Just weeks into 2024, the crypto world is already seeing major regulatory changes, with the most notable one being the US SEC’s approval of 11 spot Bitcoin ETFs. That was just the tip of the iceberg, though, as a lot more is to come this year in areas like issuance, services, stablecoins, and oversight, with a strong focus on AML and KYC measures.
Emerging technologies such as DeFi, NFTs, and DAOs will also be under the regulatory lens, especially in Europe, Japan, and parts of Africa this year. So, what major crypto regulatory changes are we to expect from these areas in 2024?
You can find the visual guide on the global crypto regulatory outlook for 2024 at: https://issuu.com/shyftnetwork/docs/global_crypto_regulatory_outlook_2024_-_shyft_netw#google_vignette
2024 will bring a wave of sweeping changes across the crypto landscape. The rollout of the Markets in Crypto Asset Regulation (MiCA) in EU states is reshaping the scene, even influencing economic partners like Switzerland. As this unfolds, European regulators are joining forces, aiming to streamline how they categorize, monitor, and handle the tech side of crypto assets, creating a unified approach across the continent, with different types of crypto assets getting their own unique set of rules.
As a part of the Markets in Crypto Assets regulation rollout, the European Securities and Market Authority is set to issue guidelines on crypto asset categorization, market monitoring, and technological infrastructure standards. By June 30th, 2024, EU states must decide on opting into the grandfathering scheme under MiCA, which permits crypto asset service providers to operate under national laws until MiCA authorization is obtained or denied.
This scenario could lead to varied regulatory approaches across Europe, which ESMA aims to harmonize. Furthermore, the Securities and Markets Stakeholder Group is advising ESMA to ensure MiCA's alignment with Decentralized Finance (DeFi) by the end of 2024.
Instead of creating a standalone regulatory framework like the EU's MiCA, the UK plans to incorporate crypto activities into its existing financial services framework, necessitating crypto firms to comply with traditional banking regulations. The Financial Conduct Authority will offer guidance for crypto businesses requiring authorization under this regime.
Different types of crypto assets, such as unique NFTs and already-regulated assets like security tokens, will also be distinctly regulated this year. Moreover, legislation to formalize this framework is anticipated in 2024, with transitional arrangements for businesses. As for stablecoins, the UK's immediate regulatory emphasis is on fiat-backed ones used in payment systems, with legislation targeted for early 2024. Meanwhile, the regulation of Decentralized Finance remains under consideration.
Switzerland is implementing the Crypto-Asset Reporting Framework (CARF) this year, bringing digital assets under tax transparency regulations and necessitating due diligence on users by crypto service providers. Moreover, the Federal Department of Finance also plans to prepare a consultation draft for implementing these rules, targeting completion by the end of June 2024.
Across the Asia Pacific region, governments and regulatory authorities are placing a heightened focus on strengthening the regulatory frameworks to ensure the security of digital assets and protect consumers. This includes the implementation of clear taxation policies for crypto assets, where profits from transactions are subject to taxation, and strict reporting requirements are imposed on crypto investors.
Governments are also emphasizing the importance of security and compliance, with regulations targeting anti-money laundering (AML), know-your-customer (KYC) procedures, and robust cybersecurity standards. Additionally, emerging technologies like DeFi, NFTs, and stablecoins are receiving regulatory attention, leading to the development of comprehensive policies and guidelines.
In 2024, Japan will continue its detailed approach to cryptocurrency regulation, focusing on consumer protection. This is in response to past breaches at Japanese exchanges, emphasizing the need for stringent security measures. We can also expect Japan to initiate its much-anticipated tax policy reforms to support the growth of crypto startups this year.
India is yet to finalize its approach to cryptocurrencies, with the anticipated cryptocurrency bill still pending since 2021. However, the Reserve Bank of India remains skeptical of cryptocurrencies and instead favors CBDCs over other digital currencies, indicating no major regulatory changes in 2024. So, we are unlikely to see any major changes in terms of crypto regulations in India in 2024.
