Author: Weilin, PANews
The year 2024 is particularly and critically significant for global blockchain regulation, as the regulatory framework for the cryptocurrency industry is being initially perfected, and crypto assets are integrating into the mainstream financial system.
The approval of Bitcoin and Ethereum ETFs in the U.S. has propelled cryptocurrencies toward mainstream adoption. At the same time, the new government led by Trump is about to take office, with the new SEC chairman Paul Atkins set to assume office, indicating that future U.S. regulators may adopt a more 'disclosure-based regulatory' approach compared to the previous SEC's 'enforcement-based regulation' model. The establishment of a White House director for AI and cryptocurrency affairs also suggests a more friendly, flexible, and innovative regulatory policy for cryptocurrencies.
In Europe, the stablecoin regulatory framework (Crypto Asset Market Regulation) (MiCA) has officially fully taken effect, accelerating competition among crypto companies over stablecoins. In the Asia-Pacific region, Hong Kong approved Bitcoin and Ethereum spot ETFs in April, and four new members joined the virtual asset exchanges. Regarding stablecoins, Hong Kong launched a stablecoin sandbox and stablecoin legislation.
In other parts of Asia, such as Vietnam, the government released a National Blockchain Development Strategy. In Russia, cryptocurrency mining regulations took effect. Additionally, in the Middle East and North Africa, as well as the Americas, the UAE, Qatar, and Argentina have also demonstrated positive policy innovations regarding cryptocurrency regulation.
At the end of the year, PANews reviewed the significant regulatory progress in the global crypto market. Under different regulatory regimes worldwide, the crypto market is expected to present a markedly different appearance next year.
United States: Approval of BTC and ETH spot ETFs along with new government regulatory expectations.
On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) approved a spot Bitcoin exchange-traded fund (ETF), and then on May 23, reversed course to approve an Ethereum ETF. On July 23, the U.S. Ethereum spot ETF officially began trading. These two events mark an important milestone in the U.S. crypto investment space. The Bitcoin ETF and Ethereum ETF provide a scalable bridge between traditional finance and cryptocurrencies, becoming key integration points.
According to SoSoValue data, as of December 23, the total net assets of the U.S. Bitcoin spot ETF were $105.08 billion, accounting for 5.7% of Bitcoin's market cap. The total net assets of the U.S. Ethereum spot ETF were $12.05 billion, accounting for 2.94% of Ethereum's market cap. The successful launch of these two ETFs has made it possible for more altcoin ETFs, such as Solana, Doge, and XRP ETFs to be applied for, further promoting the maturity of the crypto asset market.
Two significant bills regarding U.S. crypto regulation this year are also noteworthy. On May 22, 2024, the U.S. House of Representatives approved the 21st Century Financial Innovation and Technology Act (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, and it is still under advancement.
On June 1, President Biden vetoed another regulation, SAB 121, which aimed to overturn the accounting standards set for companies holding cryptocurrencies. Changes may also occur in the new year as a new government takes office, facilitating the adoption of cryptocurrencies by more large companies.
After the U.S. elections, the new government led by Trump is expected to usher in a new model of crypto regulation. Trump, a supporter of cryptocurrencies, appointed multiple cryptocurrency-friendly politicians to key positions in the new government. For example, on December 5, Trump officially nominated Paul Atkins as SEC chairman. On December 6, Trump announced the appointment of David Sacks as White House commissioner for AI and cryptocurrency affairs, marking the establishment of this position for the first time. On December 23, 29-year-old newcomer Bo Hines was appointed as the executive director of Trump's crypto committee. On December 13, French Hill was elected chairman of the House Financial Services Committee. This series of appointments indicates that the U.S. may adopt more friendly policies in the field of crypto regulation in the future.
Europe: The effectiveness of the MiCA legislation and intensified competition for stablecoins.
