Author: Weilin, PANews.
The year 2024 is a special and critical year for global blockchain regulation, with the regulatory framework for the cryptocurrency industry preliminarily完善 and crypto assets integrating into the mainstream financial system.
The approval of Bitcoin and Ethereum ETFs in the U.S. has propelled the cryptocurrency toward mainstream adoption. Meanwhile, the new government led by Trump is about to take office, and the new chairman of the Securities and Exchange Commission (SEC), Paul Atkins, will assume office, indicating that U.S. regulators may adopt a more 'information disclosure-based regulation' approach in the future, compared to the previous SEC's 'enforcement-based regulation' model. The establishment of the White House Artificial Intelligence and Cryptocurrency Affairs Director also suggests a more friendly, flexible, and innovative regulatory policy for cryptocurrencies.
In Europe, the stablecoin regulatory bill (MiCA) has officially come into full effect, accelerating the competition among crypto companies for stablecoins. In the Asia-Pacific region, Hong Kong approved Bitcoin and Ethereum spot ETFs in April, adding four new members to the virtual asset exchange. Regarding stablecoins, Hong Kong has launched a stablecoin sandbox and stablecoin bill.
In other parts of Asia, such as Vietnam, the government released its National Blockchain Development Strategy. In Russia, cryptocurrency mining regulations have come into effect. Additionally, in the Middle East and North Africa, as well as the Americas, the UAE, Qatar, and Argentina have shown positive policy innovations in cryptocurrency regulation.
As the year draws to a close, PANews reviews the significant regulatory developments in the global cryptocurrency market, where differing regulatory systems will present strikingly different landscapes for the market in the coming year.
United States: Approval of BTC and ETH spot ETFs and new regulatory expectations from the government.
On January 10, 2024, local time, the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin exchange-traded funds (ETFs), and then, on May 23, it reversed its decision and approved the Ethereum ETF. The Ethereum spot ETF officially began trading on July 23. These two events mark a significant milestone in the U.S. crypto investment landscape. The Bitcoin ETF and Ethereum ETF provide a scalable bridge between traditional finance and cryptocurrency, becoming a key integration point.
According to SoSoValue data, as of December 23 local time, the total net asset value of Bitcoin spot ETFs in the U.S. is $105.08 billion, accounting for 5.7% of Bitcoin's market capitalization. The total net asset value of Ethereum spot ETFs is $12.05 billion, accounting for 2.94% of Ethereum's market capitalization. The successful launch of these two ETFs has made it possible for more altcoin ETFs, such as Solana, Doge, and XRP ETFs, to apply, further promoting the maturation of the crypto asset market.
Two significant bills related to U.S. crypto regulation this year are also noteworthy. On May 22, 2024, the U.S. House of Representatives approved the Financial Innovation and Technology Act of the 21st Century (FIT21), which aims to clearly define cryptocurrencies, classify specific cryptocurrencies to determine whether they are securities or commodities, and decide which government agency (SEC or Commodity Futures Trading Commission CFTC) will regulate them. This is still in progress.
In response to another regulation, SAB 121, on June 1, U.S. President Biden vetoed the bill aimed at overturning the accounting standards set for companies that custody cryptocurrencies. Changes may occur in the new year with the new government taking office, facilitating the adoption of cryptocurrencies by more large companies.
After the U.S. elections, the new government led by Trump is expected to open a new regulatory model for cryptocurrencies. Trump, who supports cryptocurrencies, has appointed several pro-cryptocurrency politicians to important positions when selecting new government personnel. For example, on December 5, Trump officially nominated Paul Atkins as SEC chairman. On December 6, Trump announced the appointment of David Sacks as the White House Artificial Intelligence and Cryptocurrency Affairs Commissioner, marking the first establishment of this position. On December 23, 29-year-old political newcomer Bo Hines was appointed as the executive director of Trump's cryptocurrency committee. On December 13, French Hill was elected chairman of the House Financial Services Committee. This series of appointments suggests that the U.S. may adopt more favorable policies in the field of crypto regulation in the future.
Europe: The effectiveness of the MiCA Act and the intensification of stablecoin competition.
The EU's regulation on stablecoin issuers (MiCA) came into effect on June 30 and will be fully implemented by December 30. MiCA is the EU's first comprehensive regulatory framework for the cryptocurrency industry, particularly setting clear requirements for the regulation of stablecoins. While some crypto companies have stated that they are not fully prepared, the competition in the European stablecoin market is expected to intensify against the backdrop of increasingly strict compliance requirements. For example, unlicensed Tether has invested in Dutch company Quantoz and European stablecoin provider StablR.