South Korea is working on a two-part crypto regulation framework for 2024. The first part, focusing on structuring the crypto market, will take effect in July 2024, whereas the second part, which is still under development, will establish rules for the issuance, listing, and delisting of cryptocurrencies. The country has also decided not to support crypto ETFs and is considering banning credit card purchases of cryptocurrencies. Adding to this, both officials and companies will need to start revealing their crypto holdings from next year.
In 2024, the Monetary Authority of Singapore is set to focus on reducing speculative trading in cryptocurrencies, including the ban on cryptocurrency platforms offering incentives for trading. Moreover, starting in mid-2024, the use of Singapore credit cards to purchase digital payment tokens will no longer be allowed.
The Hong Kong Monetary Authority and the Securities and Futures Commission are considering applications for spot crypto ETFs and other virtual asset funds this year. It is expected to make significant progress in stablecoin regulation, too, with a consultation paper already published seeking public feedback. The regulator also has plans to unveil a "sandbox" framework, enabling market participants to engage directly with the regulatory environment in 2024.
The People's Bank of China recently emphasized the need for global crypto rules, maintaining its tough stance on cryptocurrencies. However, the country is pushing for standardization in the metaverse sector, collaborating with tech giants and government representatives, and has proposed a ban on converting virtual gaming tokens to real-world assets this year.
Australia plans to advance its crypto licensing framework in 2024, introducing a regulatory framework covering licensing and custody rules for crypto asset providers. This legislation, once approved, will include a 12-month transitional period. The Treasury and Reserve Bank of Australia will also publish a joint report on CBDC research this year, setting a roadmap for future work.
Governments throughout the Americas are actively enhancing cryptocurrency regulations to address common concerns. They're taking steps to combat issues like money laundering and fraud and safeguard investors.
A prominent focus is on regulating stablecoins, with measures to ensure that issuers maintain sufficient reserves and adhere to financial rules gaining traction.
Additionally, tax regulations concerning cryptocurrencies are being clarified, encompassing reporting requirements, capital gains taxes, and income tax obligations for crypto-related activities.
2024 in the US kicked off with the launch of the country's first Spot Bitcoin ETF. Yet, the SEC is maintaining its firm stance, not relenting in its rigorous crypto scrutiny. Laws for stablecoin issuers are also likely to emerge in 2024 following the House Financial Services Committee's passage of the Clarity for Payment Stablecoins Act, which is currently awaiting consideration in the House of Representatives.
Another key focus for this year is the Financial Innovation and Technology for the 21st Century Act, which could shift the crypto world from securities to commodities, with the CFTC taking the lead. Similarly, the bipartisan Responsible Financial Innovation Act aims to classify most cryptos as commodities, shifting more responsibility to the CFTC and establishing stablecoin regulations.
Moreover, from January 2024, the 2021 Infrastructure Investment and Jobs Act has been in effect, making it mandatory for entities to report crypto transactions over $10,000 to the IRS or face serious consequences. Lastly, the outcome of the US elections in November 2024 could significantly impact the crypto industry, as a crypto-friendly administration could bring much-needed clarity and legitimacy to the sector.
The Canadian Securities Administrator announced new regulations for public investment funds in crypto assets in January this year, which is open for public feedback until April 17th, 2024. The new rule will permit only the non-redeemable and alternative investment funds to handle crypto transactions directly, requiring other mutual funds to invest through these entities. It also underlines that the crypto assets must also be fungible, insured, stored offline, and listed on a recognized Canadian exchange with an annual custodian review.
In Brazil, policymakers are working to tighten crypto regulation and bring brokerages under stricter supervision in 2024. Meanwhile, the newly enacted income tax regulations, effective January 1st, 2024, impose up to 15% tax on individuals earning over $1,200 from foreign-based exchanges, aiming to generate $4 billion in tax revenue. Also, the Brazilian central bank's digital currency, DREX, is in its testing phase until February 14th, 2024, with a public launch planned by year-end.
Colombian lawmakers are drafting a bill for comprehensive crypto regulation, with collaboration between the crypto ecosystem and government bodies like the Central Bank and the Financial Superintendency. The bill, expected to be presented publicly this year, will undergo analysis by the Executive and then Congressional approval.