The EU's regulatory rules for stablecoin issuers under the Crypto Asset Market Regulation (MiCA) took effect on June 30 and will be fully implemented on December 30. MiCA is the EU's first complete regulatory framework for the crypto industry, particularly outlining clear requirements for stablecoins. While some crypto companies have stated they are not fully prepared, the competition in the European stablecoin market is expected to intensify against the backdrop of increasingly stringent compliance requirements. For example, the unlicensed Tether has already invested in Dutch company Quantoz and European stablecoin provider StablR.
In addition, the UK's Financial Conduct Authority (FCA) also expressed hope to launch a comprehensive regulatory framework for cryptocurrencies by 2026. A study commissioned by the FCA showed that the holding of crypto assets increased by 4% in the past two years, with about 7 million adults holding crypto assets among the country's approximately 68 million population.
On December 21, the German parliament passed the Financial Market Digitalization Act, necessary for the full implementation of the crypto MiCA.
Hong Kong: Four new VATP license holders to promote stablecoin development.
On October 31, 2022, Hong Kong officially released its virtual asset policy declaration, and to date, nearly 1,000 Web3 companies have emerged in Hong Kong.
At the end of April this year, Hong Kong licensed six virtual currency ETFs under Huaxia Hong Kong, Bosera International, and Harvest International. Despite facing fierce competition from similar products overseas, trading volumes need to improve, but they mark Hong Kong's key position in the global crypto regulatory framework.
On July 18, the Hong Kong Monetary Authority announced the first batch of three participating institutions in the 'sandbox', including JD Coin Chain Technology, Yuan Coin Innovation Technology, and a joint application by Standard Chartered Bank (Hong Kong) and Animoca Brands Limited, Hong Kong Telecommunications (HKT). These three institutions can test their expected business models within a designated range and communicate with the Monetary Authority on how to comply with the proposed stablecoin regulatory system in the future. Hong Kong's Virtual Asset License (VATP) system further promotes the compliant development of crypto asset service providers. On December 18, after 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 Assets Trading Group, and Thousand Whales Technology.
On December 6, the Hong Kong government announced the long-awaited stablecoin legislation, laying the foundation for comprehensive regulation of fiat-pegged stablecoins (FRS). 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 advancement of Web3 policies and sandbox regulations.
On November 27, Japan's new digital minister Masaaki Taira announced at a forum that the country's Prime Minister Shigeru Ishiba has reorganized his party's Web3 and crypto policy-making department, further promoting the country's policy innovation in the crypto and blockchain fields. The government stated it has no intention of preventing the promotion of Web3-related businesses. This project was initiated by former Prime Minister Fumio Kishida, who resigned from both his position as Prime Minister and as head of the Liberal Democratic Party earlier this year. Shigeru Ishiba has also expressed his support for Web3-related policies. The Liberal Democratic Party (LDP) is pushing for cryptocurrency tax reform. Proposed reforms include applying a separate tax rate of 20% on cryptocurrency trading profits and introducing a loss carryforward system. Currently, cryptocurrency profits 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 regulations were implemented, political turmoil arose in South Korea, and after a state of emergency and plans to impeach the current president, the National Assembly decided to suspend all regulatory discussions related to cryptocurrency.
At the same time, countries like Indonesia, Thailand, and Vietnam are also strengthening their regulations on the crypto market, especially by introducing sandbox frameworks that allow innovative projects to experiment in a more relaxed regulatory environment. Specifically, Indonesia's Financial Services Authority (OJK) launched a sandbox framework in June 2024. In August 2024, the Thai SEC introduced a digital asset sandbox, complementing its existing detailed licensing framework to allow testing of key initiatives aligned with emerging market trends. On October 22, the Vietnamese government announced its National Blockchain Development Strategy on its official website, aiming to make Vietnam a regional leader in blockchain technology research, application, and innovation by 2030.
India's unfriendly regulatory policies towards the crypto market are also showing signs of easing. In January of this year, exchanges like Binance and Kraken were requested by India's financial intelligence agency to block their apps and remove them from the Indian App Store for not complying with anti-money laundering rules. However, in May of this year, Binance and KuCoin became the first offshore crypto-related entities approved by the Indian Financial Intelligence Unit (FIU), subject to paying fines after hearings with the FIU.