Furthermore, the UK's Financial Conduct Authority (FCA) has also expressed its desire to launch a comprehensive regulatory system for cryptocurrencies before 2026. A study commissioned by the FCA shows that over the past two years, the ownership of crypto assets has grown by 4%, with approximately 7 million adults holding crypto assets among the country's roughly 68 million population.
On December 21, the German parliament passed the Financial Market Digitalization Act, which is necessary for the comprehensive implementation of MiCA.
Hong Kong: 4 new VATP licensees added, advancing stablecoin development.
On October 31, 2022, Hong Kong officially released its virtual asset policy declaration, and to date, nearly 1,000 Web3 companies have been established in Hong Kong.
At the end of April this year, Hong Kong licensed six virtual currency ETFs under Huaxia Hong Kong, Bosera International and Jiasheng International. Despite facing fierce competition from similar products overseas and needing to increase trading volume, they mark Hong Kong's key position in the global cryptocurrency regulatory system.
On July 18, the Hong Kong Monetary Authority announced the first batch of three 'sandbox' participating institutions, including JD Coin Chain Technology, Yuan Coin Innovation Technology, and a joint application by Standard Chartered Bank (Hong Kong) Animoca Brands Limited and Hong Kong Telecommunications (HKT). These three institutions can test their expected business models within a designated scope and communicate with the Monetary Authority on how to comply with the proposed stablecoin regulatory system in the future. Hong Kong's Virtual Asset Trading Platform (VATP) system further promotes the compliant development of crypto asset service providers. On December 18, following OSL Exchange, HashKey Exchange, and HKVAX, Hong Kong VATP welcomed four new members, including Cloud Account Greater Bay Area Technology (Hong Kong), DFX Labs, Hong Kong Digital Asset Trading Group, and Thousand Whales Technology.
On December 6, the Hong Kong government announced the long-awaited stablecoin bill, laying the foundation for comprehensive regulation anchored on the stability of fiat currency. In the future, under a legally compliant regulatory framework, Hong Kong is likely to issue a stablecoin that can be widely used in various scenarios such as investment, trade, and payment.
Other regions in the Asia-Pacific: Further progress on Web3 policies and sandbox regulations.
On November 27, Japan's newly appointed Digital Minister Masaaki Taira announced at a forum that the country's Prime Minister Shigeru Ishiba has restructured his party's Web3 and cryptocurrency policy-making department to further promote policy innovation in the fields of cryptocurrency and blockchain. The government stated it has no intention of obstructing the 'promotion' of Web3-related businesses. This project group is a creation of former Prime Minister Fumio Kishida, who resigned earlier this year from the position of Prime Minister and leader of the Liberal Democratic Party. Ishiba has also expressed his support for policies that support Web3. The Japanese Liberal Democratic Party (LDP) is pushing for cryptocurrency tax reforms. The proposed reforms include applying a separate tax rate of 20% to profits from cryptocurrency transactions and introducing a loss carryforward system. Currently, profits from cryptocurrency in Japan are classified as miscellaneous income, with a maximum tax rate of up to 55%.
In South Korea, on July 19, the country introduced a virtual asset user protection law aimed at enhancing investor protection and ensuring future market development. However, shortly after the new regulation was implemented, political turmoil arose in South Korea, and following martial law and plans to impeach the current president, the South Korean National Assembly decided to suspend all regulatory discussions related to cryptocurrency.
Meanwhile, countries such as Indonesia, Thailand, and Vietnam are also strengthening regulations on the crypto market, particularly by launching sandbox frameworks that allow innovative projects to experiment in a loosely regulated environment. Specifically, Indonesia's Financial Services Authority (OJK) launched its sandbox framework in June 2024. In August 2024, the Thai SEC introduced a digital asset sandbox, supplementing its existing detailed licensing framework. This allows for testing key initiatives that align with emerging market trends. The Vietnamese government announced its National Blockchain Development Strategy on October 22, aiming to make Vietnam a regional leader in blockchain technology research, application, and innovation by 2030.
India's unfriendly regulatory policies toward the crypto market are also beginning to ease. In January of this year, apps from exchanges like Binance and Kraken were requested to be blocked by India's financial intelligence agency for non-compliance with India's anti-money laundering rules and were removed from the Indian Apple App Store. However, in May this year, Binance and KuCoin became the first offshore crypto-related entities approved by India's Financial Intelligence Unit (FIU), on the condition that they pay fines after the FIU hearing.
Russia: Cryptocurrency mining regulations come into effect along with adjustments to digital currency taxation.