This year, Argentinian President Javier Milei, a pro-Bitcoin advocate, aims to introduce crypto regulation aligned with the IMF's anti-money laundering approach.
Milei's draft bill, the Law of Bases and Starting Points for the Freedom of Argentines proposes favorable tax rates for declared domestic and foreign crypto holdings and legalizes their use. Tax rates start at 5% until March 2024, then increase to 10% through June, and 15% thereafter until September 2024.
In the Middle East and Africa, governments are attempting to strike a balance between nurturing the growth of digital finance and addressing regulatory challenges. This trend involves a focus on developing structured frameworks for cryptocurrencies, especially stablecoins, reflecting an awareness of their growing economic impact. However, there's also an emphasis on enhancing anti-money laundering and combating the financing of terrorism measures within the crypto sector.
This year, the UAE is on the brink of finalizing its stablecoin laws, with Dubai's Virtual Asset Regulatory Authority leading the charge. VARA, the first of its kind in crypto supervision, has revamped its virtual asset rulebook to integrate regulations for fiat-referenced virtual assets (FRVAs), or stablecoins. These rules categorize cryptocurrencies, placing FRVAs in 'category 1'. For stablecoin issuers, this means getting authorization and a license from VARA and adhering to its stringent regulations and the newly minted FRVA Rules.
The UAE's Financial Services Regulatory Authority has also recently tweaked its AML and sanctions rules in line with the FATF Travel Rule, specifically targeting provisions related to wire transfers in the digital asset realm.
As of yet, Saudi Arabia does not have a regulatory framework for cryptocurrencies. The country has also banned banks from processing transactions related to crypto, while the Saudi Central Bank governor has underscored the need for adequate supervision, regulation, and coordination in virtual currency activities. Amidst this, SAMA has been experimenting through the launch of Project Aber, a joint collaboration between SAMA and the Central Bank of the United Arab Emirates ("CBUAE"), which explores CBDC for cross-border payments. Besides these developments that will continue this year, there’s not much happening on the regulatory front in Saudi.
Last year, on October 22nd, South Africa began recognizing cryptocurrencies as a financial product and made it mandatory for all crypto exchanges to secure operating licenses before the year ends. While the Financial Advisory and Intermediary Services Act currently governs them, crypto-related services will soon fall under the Conduct of Financial Institutions bill, set to become law in the coming years. Additionally, with the Financial Action Task Force closely monitoring South Africa, 2024 will bring more robust anti-money laundering and counter-terrorism financing measures to the crypto sector, aiming to help the country exit the greylist by 2025.
Nigeria, after lifting its 2021 crypto ban, has set out new rules for VASPs, focusing on strong KYC and AML checks. However, Nigerian banks still can't trade or hold cryptocurrencies themselves. At the same time, Nigeria's Securities and Exchange Commission is starting to handle license applications from crypto custodians and exchanges, showing a careful move towards more involvement in cryptocurrencies.
After passing the Finance Bill 2023 and signing it into law, Kenya is ready for a comprehensive digital asset regulatory framework covering tax integration and revenue guidelines. The local industry lobby group, the Blockchain Association of Kenya (BAK), is tasked with preparing the first draft of a VASP bill referred to as the Crypto Bill by the National Assembly's Departmental Committee on Finance and National Planning. With that, Kenya might become the first country where the industry's representatives develop the regulatory framework for crypto.
In 2024, we’re at a crossroads as far as global crypto regulations are concerned. Across the globe, from the European Union to the United States, governments are crafting new rules, influencing how the world perceives and uses cryptocurrencies in everyday life.
While each country’s approach varies, it’s crucial to ensure that the underlying intent remains consistent: safeguarding user experience and security. The decisions made this year will not only shape the immediate future of cryptocurrencies but will also lay the groundwork for their integration into the mainstream global financial ecosystem. So, this year will go down in history as a defining moment for the crypto industry, one that could determine its trajectory for the years to come.
You can find the visual guide on the global crypto regulatory outlook for 2024 at: https://issuu.com/shyftnetwork/docs/global_crypto_regulatory_outlook_2024_-_shyft_netw#google_vignette
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