Author: Weilin, PANews
2024 is a special and critical year for global blockchain regulation. The regulatory framework for the cryptocurrency industry has been initially improved, and cryptocurrency assets are integrating into the mainstream financial system.
The approval of Bitcoin and Ethereum ETFs in the United States has driven the mainstream adoption of cryptocurrencies. At the same time, the new U.S. government led by Trump is about to take office, and the new SEC chairman Paul Atkins will take office, indicating that compared to the SEC's "enforcement-based regulation" in the past, U.S. regulators may adopt a "disclosure-based regulation" in the future. The establishment of the White House's AI and Cryptocurrency Affairs Coordinator also suggests a more friendly, flexible and innovative cryptocurrency regulatory policy.
In Europe, the Crypto Asset Markets (MiCA) regulation has officially come into full effect, and crypto companies are accelerating their stablecoin competition. In the Asia-Pacific region, Hong Kong approved Bitcoin and Ethereum spot ETFs in April, and the number of virtual asset trading platform (VATP) licensees increased by 4. In terms of stablecoins, Hong Kong has launched a stablecoin sandbox and stablecoin legislation.
In other parts of Asia, such as Vietnam, the government has issued the "National Blockchain Development Strategy". In Russia, cryptocurrency mining regulations have come into effect. Additionally, in the Middle East, North Africa, and the Americas, the UAE, Qatar, and Argentina have also shown positive policy innovations in cryptocurrency regulation.
At the end of the year, PANews reviewed the important regulatory developments in the global cryptocurrency market. Under different regulatory systems in various regions, the cryptocurrency market will present a completely different appearance next year.
United States: Approval of BTC and ETH Spot ETFs and Regulatory Expectations of the New Government
On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) approved a spot Bitcoin exchange-traded fund (ETF), and then on May 23, it "reversed 180 degrees" and approved an Ethereum ETF. On July 23, the U.S. Ethereum spot ETF officially began trading. These two events mark an important milestone in the U.S. cryptocurrency investment field. Bitcoin ETFs and Ethereum ETFs provide a scalable bridge between traditional finance and cryptocurrencies, becoming a key point of integration.
According to SoSoValue data, as of December 23 local time, the total net asset value of the U.S. Bitcoin spot ETF was $105.08 billion, accounting for 5.7% of Bitcoin's market capitalization. The total net asset value of the U.S. Ethereum spot ETF was $12.05 billion, accounting for 2.94% of Ethereum's market capitalization. The successful launch of these two ETFs has made the application of more Altcoin ETFs, such as Solana, Doge, and XRP ETFs, a possibility, further promoting the maturity of the cryptocurrency asset market.
This year, two important cryptocurrency regulatory bills in the U.S. are also worth noting. On May 22, 2024, the U.S. House of Representatives passed the "21st Century Financial Innovation and Technology Act" (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 CFTC) will regulate them. The bill is still in progress.
Regarding another regulation, SAB 121, on June 1, U.S. President Biden vetoed it. The bill aimed to overturn the accounting standards developed for companies that custody cryptocurrencies. In the new year, it may also change with the new government taking office, providing convenience for more large companies to adopt cryptocurrencies.
After the U.S. election, the new government led by Trump is expected to launch a completely new cryptocurrency regulatory model. In selecting new government officials, Trump, who supports cryptocurrencies, has appointed several pro-cryptocurrency politicians to important positions. For example, on December 5, Trump officially nominated Paul Atkins as the new SEC chairman. On December 6, Trump announced the appointment of David Sacks as the White House's AI and Cryptocurrency Affairs Coordinator, which is the first time this position has been established. On December 23, 29-year-old political newcomer Bo Hines was appointed as the executive director of Trump's Cryptocurrency Commission. On December 13, French Hill was elected chairman of the House Financial Services Committee. This series of appointments suggests that the U.S. may adopt a more friendly policy in the field of cryptocurrency regulation in the future.
Europe: The Implementation of the MiCA Act and the Intensification of Stablecoin Competition
The EU's Crypto Asset Markets (MiCA) regulation on the regulatory rules for stablecoin issuers came into effect on June 30 and was fully implemented on December 30. MiCA is the EU's first comprehensive regulatory framework for the cryptocurrency industry, especially with clear requirements for the regulation of stablecoins. Although some crypto companies have stated that they are not yet fully prepared, the increasingly strict compliance requirements will inevitably intensify competition in the European stablecoin market. For example, Tether, which has not obtained a license, has already invested in the Dutch company Quantoz and the European stablecoin provider StablR.
In addition, the UK Financial Conduct Authority (FCA) has also stated that it hopes to introduce a comprehensive regulatory system for cryptocurrencies by 2026. A study commissioned by the FCA shows that the holding of cryptocurrency assets has grown by 4% over the past two years, and about 7 million adults in the UK, out of a population of around 68 million, hold cryptocurrency assets.
On December 21, the German parliament passed the "Financial Market Digitization Act" required for the full implementation of the crypto MiCA.
Hong Kong: 4 New VATP Licensees, Advancing Stablecoin Development
On October 31, 2022, Hong Kong officially released the Virtual Asset Policy Statement, and to date, Hong Kong has nearly 1,000 Web3 companies.
