Author: Weilin, PANews
2024 is a special and critical year for global blockchain regulation. The regulatory framework of the cryptocurrency industry will be initially improved, and crypto assets will be integrated into the mainstream financial system.
The approval of Bitcoin and Ethereum ETFs in the United States has pushed cryptocurrencies towards mainstream adoption. At the same time, the new US government led by Trump is about to take office, and the new Securities and Exchange Commission (SEC) Chairman Paul Atkins will take office, indicating that compared with the previous SEC's "enforcement-based regulation" model, US regulators may adopt "information disclosure-based regulation" in the future. The establishment of a White House director of artificial intelligence and cryptocurrency affairs for the first time also indicates a more friendly, flexible and innovative crypto regulatory policy.
In Europe, the stablecoin regulatory bill (Markets in Crypto-Assets Regulation) (MiCA) has officially come into full effect, accelerating 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 exchanges. Regarding stablecoins, Hong Kong has launched a stablecoin sandbox and stablecoin bill.
In other parts of Asia, such as Vietnam, the government has released a (National Blockchain Development Strategy). In Russia, cryptocurrency mining regulations have come into effect. Furthermore, in the Middle East and North Africa, as well as in the Americas, the UAE, Qatar, and Argentina have demonstrated proactive policy innovations in cryptocurrency regulation.
As the year ends, PANews reviews significant regulatory developments in the global crypto market. Under different regulatory systems across regions, the crypto market is expected to present a distinctly different landscape next year.
United States: Approval of BTC and ETH spot ETFs and new regulatory expectations from the government.
On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) approved a spot Bitcoin exchange-traded fund (ETF), and later on May 23, made a '180-degree' reversal by approving an Ethereum ETF. On July 23, the U.S. Ethereum spot ETF officially began trading. 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 key integration points.
According to SoSoValue data, as of December 23, the total net asset value of the U.S. Bitcoin spot ETF is $105.08 billion, accounting for 5.7% of Bitcoin's market value. The total net asset value of the U.S. Ethereum spot ETF is $12.05 billion, accounting for 2.94% of Ethereum's market value. The successful start of these two ETFs has opened up possibilities for more altcoin ETFs, such as Solana, Doge, and XRP ETFs, further promoting the maturation of the crypto asset market.
This year, two significant bills on cryptocurrency regulation in the U.S. are also worth noting. On May 22, 2024, the U.S. House of Representatives approved the (Financial Innovation and Technology Act for 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, and it is still being advanced.
Regarding another regulation, SAB 121, President Biden vetoed it on June 1. The bill aimed to overturn accounting standards set for custodial cryptocurrency companies, and it may change with the new government taking office in the new year, easing the adoption of cryptocurrencies by more large companies.
After the U.S. elections, the new government led by Trump is expected to initiate a new model for cryptocurrency regulation. Trump, who supports cryptocurrencies, has appointed several pro-crypto politicians to key positions during the selection of the 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 crypto committee. On December 13, French Hill was elected chair of the House Financial Services Committee. This series of appointments indicates that the U.S. may adopt more favorable policies in the field of crypto regulation in the future.
Europe: The enforcement of the MiCA Act and intensified competition for stablecoins.
The European Union's (Markets in Crypto-Assets Regulation) (MiCA) regulatory rules for stablecoin issuers came into effect on June 30 and will be fully implemented by December 30. MiCA is the EU's first complete regulatory framework for the crypto industry, particularly laying out clear requirements for stablecoins. While some crypto companies have stated they are not fully prepared, competition in the European stablecoin market is expected to intensify against a backdrop of increasingly strict compliance requirements. For example, the unlicensed Tether has invested in Dutch company Quantoz and European stablecoin provider StablR.
Additionally, the UK's Financial Conduct Authority (FCA) has expressed hopes to launch a comprehensive regulatory system for cryptocurrencies by 2026. A study commissioned by the FCA showed that the number of crypto asset holders has grown by 4% over the past two years, with approximately 7 million adults holding crypto assets in a population of about 68 million.
On December 21, the German parliament passed the (Digitalization of Financial Markets Act), which is necessary for the comprehensive implementation of crypto MiCA.
Hong Kong: Four new VATP license holders, advancing stablecoin development.
On October 31, 2022, Hong Kong officially released its Virtual Asset Policy Declaration. To date, nearly 1,000 Web3 companies have established operations 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 and with trading volumes needing improvement, they signify Hong Kong's crucial position in the global crypto regulatory framework.
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 the joint application of Standard Chartered Bank (Hong Kong) Animoca Brands Limited and Hong Kong Telecom (HKT). These three institutions can test their anticipated 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 License (VATP) system further promotes the compliance development of crypto asset service providers. On December 18, after OSL Exchange, HashKey Exchange, 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 foundation for comprehensive regulation to anchor stablecoins (FRS) to legal currencies. 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 including investment, trade, and payment.
