Crypto Regulations 2022 and Beyond
As the global cryptocurrency landscape evolves, so do crypto regulations governing it. Keeping up to date with the rules and regulations in different countries is not always easy, but it is essential for anyone looking to trade or invest in cryptocurrencies.
Here are some key regulatory developments in the space over the past year and what we can expect in the year ahead.
The Securities and Exchange Commission (SEC) in the United States has been ramping up its scrutiny of the cryptocurrency space. In 2020, the SEC brought many enforcement actions against companies and individuals involved in illegal activity, including fraud and money laundering. The SEC also issued several investor warnings about the risks of investing in cryptocurrencies.
In 2022, the SEC is expected to continue its crackdown on illegal activity in the cryptocurrency space. The agency is also likely to release more guidance on what types of digital assets will be considered securities. This could significantly impact how cryptocurrencies are traded and sold in the United States.
The Internal Revenue Service (IRS) considers cryptocurrencies a digital representation of value that serves as a store of value, unit of account, and a medium of exchange. Still, it does not consider them to be legal currency. As a result of this guidance, the IRS has issued cryptocurrency-specific tax rules.
As the European Union looks to 2022 and beyond, cryptocurrencies will continue to play a significant role in the digital economy. In light of this, the EU is taking steps to ensure that crypto assets are regulated to promote innovation and protect consumers.
The Fifth Anti-Money Laundering Directive (5AMLD), brought into force in January 2020, is a vital part of the EU's efforts to regulate cryptocurrencies. 5AMLD brought cryptocurrency-fiat currency exchanges under EU anti-money laundering legislation to prevent the use of crypto assets for illicit purposes.
The European Commission is considering proposals to extend 5AMLD to cover custodial wallet providers and peer-to-peer (P2P) exchanges. The Commission is also considering introducing a pan-EU licensing regime for cryptocurrency service providers.
The European Union is also working on developing its digital currency, known as the Digital Euro. The Digital Euro would be a new form of central bank money, available to all citizens and businesses in the EU. The European Commission is currently exploring the feasibility of launching a Digital Euro and is expected to present its findings before the launch.
In Asia, China has been one of the most active countries when it comes to regulating cryptocurrencies. In 2017, China banned initial coin offerings (ICOs) and shut down cryptocurrency exchanges. Since that time, the Chinese government has taken a more cautious approach to space.
In 2020, China launched its digital currency, known as the "digital yuan." The digital yuan is not entirely decentralised like other cryptocurrencies. However, it is still seen as a significant step forward for the adoption of digital currencies.
The Chinese government is also working on a blockchain-based system to track and trace digital assets. This year, we can expect more regulatory clarity from the Chinese government. The digital yuan is expected to launch in a pilot program sometime this year. And the blockchain-based tracking system could be up and running very soon. And it will be legalised as payment for tolls, transport fares, bills, and goods.
As the global cryptocurrency market matures, governments and financial institutions pay increasing attention to digital assets. Cryptocurrencies are not treated as legal money in South Korea. While exchanges are legal, they operate in a carefully regulated environment.
Cryptocurrency transactions are currently tax-free in the country because they are considered neither currency nor a financial asset. However, the Ministry of Strategy and Finance has stated that it will consider imposing a tax on cryptocurrency earnings to provide clarity for investors.
The South Korean government announced a new bill in March 2021 that requires cryptocurrency investors to use the same name on their digital wallet accounts as they do on their bank accounts. That requires cryptocurrency exchanges to provide information to banks to confirm customer identities.
The Tax on Cryptocurrency in South Korea was supposed to go into effect in January 2022, but it has been delayed until January 2023. South Korea has also committed to maintaining the tax framework to foster international financial transparency. In addition, the country has stated that it will continue working toward aligning the industry with FATF's anti-money laundering standards.
The United States, Europe, China, and South Korea are all taking different approaches to regulating cryptocurrencies. Here's a breakdown of what each country is doing and how it will impact the future of crypto.
• The United States has been relatively hands-off when it comes to cryptocurrency regulation. However, the SEC recently clarified that they consider some digital tokens to be securities. Companies issuing or selling these tokens must comply with federal securities laws. • Europe is taking a more rigorous approach to crypto regulation than the US. The EU has classified Bitcoin as a currency and virtual asset, which subjects it to certain regulations like anti-money laundering and terrorist financing laws. Additionally, new rules proposed by the European Commission would require exchanges to verify customer identities and report suspicious activity. • China has taken a hard line on cryptocurrency regulation, banning ICOs and exchanges. However, the Chinese government is still researching blockchain technology and its potential applications. • South Korea is another country that has taken a tough stance on crypto regulation. The government has banned anonymous trading, required exchanges to verify customer identities, and limits how much money Koreans can invest in cryptocurrency.
These different approaches to regulating cryptocurrencies will have a big impact on the industry's future. In the US, crypto companies will need to comply with securities laws if they want to sell digital tokens. In Europe, crypto exchanges will need to verify customer identities and report suspicious activity. And in China and South Korea, crypto trading is more difficult due to the restrictions placed on exchanges.
As the world grapples with crypto regulations, it will be interesting to see how these different approaches play out.
Author: Jay Jackson
Jay Jackson is a crypto trader, researcher and freelance writer. He works closely with people and businesses in the crypto sphere, writing blog posts, guides, press releases, reviews and ebooks.