Written by: Weilin, PANews
The year 2024 is particularly crucial 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 the cryptocurrency industry toward mainstream acceptance. At the same time, the new government led by Trump is set to take office, with the new SEC chairman Paul Atkins suggesting that U.S. regulators may adopt a 'disclosure-based regulatory' approach, in contrast to the previous 'enforcement-based regulation' model. The establishment of a White House supervisor for artificial intelligence and cryptocurrency affairs also signifies a friendlier, more flexible, and innovative regulatory policy for cryptocurrencies.
In Europe, the stablecoin regulatory bill (Markets in Crypto-Assets Regulation) (MiCA) officially came into full effect, accelerating competition among 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 bill.
In other parts of Asia, such as Vietnam, the government has released the National Blockchain Development Strategy. In Russia, cryptocurrency mining regulations have come into effect. Additionally, in the Middle East and North Africa, as well as in the Americas, countries like the UAE, Qatar, and Argentina have demonstrated positive policy innovations in cryptocurrency regulation.
As the year comes to a close, PANews reviews the significant regulatory developments in the global cryptocurrency market. Under different regulatory systems worldwide, the cryptocurrency market is expected to present a vastly different landscape next year.
United States: Approval of BTC and ETH spot ETFs and regulatory expectations from the new government
On January 10, 2024, the U.S. SEC approved the Bitcoin spot exchange-traded fund (ETF), followed by a reversal on May 23, approving the 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. cryptocurrency investment landscape. The Bitcoin ETF and Ethereum ETF provide a scalable bridge between traditional finance and cryptocurrency, becoming key integration points.
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 value. The total net asset value of Ethereum spot ETFs is $12.05 billion, accounting for 2.94% of Ethereum's market value. The successful launch of these two ETFs opens the door for more altcoin ETFs, such as Solana, Doge, and XRP ETFs, further propelling the maturation of the cryptocurrency asset market.
Two significant bills regarding cryptocurrency regulation in the U.S. are also noteworthy this year. 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 CFTC) will regulate them. The bill is still in progress.
Regarding another regulation, SAB 121, President Biden vetoed it on June 1. This bill aimed to overturn accounting standards set for companies holding cryptocurrencies as custodians. With the new government taking office in the new year, changes may also occur, 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 regulatory model for cryptocurrency. Trump, who supports cryptocurrency, has nominated several pro-crypto politicians for important positions in his new government. For example, on December 5, Trump officially nominated Paul Atkins as the SEC Chairman. On December 6, Trump announced the appointment of David Sacks as the White House Commissioner for Artificial Intelligence and Cryptocurrency Affairs, marking the establishment of this position for the first time. On December 23, 29-year-old political newcomer Bo Hines was appointed as the Executive Director of Trump's Cryptocurrency Advisory 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 a more favorable policy in the field of cryptocurrency regulation in the future.
Europe: The MiCA Act's enforcement and intensified competition among stablecoins
The EU's regulation of stablecoin issuers under the MiCA (Markets in Crypto-Assets Regulation) has been in effect since June 30 and will be fully implemented by December 30. MiCA is the EU's first complete regulatory framework for the cryptocurrency industry, particularly outlining clear requirements for stablecoins. Although some cryptocurrency companies claim they are not yet fully prepared, the increasingly stringent compliance requirements are expected to intensify competition in the European stablecoin market. For instance, the unlicensed Tether has already invested in the Dutch company Quantoz and European stablecoin provider StablR.
Moreover, the UK's Financial Conduct Authority (FCA) has also expressed its desire to implement a comprehensive regulatory system for cryptocurrencies by 2026. A study commissioned by the FCA showed that the ownership of crypto assets has increased by 4% over the past two years, with approximately 7 million adults holding crypto assets out of a population of about 68 million.
On December 21, the German parliament passed the Financial Market Digitization Act, required for the comprehensive implementation of MiCA in cryptocurrency regulation.
Hong Kong: 4 new VATP license holders added, advancing the development of stablecoins
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 fierce competition from similar products overseas and the need to increase trading volume, they signify Hong Kong's key position in the global cryptocurrency regulatory framework.
On July 18, the Hong Kong Monetary Authority announced the first batch of three institutions participating in the 'sandbox' initiative, including JD Coin Chain Technology, Yuan Coin Innovation Technology, and a joint application from Standard Chartered Bank (Hong Kong) and Animoca Brands Limited, as well as Hong Kong Telecommunications (HKT). These three institutions can test their expected business models within a specified scope and communicate with the Monetary Authority regarding compliance with the proposed stablecoin regulatory regime. Hong Kong's Virtual Asset Trading Platform (VATP) system has further promoted the compliant development of cryptocurrency service providers. On December 18, after OSL Exchange, HashKeyExchange, and HKVAX, four new members joined the Hong Kong VATP, 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 groundwork for comprehensive regulation of fiat-backed 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 payments.
