When Bitcoin was born, it was just a popular niche currency in the geek culture circle. But as blockchain becomes more and more popular, the market for cryptocurrency continues to expand. The number of global cryptocurrency holders has exceeded 200 million, and the number of cryptocurrency owners in China has exceeded 19 million, truly realizing the move from the niche to the masses. In a few years, the encryption market has developed to a level that various countries cannot ignore. For governments, supervision has become an issue that must be considered. However, until now, the world has not reached a consensus on cryptocurrency, and the attitudes of various countries towards encryption are not clear.
This article will detail the evolution of regulatory styles in five countries and regions that have attracted much attention in the field of encryption, as well as the current attitudes of these countries towards the regulation of encryption.
United States: Control risks and welcome innovation
The United States has always been the country that attracts the most attention in the world in the field of encryption. However, the United States is not a global leader in the regulation of encryption. Compared with countries such as Japan and Singapore, the United States' regulatory policies for cryptocurrency are more vague and unpredictable.
Before 2017, cryptocurrencies were still in a stage of rampant growth, and U.S. regulatory policies only controlled overall risks, with no signs of strict bans or accelerated legislation.
In 2017, cryptocurrency began an ICO craze, and regulatory policies in various countries began to tighten. The U.S. SEC issued an announcement on cryptocurrency for the first time. In the "Investor Announcement: Initial Coin Offering", it was clarified that ICO activities fall under the jurisdiction of federal securities laws. category. Although this is the first time that the US government has spoken out, its attitude towards encryption is still to strengthen supervision rather than ban it.
In January 2019, Binance joined cryptocurrency exchanges such as OKEx and KuCoin in reopening its platform for IEOs (Initial Exchange Offerings) to allow tokens to be traded and bought and sold, but soon after this incident, these exchanges Being targeted by regulators. Afterwards, Binance was banned from operating in the United States. Since then, the United States has launched a severe crackdown on cryptocurrencies. The United States regulates cryptocurrencies as securities rather than assets or currencies, which means that cryptocurrencies will face numerous restrictions and constraints under the Securities Act.
But as more and more crypto enthusiasts join in, coupled with the continuous calls and lobbying from crypto institutions, the United States’ attitude towards cryptocurrencies has changed in 2021.
In February 2021, Gary Gensler became the chairman of the Trust U.S. Securities and Exchange Commission (SEC). He once taught "Blockchain and Currency" at MIT and is more friendly to cryptocurrencies and blockchain. This is also the United States' response to cryptocurrencies. Accelerator of attitude change. Shortly thereafter, the United States allowed Coinbase to be listed on the Nasdaq stock exchange, making it the first cryptocurrency exchange to be listed in the United States. Since then, the United States has begun actively studying encryption-related regulations.
Until 2022, Luna and FTX were hit by thunderstorms one after another. The United States became one of the countries that suffered the most serious losses from these two incidents, and the density of encryption supervision also began to expand.
In September 2022, the United States released its first draft regulatory framework for the cryptocurrency industry, but so far, the United States has not passed any laws. Recently, U.S. regulatory authorities have initiated lawsuits against both CZ and Justin Sun, and the intensity of supervision has become increasingly intense.
The current regulation in the United States is still jointly regulated by the federal and state governments. Regulation at the federal level is not the responsibility of a dedicated regulatory agency, but is jointly supervised by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), with the SEC being given most of the regulatory powers. However, the two regulatory agencies have not yet reached agreement on regulatory responsibilities and standards. And at the state level, attitudes toward cryptocurrencies and regulatory intensity are inconsistent across states. For example, some states have enacted regulations that favor cryptocurrencies, while others, such as Iowa, passed a bill banning government agencies from accepting cryptocurrencies as payment. However, there has been news that the US government is considering establishing a unified regulatory framework to eliminate regulatory differences between states.
As for the attitude towards regulatory legislation, the two parties in the United States have different opinions. Some local politicians do not regard encryption regulation as an urgent matter, and even do not care about cryptocurrency at all. Encryption regulatory legislation is mixed in the struggle between the party and the government, and more changes will be made in a short period of time. It is difficult to reach consensus.
However, U.S. President Biden has signed an executive order called "Ensuring the Responsible Development of Digital Assets," which emphasizes that federal agencies take a unified approach to regulating cryptocurrencies and jointly address the risks of cryptocurrencies. At the same time, he expressed his support for cryptocurrency innovation and hoped that the United States can lead the world in technology in the field of encryption.
The United States is not at the forefront of the world in regulating the encryption field. Because the United States pursues controllable risks and uses certain innovations to promote the development of the encryption field. It can be said that the United States hopes to be at the forefront of the world in encryption technology rather than encryption supervision. The ambiguity of regulatory policies has increased market instability for encryption companies, but it also leaves room for some innovation in encryption technology. This is exactly what President Biden emphasized before "resolving risks and supporting innovation."