Russia: The effectiveness of cryptocurrency mining regulations and adjustments to digital currency taxation.
Russia's comprehensive cryptocurrency mining regulations took effect on November 1, 2024, setting strict energy caps, mandatory registration, and regulatory requirements, bringing a clearer legal framework to the industry. The new regulations officially include cryptocurrency mining as a legal activity and set safety and operational standards for miners while requiring digital financial asset trading on specified platforms. The regulations aim to balance the growth of the Russian crypto industry, energy demands, and control over illegal mining.
According to the new regulations, only registered businesses and individual entrepreneurs can legally engage in crypto mining activities, while unregistered individual miners are limited to a monthly power consumption of no more than 6,000 kWh; those exceeding this limit must register as entrepreneurs to continue mining. Additionally, on November 29, Putin signed a new digital currency tax law, clearly classifying digital currencies as property, exempting them from value-added tax, and providing tax-free treatment for cross-border settlements. Nevertheless, mining service providers are still required to report user information to tax authorities, and those who fail to do so 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 like 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 due to regulatory innovation, institutional interest, and market activity expansion. 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, and this year, 13 new licenses were issued, including Binance, Bybit, OKX, and Deribit.
Saudi Arabia remains the fastest-growing country in the Middle East and North Africa in terms of cryptocurrency economy, with a report from Chainalysis indicating that the on-chain total value has grown by 154% compared to last year. This rapid growth is attributed to the country's continuous development in blockchain innovation, central bank digital currencies (CBDCs), the gaming industry, and fintech.
Following closely is Qatar, becoming the second fastest-growing cryptocurrency market in the region in terms of on-chain value. The Qatari government had previously banned the trading of crypto assets, but regulatory policies are now continuously improving. The Qatar Financial Center (QFC) launched a new digital asset regulatory framework in September this year, covering aspects such as the definition of digital assets, market access and compliance requirements, technical standards and security guarantees, consumer protection and education, as well as 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 African countries, South Africa is one of the most crypto-friendly nations. The South African Reserve Bank (i.e., the South African central bank SARB) has not clearly prohibited the use of cryptocurrencies.
As of December 16, 2024, South Africa's Financial Sector Conduct Authority (FSCA) has issued 248 licenses out of 420 applications received from crypto asset service providers (CASPs). According to a local report, 56 applications are still under review, and 9 have been rejected. Additionally, the report noted that 106 institutions withdrew their applications after the FSCA questioned the business models of some companies.
Americas: National policy innovation for cryptocurrencies.
In the Americas, Argentina is vigorously promoting the popularization of cryptocurrencies. On October 22, the Argentine securities regulator (CNV) announced a public consultation on a draft aimed at regulating the operations of virtual asset service providers (VASPs) in the country and imposing new compliance requirements on these institutions. At the same time, the Argentine securities regulator announced the allowance of foreign investment products related to various crypto ETF opportunities to enter the market. President Milei plans to implement a free currency circulation policy in 2025, allowing Argentinians to choose any currency, including Bitcoin, for transactions, providing new opportunities for economic diversification.
Brazil has established friendly regulations and has great potential to develop RWA (Real World Assets), a diverse and vibrant community, and is in the pilot phase of a CBDC (called DREX).
In El Salvador, Bitcoin is legal tender, and the government encourages adoption and incentivizes cryptocurrency tourism. On December 11, El Salvador signed an agreement with Argentine regulators to assist the development of the crypto industry in both countries.
Conclusion:
Overall, the year 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 constantly evolving regulatory framework, the overall situation is improving, and cryptocurrencies are moving towards mainstream financial systems and widespread adoption. Looking ahead to 2025, how to balance regulation and innovation, as well as strengthen coordination and communication between the industry and regulators, will be key to the future development of the crypto industry.
