comMore than 190 global jurisdictions have adopted crypto regulation at different speeds and approaches.
Jonathan Merry, CEO of BanklessTimes, said:
The jurisdictions that have been most welcoming to cryptocurrencies and blockchain technology are Malta, GermanySwiss, Singaporeand Canada. These countries have enacted friendly regulations that have attracted many companies in the crypto space.
In contrast, jurisdictions such as China, the Netherlands, Japan, India and Algeria have taken a more aggressive approach, cryptocurrency ban exchanges and Initial Coin Offerings (ICOs).
Cryptocurrency regulations around the world
Regulatory approaches to cryptocurrencies differ from jurisdiction to jurisdiction. The most common regulatory approach has been to treat cryptocurrencies as commodities or taxable goods.
The US, for example, does not consider cryptocurrencies to be legal tender, but rather cryptocurrency exchanges as money transmitters. The Internal Revenue Service (IRS) taxes cryptocurrencies as property. In contrast, El Salvador has classified specific cryptocurrencies as legal tender.
The US Treasury has emphasized crypto regulations to fight global and domestic criminal activities. FINANCE (Financial Crimes Enforcement Network) has a new cryptocurrency regulation that requires the collection of data from crypto exchanges and wallets. The rule requires exchanges to file suspicious activity reports (SARs) for transactions over $10,000. Wallet owners must identify themselves when sending more than $3,000 worth of cryptocurrency in a single transaction.
financial experts believes that cryptocurrency needs a global regulatory system. Like financial service providers, they need guidance that stretches across nations. For example, critical crypto asset service providers must be licensed.
Also, crypto assets and stablecoins must have specific requirements. In addition, investment services and products must be regulated like securities brokers and dealers. In addition, there must be a procedure that clarifies the standards for the granting of licenses and authorizations.
Many analysts suggest that regulated financial institutions should have defined criteria for crypto exposure and participation. If regulated companies provide custody services, the requirements must address the risks.
Some emerging markets face significant dangers of currency substitution for crypto assets. cryptoization requires fine-tuning the management of the flow of capital.
Cross-border collaboration is vital to address technological, legal, regulatory and supervisory issues. Creating a coherent and coordinated cryptographic regulatory framework is a challenge.
International organizations at the forefront
International organizations are playing a role in developing global crypto regulations. the Financial Action Task Force (FATF) is one of those organizations. It has published guidance for a risk-based approach to regulating virtual assets and virtual asset service providers (VASPs).
the Bank of international agreements (BIS) is another. He has released a report assessing the current state of central bank approaches to crypto assets.
The G20 is also active on the regulatory front. In October 2019, it endorsed the FATF standards and pledged to implement them by June 2020. The group has also urged relevant standard setting bodies (SSBs) to develop global standards for crypto assets.
the 2020 G7 Summit reaffirmed the group’s commitment to global stablecoin regulation. It also urged the FATF to provide an interim report on its work by April 2021 and a final report by October 2021.
The coronavirus pandemic has highlighted the importance of digital finance in the global financial system, including crypto assets. In response, the G20 called on the FATF to speed up its work on crypto assets and provide an interim report by July 2020 and a final report by October 2020.
the OECD is also active in this space. He has published a discussion paper assessing the challenges and opportunities of crypto assets.
the Basel Committee on Banking Supervision (BCBS) has also released a report assessing the prudential risks and opportunities of crypto assets.
Thus, there is a growing recognition of the need for global crypto regulation, and it is a matter of time before a more coordinated and comprehensive regulatory approach emerges.