Overview of International Cryptocurrency Regulatory Agencies

International Cryptocurrency Regulatory Agencies Overview

Authors: Ananya Kumar, Greg Brownstein & Alisha Chhangani

Since its inception in 2008, cryptocurrencies have become increasingly popular and have become an integral part of the global financial system. Cryptocurrencies have greatly changed the current financial structure and the next generation of currencies and payment methods. However, these changes have also raised significant concerns about the potential negative impact of cryptocurrencies on the market, investors, users, and the environment. Governments around the world are seeking to establish regulations to prevent these harms while encouraging the innovative capabilities of cryptocurrencies.

We studied 45 countries, including G20 member countries and countries with the highest adoption rates of cryptocurrencies. This new research categorizes and explains how the world’s largest economies and economies with frequent cryptocurrency activities regulate cryptocurrencies.

45 countries

• What do legal experts think of the SBF trial?
• FTX Reappearance? JPEX Embezzles User Assets and Is Involved in a High-Value Fraud Case
• Behind the Balancer attack incident In addition to the downsizing of the security team, we should pay more attention to the hidden concerns of centralized front-ends.

We analyzed how 45 countries regulate cryptocurrency within their jurisdictions. In each country, regulated participants can be cryptocurrency issuers, cryptocurrency exchanges, traditional financial institutions, service providers, or miners.

Legal status

Each country is designated as one of the following regulatory states: legal (allowing all activities), partially prohibited (not allowing one or more activities), and fully prohibited (restricting all activities).

Regulatory categorization

Countries regulate actors in the cryptocurrency field using tax policies, requirements to combat money laundering and financing of terrorism, consumer protection rules, as well as licensing and disclosure obligations.

Main findings

· Among the 45 countries we studied, cryptocurrencies are legal in 20 countries, partially prohibited in 17 countries, and fully prohibited in 8 countries. In the 10 G20 countries, which account for over 50% of global GDP, cryptocurrencies are fully legal. All G20 countries are considering regulating cryptocurrencies.

· Regulatory changes in cryptocurrency are happening rapidly. In the countries under review, nearly 75% of countries are making significant adjustments to their regulatory frameworks, often through new tailored legislation targeting the cryptocurrency market.

· Stablecoins, which are typically backed by fiat currencies, are the next frontier in cryptocurrency regulation. The European Union, the United States, the United Kingdom, and Thailand are considering regulating stablecoins. In Mexico, financial institutions are not allowed to issue stablecoins.

· Emerging market economies lag behind developed economies in regulatory development. Among the developed economies studied, 64% of countries have established regulations in areas such as taxation, anti-money laundering/counter-terrorism financing, consumer protection, and licensing. In emerging market countries, only 11% of countries have established relevant regulations.

·Experiments are very common. Countries use regulatory sandboxes for testing and collaborate with the private sector. Japan has established a cryptocurrency exchange and issuer association in an attempt to encourage self-regulation. Canada, Italy, Mexico, and Saudi Arabia have also developed regulatory sandboxes.

·Consumer protection rules are relatively lagging. Among the countries under review, only one-third of them have established rules to protect consumers. These rules include advertising regulations, network security requirements for service providers, investor authentication, etc. These rules can effectively prevent fraud.

·In countries under review, the relationship between cryptocurrency adoption rates and regulatory restrictions is generally weak. Among the top ten countries in terms of cryptocurrency adoption rates, six countries have implemented partial or complete bans.

·Cryptocurrency exchanges have faced more scrutiny since the collapse of FTX. Global regulatory agencies are hoping to promote responsible industry standards to prevent the negative impact of regulatory arbitrage.

·Among the 45 countries analyzed, over 90% of them have active central bank digital currency (CBDC) projects in addition to cryptocurrency regulations. This indicates that countries are exploring CBDCs while also adjusting and updating cryptocurrency regulations.

Role of Global Governance Institutions

In addition to promoting global cooperation in the regulation of crypto assets, standard-setting institutions also play an important role in creating governance and industry standards.

Financial Stability Board (FSB)

The Financial Stability Board’s members primarily include G20 countries, international organizations such as the International Monetary Fund, as well as standard-setting institutions such as the Bank for International Settlements and the International Organization of Securities Commissions.

The Financial Stability Board focuses on the financial stability aspects of crypto assets and promotes international cooperation between financial authorities and standard-setting institutions to ensure consistent regulatory standards. It has issued regulatory recommendations for cryptocurrencies and stablecoins.

Financial Action Task Force (FATF)

The Financial Action Task Force has 38 member countries and a large number of regional and international organizations. Its broader network includes 200 jurisdictions that have agreed to implement anti-money laundering/countering the financing of terrorism standards.

In 2019, FATF provided a global framework for all virtual asset service providers, which listed 15 recommendations for improving anti-money laundering/countering the financing of terrorism regulations. These recommendations were updated in 2021. FATF also conducts annual reviews of the implementation of its recommendations. The latest review found that most jurisdictions still need to adopt, implement, and enforce the recommendations. Recommendation 15, also known as the “Travel Rule,” requires value-added service providers to share beneficiary and originator information for all transactions. In practice, this rule is controversial, and only a few jurisdictions have implemented it.

Basel Committee on Banking Supervision (BCBS)

The Basel Committee on Banking Supervision consists of 45 members, comprising central banks and banking supervisory authorities from 28 jurisdictions.

The Basel Committee is the standard-setter for global banking supervision. It provides recommendations for the prudent handling of risks associated with cryptocurrencies by banks. It provides guidance for capital requirements, liquidity requirements, leverage ratios, and supervisory functions. It is part of the Bank for International Settlements.

International Organization of Securities Commissions (IOSCO)

IOSCO members include 131 national securities and derivatives commissions, 34 regional and international organizations, and 72 non-governmental organizations such as self-regulatory associations, stock exchanges, and financial market infrastructures.

IOSCO is the standard-setter for global securities market regulation. It published guidelines on the regulation of cryptocurrency exchanges in 2020. In 2022, it agreed to establish a board-level FinTech Special Working Group, currently chaired by the Monetary Authority of Singapore (MAS). The working group focuses on market integrity and investor protection issues, with two broad workstreams on cryptocurrencies and digital assets, and decentralized finance.

Committee on Payments and Market Infrastructures (CPMI)

CPMI members consist of central banks from 28 countries.

CPMI is the standard-setter for global payment, clearing, and settlement arrangements, and serves as a platform for international cooperation among central banks. Its work on crypto assets includes cross-border payment workstreams and collaboration with IOSCO on stablecoin market infrastructures.

Egmont Group

The Egmont Group consists of 166 financial intelligence units from around the world.

The Egmont Group is a coordinating body among the 166 financial intelligence units. It is a major platform for the sharing of financial intelligence, supporting domestic and international efforts against money laundering/terrorist financing. The Egmont Group’s Information Exchange Working Group aims to facilitate bilateral and multilateral information sharing and enhance members’ information technology capabilities. Its current project is focused on emerging financial technologies, virtual currencies, and the risks related to anti-money laundering/counter-terrorism financing standards.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!