Japan: Continued stability, but unattractive
Japan is also a country that has been deeply active in the encryption field for a long time, and Japan’s presence is indispensable in any change in the encryption field. Since the early days of cryptocurrency development, the Japanese government has actively sought to create a sound and regulated environment for the encryption industry. It has now issued laws and regulations specifically for cryptocurrency to legalize and include Bitcoin in supervision.
In 2014, many countries around the world expressed their stance on cryptocurrency. Some countries strictly banned it, while others were cautious and cautious. Japan experienced one of the industry's most serious setbacks as early as 2014 - the collapse of Mt. Gox, Japan's largest Bitcoin exchange at the time. This incident was a major disaster in the history of cryptocurrency. The exchange was responsible for more than 80% of Bitcoin transactions at the time and was the world's largest cryptocurrency exchange at the time. This incident also directly triggered investors' attention to crypto regulatory issues, and investors urgently need a stable and safe crypto investment environment. Since then, Japan has begun to implement stricter regulations on the cryptocurrency industry and adopt clearer and clearer control policies than other countries such as the United States.
In 2016, the Japanese Congress began to actively legislate on cryptocurrency, adding a "virtual currency" chapter to the "Funds Settlement Act" to define virtual currencies and set relevant regulatory rules. It aims to protect the rights and interests of virtual currency investors and prevent virtual currencies from being used for illegal purposes such as money laundering.
In 2017, Japan revised the Payment Services Act to bring cryptocurrency exchanges into the regulatory scope and be supervised by the Financial Services Agency (FSA). This system not only brings Bitcoin into supervision and uses cryptocurrency as a normal means of payment, but also makes Japan the first country to legalize Bitcoin. In December of the same year, Japan’s National Tax Bureau began to collect taxes on income from the crypto field. Compared with Singapore, Japan’s taxes are higher.
In 2018, the local exchange CoinCheck suffered a $530 million hacker attack, which also became a turning point in Japan's encryption policy. After the incident, Japan’s crypto exchanges strengthened self-regulation, and institutions also carried out extremely intensive supervision. Japan’s attitude toward encryption has always been one of strict supervision, treating it as an emerging field and actively promoting relevant regulatory legislation.
In June 2022, Japan passed the amendment to the "Funds Settlement Law" and officially passed legislation on stable currencies, becoming the first country in the world to create a legal framework for stable currencies. In order to protect users of digital currency, this move will link the stable currency to the Japanese yen or other legal currencies to ensure the stability of the currency value.
Japan's sound regulatory environment has allowed many crypto companies to develop stably and sustainably, and protected many investors from losses in the FTX collapse.
In general, Japan’s cryptocurrency regulation is clear and strict, focusing on industry guidance rather than prohibiting industry development. Most importantly, it has been committed to protecting retail investors and has been trying to fill the gaps in cryptocurrency-related legislation.
Japan’s attitude towards encryption has always been to carry out systematic legislation and supervision. It is precisely because of its clear regulatory attitude that the expectations of encryption companies in the Japanese market are clearer.
South Korea: Step up the enforcement and hopefully legalize it
As the fourth largest economy in Asia, South Korea is one of the countries with the most active cryptocurrency market, and 20% of young people are cryptocurrency traders. Even though encryption penetration is extremely high, South Korea currently has not made it a law like Japan.
Since 2017, various forms of token issuance have been banned in South Korea. At the same time, the government has also stipulated the use of virtual currencies to engage in illegal and criminal activities. In addition, regulations to protect crypto investors include requiring real-name registration, prohibiting minors (under 20 years old) and prohibiting foreigners who do not live in South Korea from opening accounts. Regarding encryption regulatory regulations, South Korea’s policy is more one-size-fits-all, only stipulating major violations and lacking relevant details. Many regulatory rules are not legislation at the congressional level, but regulations issued by government agencies or departments, and regulatory legislation has not yet appeared.
In February 2021, South Korea finally had signs of cryptocurrency legislation. Financial regulators have begun to legislate on virtual currencies. This is the first time that regulators have begun to consider legislating cryptocurrencies.
This all happened before Terra collapsed. After Terra collapsed in June 2022, it accelerated the legislation of cryptocurrency in South Korea.
On June 1, 2022, the South Korean government announced the establishment of the “Digital Asset Committee.” Its main goal is to propose policy recommendations, including standards for listing new cryptocurrencies on exchanges, timelines for ICOs, and implementing investor protections ahead of the enactment of the Digital Assets Basic Act (DABA). In addition, the Korean Financial Supervisory Authority also plans to establish a "Virtual Asset Risk Committee", which is also a follow-up regulatory measure triggered by the Terra incident.
Since 2022, perhaps affected by numerous lightning incidents, South Korea has begun to adopt more intensive encryption regulatory measures.
