The financial sector had been greatly modified since the invention of cryptocurrencies, this is due to digital assets and decentralization that has grown in massive adoption by different individuals around the globe.
Although, the fast expansion of these digital assets has made regulatory organizations and federal bodies around the world address the kinds of problems and dangers that are accompanied by the evolution of this technology thereby setting out some rules and regulations guiding it.
In this article, we will be emphasizing the meaning of cryptocurrency regulations, some of the regulations made on cryptocurrencies in different countries of the world, and what we should anticipate in the future.
What are Cryptocurrency Regulations?
Cryptocurrency regulations are a set of rules, laws, or policies published or made by the government of a particular country or an organization to guide or regulate the cryptocurrency ecosystem in a way to reduce fraudulent activities associated with emerging technology, ensure financial stability, and market integrity.
The government and other regulatory made those policies or regulations because of the rapid growth of cryptocurrency from a speculative investment to a new asset. In other to stop the illegal use of cryptocurrencies, the European Union set up crypto service providers to detect those involved in the illicit use of these digital assets. There became the first people to set up such a body to regulate cryptocurrency.
Cryptocurrencies Regulation Approach Strategies
Like it was stated in the previous paragraph above, different countries of the world set out different rules and regulations to guild cryptocurrencies in other to protect individuals from some of the challenges it faces.
In this part, we will consider different countries and the regulations there made on cryptocurrencies. Some of these regulations that will be discussed here from different countries of the world will be based on; restrictive, hybrid, and permissive.
Canada: they are more proactive than other countries in regulating cryptocurrencies despite it is not regarded as a legal means of exchange there. Canada became the first county to authorize Bitcoin Exchange-Traded Fund. In Canada, it is a must that crypto trading platforms and dealers register with their respective provincial regulatory bodies (Canadian Securities Administration and the Investment Industry Regulatory Organization Of Canada).
In terms of taxation in Canada, cryptocurrencies are handled like other commodities, and as that, cryptocurrency investment (FINTRAC) and classified by Canada as a money service business.
United State Of America (USA): A fresh framework that allowed more regulation was unveiled by the US in 2022. Commodity Future Trading Commission (CFTC) and Security Exchange Commission (SEC), are existing market regulators that were given audacity under a new mandate.
It was claimed that Ripple company generated over $1.5 Billion by selling their cryptocurrency native token $XRP, in unregistered security transactions this was publicized. SEC has already taken broad steps to regulate the crypto industry.
Nigeria: The Security And Exchange Commission Of Nigeria unveiled crypto policies to regulate cryptocurrencies in Nigeria. In May 2022 the Nigeria SEC brought the regulations on cryptocurrencies published on a 54-page of document and it was headed with titled “NEW RULES ON INSURANCE, OFFERING PLATFORMS AND CUSTODY OF DIGITAL ASSETS” on their site. The set of rules published in the document gave hinds on how her citizens can interact with cryptocurrencies and banking institutions relative to cryptocurrencies in the country.
Australia: Cryptocurrencies are considered legal assets and are subject to capital gain tax. As long as cryptocurrency exchanges are registered with AUSTRAC and can meet up with AML/CTF requirements, then they can do their business freely in Australia. Australia laid a regulatory restriction for Initial Coin Offerings (ICOs) and in 2019, they outlawed the sale of privacy coins by exchanges. This was done by Australia Security And Investments Commission (ASIC).
China: To assess inheritance, in China Bitcoin is regarded as a property. The People’s Bank Of China (PBOC) restricted cryptocurrency exchanges from functioning in China, mainly because of public funding. Additionally, in 2021 China banned Bitcoin mining and advised those who are into Bitcoin Mining as a business should leave to a country that regulates cryptocurrencies.
But then, china has been effortlessly building E-CNY (Chinese electronic currency). In August 2022, the second phase of its Central Bank Digital Currency was launched (CBDC).
The above countries are some examples of those countries in which the government or other federal bodies in the countries wrote down policies that control cryptocurrencies. Other countries include Brazil, India, South Korea, Singapore ETC.
The Bodies Regulating Cryptocurrency
Each country has its bodies regulating cryptocurrencies. Using Nigeria as a case study, The Security And Exchange Commission Of Nigeria together with the Central Bank Of Nigeria are the bodies responsible for the regulations of cryptocurrency.
In the USA, the policies laid on cryptocurrencies depend on how and where it is been used. The Financial Industry Regulatory Authority, The Community Future Trading Commission, and The Security And Exchange Commissions are all engaged in some way.
While in Australia there is AUSTRAC and AML/CTF and more examples in different countries.
What To Anticipate In The Coming Years
In the coming years, there will be an increase in the level of participation in terms of retail in the cryptocurrency space more than the traditional commodity markets which will pose a different challenge for regulators.
Commodity Future Trading Commission (CFTC) will be improved in a good way that will favor consumers more effectively regulate markets. In addition, cryptocurrency will challenge the traditional regulatory distinction between securities and commodities.
The regulation of cryptocurrencies is a complicated and dynamic area that calls for a careful balance between innovations and investor protection. A sophisticated and thorough approach to regulation is required as authorities such as government and policy agencies try to balance the potential and threats presented by cryptocurrencies.
Regulators can successfully navigate the cryptocurrency ecosystem by examining the different regulatory frameworks and international coordinating initiatives, supporting innovation while defending the financial system and consumer interest.