Russia implemented comprehensive cryptocurrency mining regulations effective November 1, 2024, establishing strict energy limits, mandatory registration, and regulatory requirements, providing a clearer legal framework for the industry. The new regulations formally include cryptocurrency mining as a legal activity and set safety and operational standards for miners, while requiring transactions of digital financial assets to be conducted on specific platforms. The regulations aim to balance the growth of Russia's crypto industry, energy demands, and control over illegal mining.
According to new regulations, only registered enterprises and individual entrepreneurs can legally engage in cryptocurrency mining activities, while unregistered individual miners must not consume more than 6,000 kWh of electricity per month; those exceeding this limit must register as entrepreneurs to continue mining. Additionally, on November 29, Putin signed a new digital currency tax law, clearly defining digital currency as property, exempting it from value-added tax, and providing tax-exempt treatment for cross-border settlements. Nevertheless, mining service providers are still required to report user information to tax authorities, and those who fail to report on time will face fines.
On December 4, Putin stated at the Russia Calling investment forum that it is impossible to ban the development of digital payment tools such as Bitcoin, emphasizing that the future of these new technologies will continue to advance.
Middle East and North Africa: Rapid growth of the cryptocurrency market.
In the Middle East and North Africa, the cryptocurrency ecosystem in the UAE is growing rapidly, thanks to regulatory innovation, institutional interest, and the expansion of market activities. The Dubai Virtual Assets Regulatory Authority (VARA), established in 2022, provides a globally leading regulatory framework for the crypto industry and promotes its further development. Currently, 23 platforms have obtained VARA licenses, with 13 new licenses issued this year, including Binance, Bybit, OKX, and Derbit.
Saudi Arabia remains the fastest-growing cryptocurrency economy in the Middle East and North Africa, with a report from Chainalysis indicating a 154% growth in on-chain total value compared to last year. This rapid growth is attributed to the country's ongoing developments in blockchain innovation, central bank digital currency (CBDC), the gaming industry, and financial technology.
Following closely is Qatar, which has become the second fastest-growing cryptocurrency market in the region. The Qatari government had previously banned trading in crypto assets, but the regulatory policies are now continuously improving. The Qatar Financial Centre (QFC) launched a brand new regulatory framework for digital assets in September this year, covering five aspects: definitions of digital assets, market access and compliance requirements, technical standards and security guarantees, consumer protection and education, and international cooperation and standardization, laying a legal and regulatory foundation for the development of digital assets.
South Africa: The most friendly attitude among African countries, having issued 248 licenses.
Among the African countries, South Africa is one of the most cryptocurrency-friendly nations. The South African Reserve Bank (SARB) has not explicitly prohibited the use of cryptocurrency.
As of December 16, 2024, the South African Financial Sector Conduct Authority (FSCA) has issued 248 licenses out of 420 applications received for crypto asset service providers (CASP). According to a local report, 56 applications are still under review, while 9 have been rejected. Additionally, the report notes that after the FSCA raised questions about the business models of certain companies, 106 institutions withdrew their applications.
Americas: National policy innovations for cryptocurrencies.
In the Americas, Argentina is vigorously promoting the adoption of cryptocurrency. On October 22, Argentina's securities regulator (CNV) announced a public consultation on a draft aimed at regulating the operations of Virtual Asset Service Providers (VASP) in the country and imposing new compliance requirements on these institutions. Meanwhile, the Argentine securities regulator announced the allowance of foreign investment products related to various cryptocurrency ETF opportunities to enter the market. President Milei plans to implement a policy for the free circulation of currency in 2025, allowing Argentinians to choose any currency, including Bitcoin, for transactions, providing new opportunities for economic diversification.
Brazil has established friendly regulations, with significant potential to develop RWA (Real World Assets), a diverse and vibrant community, and is piloting a CBDC (called DREX).
In El Salvador, Bitcoin is legal tender, and the government encourages adoption and promotes cryptocurrency tourism. On December 11, El Salvador signed an agreement with the Argentine regulatory authority to help both countries develop the crypto industry.
Conclusion:
Overall, the bull market in 2024 is undoubtedly a key year for the global cryptocurrency and blockchain industry in terms of compliance. Despite facing certain uncertainties and challenges under the continuously evolving regulatory framework, the overall situation is improving, and cryptocurrencies are moving toward integration with the mainstream financial system and wider adoption. Looking ahead to 2025, how to balance regulation and innovation, and strengthen coordination and communication between the industry and regulators, will be key to the future development of the cryptocurrency industry.