In the past, the South Korean government has not considered cryptocurrencies as legal tender, but as South Korea’s new President Yun Seok-yeol won the election, South Korea’s attitude towards crypto is also changing. Yoon Seok-yeol was once known as the "crypto-friendly president". In order to win the favor of young voters, he even promised to deregulate the encryption industry and said that he would "take legal measures to confiscate cryptocurrency profits obtained through illegal means and return them to the victims." ". Even local South Korean media The Korea Herald reported that the market is moving towards significant legalization as incoming South Korean President Yoon Seok-yeol promises to relax cryptocurrency regulations.
Singapore: Predictable, but not loose
If there is any country in the world that has always maintained a friendly and open attitude towards encryption, it must be Singapore. Like Japan, cryptocurrencies are also deemed legal in Singapore.
In 2014, the Monetary Authority of Singapore (MAS) issued a statement on the money laundering and terrorist financing risks of virtual currencies, becoming one of the first countries in the world to regulate virtual currencies.
Between 2016 and 2017, cryptocurrency ICOs were extremely active and scams were extremely popular. At this time, many countries began to implement strict supervision of cryptocurrency. At that time, the Monetary Authority of Singapore (MAS)’s attitude towards cryptocurrency was that it warned of risks but did not consider it legal.
In 2019, the Singapore Parliament passed the Payment Services Act, legislating supervision for the first time. Singapore has always been known for being "friendly and open" and has lower taxes than Japan. Therefore, it attracted many crypto companies in the following two years and became a hot spot for crypto. In January 2021, the Payment Services Act was revised and improved to continuously expand the scope of regulated cryptocurrency services. It’s also legislation, but Singapore’s regulatory environment is much looser than Japan’s.
In 2022, the Singapore authorities will continue to improve the regulatory environment, hoping to maintain the stability of the financial market while opening up. And began to focus the regulatory attention on retail investors, and began to carry out relevant legislation to further restrict retail investment. The Singapore government has also been guiding retail investors to face investment risks and discourages retail investors from participating in crypto investments.
In 2023, Singapore is still maintaining its crypto-friendly image, offering tax benefits to individuals who own digital assets.
All in all, although trading in Singapore is free, Singapore was also deeply affected by the collapse of FTX. Before this incident, Singapore’s regulation of the crypto industry focused on money laundering and terrorism financing risks, and after the crash, Singapore began to tighten crypto policies in order to protect investors.
Li Guoquan, a professor at a well-known university in Singapore, said in an interview with the media that Singapore has always maintained a friendly but not relaxed attitude towards the operation of crypto assets, and has always opposed fraud, speculation, money laundering and irresponsible propaganda. Singapore's policies have always been relatively stable and sustainable, with flexibility based on market conditions. Like Japan, Singapore's system has always been stable and predictable, but Singapore is also gradually tightening regulatory policies in order to control financial risks.
Hong Kong: catch up and actively legislate
Hong Kong, which was originally skeptical about cryptocurrencies, has changed since the new Hong Kong SAR government took office. After several years of waiting and watching, Hong Kong appears to have found its own regulatory path from the mistakes of other countries.
Before 2018, Hong Kong had an extremely cautious attitude towards cryptocurrencies, and the regulation of cryptocurrencies had been in an exploratory period. It was not until November 2018 that Hong Kong included virtual assets under supervision for the first time. Since then, Hong Kong has always regarded cryptocurrencies as “securities” and included them in the existing legal system for supervision, but it has not regulated non-securities cryptocurrencies.
This regulatory trend has continued until 2021, when Hong Kong released a consultation conclusion on the "Public Consultation on Legislative Proposals on Strengthening Regulation of Combating Money Laundering and Kongbu Fund Raising in Hong Kong". Only then did there appear to be signs of legislation on encryption regulation.
In October 2022, the Financial Secretary of Hong Kong officially issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong". The Hong Kong government changed its attitude and began to actively embrace virtual assets such as encryption, and is expected to legalize crypto assets in the future.
Starting in 2023, Hong Kong will continue to release legislative signals. On January 31, the Hong Kong Monetary Authority stated that it planned to bring stablecoins into the scope of supervision. On April 14, the Monetary Authority released a consultation summary of the encrypted assets and stable currency discussion paper, hoping to implement regulatory arrangements in 2023 or 2024. All this means that Hong Kong should take the initiative to join the ranks of encryption regulatory legislation.
An article in the Wall Street Journal on April 1 mentioned that “the United States now regulates cryptocurrencies more strictly than ever before, while Hong Kong regulates them in a more relaxed manner.” In recent years, Hong Kong has been on the sidelines and lost its leading position. However, with the experience and lessons of other countries, Hong Kong has taken advantage of the development of web3 and has the ambition to return to the encryption field, and is expected to become a leader in the cryptocurrency market. However, all results will not be final until relevant regulations are implemented.
Summarize
Although cryptocurrency has not yet reached a consensus in various countries around the world, overall, strengthening the supervision of cryptocurrency is still a future trend. In the early stages of an industry's development, strict regulations may hinder innovation. But when an industry develops to a certain level, lack of regulation will cause harm to the entire industry. The legislative issues of encryption supervision are gradually being taken seriously, which also proves that the entire industry is developing in a good direction.
