Crypto Regulations: The Road So Far

Crypto mining

Bitcoin’s recent bullish trend has caught the attention of investors, governments, and financial institutions alike. Even though cryptocurrency adoption has improved significantly over the year, cryptocurrency regulations to match the steady growth and maturity of the crypto space are still a distant reality. Different regulatory bodies are focused on producing crypto regulations all over the world, but nothing concrete has been put forth yet. Many digital currencies are, mistakenly, associated with criminal activities such as terrorism and fraud in the minds of many. Therefore, regulatory clarity would help eliminate these vices while simultaneously improving crypto and digital asset adoption globally. Below we talk about some of the most recent cryptocurrency regulations that are making headlines.

SEC Publishes Long-Awaited Cryptocurrency Regulation Updates

The U.S. SEC (Securities and Exchange Commission) on April 3 published long-awaited cryptocurrency regulation guidelines. In the guidelines, titled “Framework for ‘Investment Contract’ Analysis of Digital Assets,” the SEC explains that, depending on certain conditions, a digital asset may be defined as a security, even though the ‘security’ may not traditionally be thought of as one. These conditions include the nature of the asset, how the asset is offered and sold, and what rights it intends to deliver to its owner. They cite that many market participants are engaging in activities involving digital assets that fall under federal security laws and, as a result, they are subject to the SEC’s regulation and oversight.

The statement explains how the SEC acknowledges the ability of new technologies to create financial instruments offered in the form of coins or tokens. The report further demonstrates that these financial instruments are provided in the form of tokens or coins that provide investment opportunities. Therefore, they created guidelines in a bid to assist investors and crypto-companies identify whether or not a crypto asset falls in the category of a security or not. They also specified that the framework is not exhaustive of the law but can be used as a tool to help analyze whether federal security laws apply to a digital asset.

While stricter definitions and tighter regulations have rarely been looked at in a positive light by crypto enthusiasts, the real bottom line is that such regulation will help formalize crypto tokens and assets and will open a path for them to be used and accepted as a mainstream means of exchange and transfer of value.

June’s G20 Summit Set to Focus on an International Crypto Regulatory Framework

During the 2018 G20 Summit held in Buenos Aires in December, leaders signed a joint declaration to help foster an international cryptocurrency regulatory framework. According to Japanese media reports, this framework has already been in the works for over three months. The report states that this might be the first new international regulatory proposal for digital assets – a massive step towards regulation clarity. If accepted internationally, the proposal might put an end to some of the sanctions imposed by various states over cryptocurrencies. It could also mark the beginning of global acceptance of cryptocurrencies and decentralization as a new way of doing things.

This year’s summit is expected to be held in Osaka, Japan in June and Japanese Prime Minister Shinzo Abe will serve as the lead speaker at the event. One issue that the summit intends to address is the security of digital assets ecosystem against hackers. Ever since the Coincheck hack where $532 million NEM were stolen, Japan has been on a campaign to push for more regulations. Japan is leading the campaign towards tighter constraints, especially when it comes to leverage in crypto-trading. This already is taking shape in the country, with most Japan-based exchanges, such as BitMEX, providing leverage of up to 4x to its customers.

New Crypto-bills from US Congress to Address Market Manipulation and Competition

Two cryptocurrency bills have been introduced to the U.S. House requesting the CFTC, the Commodity Futures Trading Commission, in conjunction with the SEC, help produce informational reports about crypto for lawmakers. They include the Virtual Currency Consumer Protection Act of 2019 and the US Virtual Currency Market and Regulatory Competitiveness Act of 2019. The bills aim to address the issue of price manipulation and create a more competitive regulatory environment for the industry. The first bill would require the CFTC to produce a report on how to make US crypto-regulations more competitive internationally. This bill would also focus on encouraging the adoption and growth of virtual currencies. The second bill would request the CFTC to produce a report outlining ways to promote transparent digital currency markets by examining the potential for price manipulation.

The second bill requests the CFTC to provide extra information such as methods used to manipulate the prices of cryptocurrencies, which digital assets are susceptible to price manipulation, and the impact on investors if manipulation occurs. The bill also requests information on the extent to which the CFTC can conduct crypto-market surveillance of digital currencies and what kind of federal regulations should be enforced on persons found guilty of manipulation.

Three congressmen spearhead both bills. They include Republicans Ted Budd and Warren Davidson, and Democrat Darren Soto. The overall aim of the bills is to gather recommendations from the CFTC and the SEC on the best ways to handle the crypto-regulation issue.

Switzerland is Getting Close to Regulating Cryptocurrencies

The Swiss Federal Assembly approved a motion requesting the Federal Council to regulate cryptocurrencies. Switzerland has long adopted a progressive approach towards cryptocurrencies and blockchain. It’s also home to the so-called “crypto-valley“ which has attracted a considerable amount of interest and media coverage over the years. According to a recent press release, the assembly explained that the digital asset’s pseudo-anonymous nature favors money laundering and extortion. Therefore, there is a growing need to address these risks. How they can be contained and whether crypto-exchange platforms should be subject to financial market supervision should also be addressed. This news comes days after Digitec Galaxus, the largest online retailer in Switzerland, announced that it would accept Bitcoin payments.

Pakistan Introduces Regulations for the Cryptocurrency Industry

According to a report from the Express Tribune, Pakistan’s federal government has decided to adopt Electronic Money Institutions (EMIs) regulations after a recommendation from the FATF (Financial Action Task Force). This comes after the FATF highlighted that Pakistan was doing very little to curb money laundering and terrorist financing. The new framework, issued by the State Bank of Pakistan (Pakistan’s central bank), requires that EMIs meet specific requirements to be licensed by the state. Firms that don’t follow these new requirements risk suspension or license cancellation. Some of these requirements include firms meeting required capital requirements, undergoing management scrutiny, and carrying out customer due diligence.

Conclusion

While it may seem that most cryptocurrency regulation interest is originating from the U.S., several nations are also in the quest to create regulations for their domestic crypto-industries. The potential of a global cryptocurrency regulation framework seems to be within grasp as the 2019 G20 Summit draws near, and we will continue to monitor global developments as and when they happen. Stay tuned!

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