Other parts of the Asia-Pacific: Further advancement of Web3 policies and sandbox regulation
On November 27, Japan's newly appointed Digital Minister Masaaki Taira announced at a forum that Prime Minister Kishida reshuffled his party's Web3 and cryptocurrency policy-making department to further promote policy innovation in the field of cryptocurrency and blockchain in the country. The government stated that it has no intention of preventing the promotion of Web3-related businesses. This project group is a concept from former Prime Minister Kishida, who resigned from his positions earlier this year. Kishida has expressed support for policies that support Web3. The Liberal Democratic Party (LDP) of Japan is pushing for cryptocurrency tax reforms. Proposed reforms include a separate tax rate of 20% on profits from cryptocurrency transactions and the introduction of 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 the Virtual Asset User Protection Act, aimed at enhancing investor protection and ensuring future market development. However, shortly after the new regulations were implemented, political turmoil occurred in South Korea, leading to the suspension of all regulatory discussions related to cryptocurrencies by the National Assembly following martial law and impeachment plans against the incumbent president.
Meanwhile, countries like Indonesia, Thailand, and Vietnam are also strengthening regulation in the cryptocurrency market, particularly by launching sandbox frameworks that allow innovative projects to experiment in a lightly regulated environment. Specifically, Indonesia's Financial Services Authority (OJK) launched a sandbox framework in June 2024. In August 2024, Thailand's SEC introduced a digital asset sandbox to supplement its existing detailed licensing framework, allowing testing of key initiatives aligned 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 cryptocurrency market are showing signs of easing. In January this year, apps from exchanges like Binance and Kraken were requested to be blocked by India's financial intelligence agency for non-compliance with the country's anti-money laundering rules, leading to their removal from the Indian Apple App Store. However, in May of this year, Binance and KuCoin became the first offshore cryptocurrency-related entities approved by India's Financial Intelligence Unit (FIU), contingent upon paying fines after a hearing with the FIU.
Russia: Cryptocurrency mining regulations come into effect and digital currency tax adjustments
Russia implemented comprehensive cryptocurrency mining regulations effective November 1, 2024, stipulating strict energy limits, mandatory registration, and regulatory requirements, bringing greater legal clarity to the industry. The new regulations formally include cryptocurrency mining as a legal activity and set safety and operational standards for miners while requiring the trading of digital financial assets on specific platforms. The regulations aim to balance the growth of Russia's cryptocurrency industry, energy demands, and control over illegal mining.
Under the new regulations, only registered enterprises and individual entrepreneurs can legally engage in cryptocurrency mining activities, while unregistered individual miners are limited to a monthly electricity 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 that explicitly classifies 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, with fines for late reporting.
On December 4, Putin stated at the Russia Calling investment forum that it is impossible to prohibit 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 UAE's cryptocurrency ecosystem is rapidly growing, thanks to regulatory innovations, institutional interest, and market activity expansion. The Dubai Virtual Assets Regulatory Authority (VARA), established in 2022, provides a globally leading regulatory framework for the cryptocurrency industry and promotes its further development. Currently, 23 platforms have obtained VARA licenses, with 13 new licenses issued this year, including Binance, Bybit, OKX, Derbit, and others.
Saudi Arabia remains the fastest-growing country for cryptocurrency economies in the Middle East and North Africa, according to Chainalysis' report, with on-chain total value increasing by 154% compared to last year. This rapid growth is attributed to the country's continuous development in blockchain innovation, central bank digital currency (CBDC), the gaming industry, and fintech.
Following closely is Qatar, which has become the second fastest-growing cryptocurrency market in the region by on-chain value. The Qatari government had previously banned trading in crypto assets but is continuously improving its regulatory policies. In September this year, the Qatar Financial Centre (QFC) launched a new digital asset regulatory framework covering five aspects: definition of digital assets, market entry and compliance requirements, technical standards and security assurances, 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 stance among African countries, with 248 licenses issued
Among African countries, South Africa is one of the most friendly towards cryptocurrencies. The South African Reserve Bank (SARB) has not explicitly prohibited the use of cryptocurrencies.
As of December 16, 2024, the Financial Sector Conduct Authority (FSCA) of South Africa has issued 248 licenses from the 420 applications received from cryptocurrency 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 after the FSCA questioned the business models of some firms, 106 institutions withdrew their applications.
Americas: National policy innovations in cryptocurrency
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 (VASPs) in the country and imposing new compliance requirements on these entities. At the same time, the Argentine securities regulator announced that foreign investment products related to various crypto ETF opportunities will be allowed to enter the market. President Milei plans to implement a policy of free currency circulation in 2025, allowing Argentinians to choose any currency, including Bitcoin, for transactions, providing new opportunities for economic diversification.
Brazil has established friendly regulations with great potential to develop RWA (Real World Assets), creating a diverse and vibrant community, and is currently in a pilot phase with a CBDC (referred to as 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 support the development of the cryptocurrency industry in both countries.
Conclusion:
Overall, the bull market in 2024 is undoubtedly a key year for global cryptocurrency and blockchain industry compliance. Despite facing certain uncertainties and challenges under the continuously evolving regulatory framework, the overall situation is improving, and cryptocurrencies are moving towards integration into the mainstream financial system and mass adoption. Looking ahead to 2025, balancing regulation and innovation, as well as strengthening coordination and communication between the industry and regulators, will be critical for the future development of the cryptocurrency industry.
