Regulations for digital assets worldwide

As cryptocurrencies continue to become a larger part of the global economy, more and more governments are exploring ways to regulate the industry and construct rules for firms operating in space.

There have been some significant regulatory developments in recent weeks, with the European Parliament approving the Markets in Crypto-Assets (MiCA) regulations on April 20, Ukraine announcing it would adopt the same regulations, and South Korea making progress on its proposed regulations. .

The collapse of the crypto exchange FTX has led to calls for swift regulation in a number of countries, with bankruptcy resulting in a contagion that contributed to the downfall of many firms it was associated with.

Speaking to Cointelegraph, chairman and co-founder of Animoca Brands Yat Siu noted that his firm is “very pro-regulation, as it provides a framework that legitimizes the industry.” Sui said a lack of regulatory clarity could have the opposite effect and create uncertainty, adding:

“Overall, regulation has seen a much more positive direction in places like Hong Kong, Japan, the UAE and even parts of Europe compared to the US, which has attracted capital, talent and jobs to those places.”

Below is an overview of crypto regulations in different countries around the world and whether they provide clear rules for a cryptocurrency industry to be built around, whether they are hostile to crypto firms, or whether they lack clear rules.

This is not a definitive list, but aims to cover many of the largest countries by gross domestic product and those with unique rules. Most EU member states are not included, and many are likely to adopt the incoming MiCA regulations.

The regulations can be very nuanced, so trying to categorize different countries’ regulations can be an oversimplification.

Countries or regions with clear rules

Bahamas: The Bahamas has been sought after for crypto firm headquarters due to its friendly tax policy and transparent regulations. FTX was headquartered there, and Coinbase is reportedly setting up a derivatives exchange there.

Brazil: Former Brazilian President Jair Bolsonaro signed a crypto bill into law on December 22, 2022, legalizing the use of crypto as a payment method and establishing a licensing regime for virtual asset service providers.

Canada: The first country to approve a Bitcoin (BTC) exchange-traded fund; Canada requires all crypto trading platforms to register with regulators and for the most part has clear rules that individuals and businesses must follow.

Cayman Islands: Like the Bahamas, the Cayman Islands have a clear regulatory framework and friendly tax policy, making it a preferred location for many crypto firms.

El Salvador: The first country to recognize Bitcoin (BTC) as legal tender; it has fully embraced crypto and plans to create a “Bitcoin City,” which will provide residents with tax benefits. The country has even pioneered Bitcoin-backed bonds.

Japan: Japan’s clear regulatory framework sets strict standards on crypto exchanges, including a requirement to segregate exchange and client funds, which meant customers of FTX Japan could fully withdraw all their funds after the collapse of its parent company.

Mexico: Mexico’s central bank has broad powers that enable it to regulate virtual assets under laws passed in 2018 outlining the requirements for firms operating in the crypto industry.

Switzerland: While Switzerland has strict laws regarding anti-money laundering (AML) and Know Your Customer requirements, its regulatory framework is clear and gives its crypto industry clear guidelines on how it must operate.

Countries hostile to crypto

Afghanistan: After the Taliban came to power, they banned cryptocurrency trading in August 2022.

Algeria: The purchase, use, sale and storage of crypto has been banned in Algeria since 2017.

Bangladesh: Although Bangladesh has indicated a desire to become a “Blockchain-enabled nation”, transactions with crypto are illegal.

Bolivia: Bolivia’s central bank issued a resolution banning the use of crypto in 2014.

China: China banned local crypto exchanges in 2017, moving to a blanket ban on cryptocurrency mining and use in 2021.

Egypt: Crypto transactions in Egypt have been banned since 2018, but the nation appears to be warming up to crypto following reports earlier this year that it was looking at creating its own regulatory framework for crypto.

Morocco: Crypto transactions have been illegal in Morocco since 2017.

Nepal: Nepal has outright banned all use of crypto in the country and earlier this year asked internet and email providers to block access to “websites, apps or online networks” related to crypto.

Countries that lack clear regulations

Australia: Australia’s lack of clear regulations has left consumers highly exposed to industry-wide events such as the collapse of FTX, but it is currently making progress in establishing broad regulations as it participates in a public consultation on how to classify crypto and firms operating in the space.

Hong Kong: Hong Kong has been rapidly advancing in efforts to regulate crypto and become a crypto hub, but still lacks clear rules. It is set to release crypto exchange licensing guidelines next month, and courts have also recently recognized crypto assets as property.

India: While India has introduced AML rules for crypto, it lacks clear rules for the crypto industry and recorded a huge drop in crypto exchange activity after introducing hefty tax laws in 2022. The Reserve Bank of India banned cryptocurrency in 2018, but the Supreme Court overturned the ban in 2020.

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Russia: Although there are reports that Russia may adopt crypto regulations as early as June, it currently does not have a clear regulatory framework and has previously banned the use of cryptocurrencies for trading.