Other regions in Asia-Pacific: Further advancement of Web3 policies and sandbox regulations.
On November 27, Japan's newly appointed digital minister Masaaki Taira announced at a forum that Prime Minister Kishida Shun'ichi has restructured his party's Web3 and crypto policy-making department, further promoting policy innovations in the country related to crypto and blockchain. The government stated that it does not intend to hinder the 'promotion' of Web3-related businesses. The project group is a concept from former Prime Minister Kishida Fumio, who resigned from his position earlier this year. Kishida has also expressed his support for policies that support Web3. The Liberal Democratic Party (LDP) of Japan is pushing for cryptocurrency tax reform. The proposed reforms include applying a separate tax rate of 20% on profits from cryptocurrency transactions and introducing a loss carryforward system. Currently, profits from cryptocurrencies in Japan are classified as miscellaneous income, with a maximum tax rate of 55%.
In South Korea, on July 19, the country introduced the Virtual Asset User Protection Act, aimed at enhancing investor protection and ensuring the future development of the market. However, shortly after the implementation of the new regulations, political turmoil arose in South Korea, and following a state of emergency and impeachment plans against the current president, the National Assembly decided to suspend all regulatory discussions related to cryptocurrencies.
Meanwhile, countries such as Indonesia, Thailand, and Vietnam are also strengthening their regulation of the crypto market, particularly by launching sandbox frameworks that allow innovative projects to experiment in a more relaxed regulatory environment. Specifically, Indonesia's Financial Services Authority (OJK) launched its sandbox framework in June 2024. In August 2024, Thailand's SEC introduced a digital asset sandbox to complement its existing detailed licensing framework, allowing testing of key initiatives aligned with emerging market trends. The Vietnamese government announced the (National Blockchain Development Strategy) on October 22 through its official website, 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 loosen. In January this year, exchanges like Binance and Kraken had their apps blocked by the Indian financial intelligence agency for not complying 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 to be approved by the Indian Financial Intelligence Unit (FIU), on the condition that they pay fines after hearings with the FIU.
Russia: The enforcement of cryptocurrency mining regulations and adjustments to digital currency taxation.
Russia enacted comprehensive cryptocurrency mining regulations that took effect on November 1, 2024, establishing strict energy caps, 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 trading of digital financial assets on specific platforms. This regulation aims to balance the growth of Russia's crypto industry, energy demands, and the control of illegal mining.
According to the new regulations, only registered companies and individual entrepreneurs can legally engage in cryptocurrency mining activities, while unregistered individual miners cannot exceed a monthly power consumption of 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 relief 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 penalties.
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 growing rapidly, thanks to regulatory innovations, institutional interest, and the expansion of market activities. Established in 2022, the Dubai Virtual Assets Regulatory Authority (VARA) provides a world-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 Deribit.
Saudi Arabia remains the fastest-growing country in the Middle East and North Africa for cryptocurrency economy growth. According to a report by Chainalysis, the total on-chain value has increased 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), gaming industry, and fintech.
Following closely is Qatar, which has become the second fastest-growing on-chain value cryptocurrency market in the region. The Qatari government had previously banned the trading of crypto assets, but currently, regulatory policies are continually improving. The Qatar Financial Centre (QFC) launched a new regulatory framework for digital assets this September, 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 the legal and regulatory foundation for the development of digital assets.
South Africa: Among African countries, it has the most favorable attitude, having issued 248 licenses.
Among African countries, South Africa is one of the most favorable towards cryptocurrencies. The South African Reserve Bank (SARB) has not explicitly banned the use of cryptocurrencies.
As of December 16, 2024, the South African Financial Sector Conduct Authority (FSCA) has issued 248 licenses from the 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 noted that after the FSCA raised concerns about the business models of some companies, 106 institutions withdrew their applications.
Americas: National policy innovations for cryptocurrencies.
In the Americas, Argentina is vigorously promoting the adoption 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 (VASP) in the country and imposing new compliance requirements on these entities. At the same time, the Argentine Securities Regulator announced that it would allow foreign investment products related to various crypto ETF opportunities to enter the market. President Milei plans to implement a policy of free currency circulation by 2025, allowing Argentines 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 in the pilot phase of a CBDC (referred to as 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 Argentine regulators to help both countries develop their crypto industry.
Conclusion:
Overall, the 2024 bull market is undoubtedly a key year for global cryptocurrencies and the blockchain industry in terms of compliance. Despite facing some uncertainty and challenges under an evolving regulatory framework, the overall situation is improving, and cryptocurrencies are moving towards mainstream financial systems and widespread adoption. Looking ahead to 2025, balancing regulation and innovation, as well as strengthening coordination and communication between the industry and regulators, will be key to the future development of the crypto industry.