At the end of April this year, Hong Kong approved 6 virtual currency ETFs operated by Huaxia Hong Kong, Bosera International, and Harvest International. Although facing fierce competition from overseas similar products and the trading volume remains to be improved, they mark Hong Kong's key position in the global cryptocurrency regulatory system.
On July 18, the Hong Kong Monetary Authority announced the first batch of three "sandbox" participant institutions, including JD Coin Chain Technology, Circlet Innovation Technology, and the joint application of Standard Chartered Bank (Hong Kong) and Animoca Brands Limited, HKT. These three institutions can test their expected business models within a specified scope and communicate with the HKMA on how to comply with the proposed stablecoin regulatory regime in the future. Hong Kong's Virtual Asset Trading Platform (VATP) licensing system has further promoted the compliant development of cryptocurrency asset service providers. On December 18, in addition to OSL Exchange, HashKeyExchange, and HKVAX, Hong Kong's VATP welcomed four new members, including Yunzhanghui Greater Bay Area Technology (Hong Kong), DFX Labs, Hong Kong Digital Asset Exchange Group, and Thousand Whales Technology.
On December 6, the Hong Kong government announced the Stablecoin Bill, a long-awaited legislative initiative that lays the foundation for a comprehensive regulatory framework for fiat-backed stablecoins (FRS). In the future, under a compliant regulatory framework, Hong Kong is likely to issue a stablecoin that can be widely used in investment, trade, payments, and many other scenarios.
Other Asia-Pacific Regions: Further Advancement of Web3 Policies and Sandbox Regulation
On November 27, Japan's new Digital Minister Masaaki Taira announced at a forum that Prime Minister Shigeru Ishiba had reorganized his party's Web3 and cryptocurrency policy-making department, further promoting policy innovations in the country's cryptocurrency and blockchain fields. The government stated that it has no intention of preventing the "promotion" of Web3-related businesses. This project group was the brainchild of former Prime Minister Fumio Kishida, who resigned as Prime Minister and LDP leader earlier this year. Shigeru Ishiba has also stated that he supports Web3-friendly policies. The Liberal Democratic Party (LDP) of Japan is pushing for cryptocurrency tax reform. The proposed reform includes a 20% separate tax rate on cryptocurrency trading profits and the introduction of a loss carryover system. Currently, cryptocurrency profits 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 new regulations were implemented, political turmoil erupted in South Korea, and after martial law and an impeachment plan against the incumbent president, the South Korean National Assembly decided to suspend all discussions related to cryptocurrency regulation.
Meanwhile, countries such as Indonesia, Thailand, and Vietnam are also strengthening their regulation of the cryptocurrency market, particularly by introducing sandbox frameworks that allow innovative projects to experiment in a more relaxed regulatory environment. Specifically, the Indonesian Financial Services Authority (OJK) launched a sandbox framework in June 2024. In August 2024, the Thailand SEC introduced a digital asset sandbox, supplementing its existing detailed licensing framework. Vietnam's government announced its National Blockchain Development Strategy on October 22, aiming to make Vietnam a leading regional center for blockchain technology research, application, and innovation by 2030.
India's unfriendly regulatory policies towards the cryptocurrency market are also showing signs of relaxation. In January this year, the apps of exchanges like Binance and Kraken were blocked and removed from the Indian Apple App Store for not complying with India's anti-money laundering rules. However, in May this year, Binance and KuCoin became the first offshore cryptocurrency-related entities to be approved by India's Financial Intelligence Unit (FIU), with the condition of paying a fine after a hearing with the FIU.
Russia: Cryptocurrency Mining Regulations Enacted and Digital Currency Tax Adjustments
Russia enacted comprehensive cryptocurrency mining regulations on November 1, 2024, which set strict energy caps, mandatory registration, and regulatory requirements, providing a clearer legal framework for the industry. The new regulations formally incorporated cryptocurrency mining into legal activities and established safety and operational standards for miners, while also requiring digital financial asset transactions to be conducted on specific platforms. The regulations aim to balance the growth of Russia's cryptocurrency industry, energy demands, and control over illegal mining.
According to the new regulations, only registered companies and individual entrepreneurs can legally engage in cryptocurrency mining activities, and unregistered individual miners cannot exceed 6,000 kWh of monthly electricity consumption, with those exceeding the limit required to register as entrepreneurs to continue mining. Additionally, on November 29, Putin signed a new digital currency tax law that explicitly treats digital currencies as property, exempting them from value-added tax and providing tax-free treatment for cross-border settlements. However, mining service providers still need to report user information to the tax authorities, with penalties for late reporting.
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 progress.
Middle East and North Africa: Rapid Growth of the Cryptocurrency Market
In the Middle East and North Africa, the United Arab Emirates' cryptocurrency ecosystem is growing rapidly, benefiting from regulatory innovation, institutional interest, and the expansion of market activities. The Dubai Virtual Assets Regulatory Authority (VARA), established in 2022, has provided a globally leading regulatory framework for the cryptocurrency industry and has driven its further development. Currently, 23 platforms have obtained VARA licenses, with 13 new licenses issued this year, including Binance, Bybit, OKX, and Derbit.
Saudi Arabia remains the fastest-growing country in the Middle East and North Africa in terms of the cryptocurrency economy, with a 154% increase in on-chain total value compared to last year, according to a Chainalysis report. This rapid growth is driven by the country's continuous development in blockchain innovation, central bank digital currency (CBDC), the gaming industry, and fintech.
Qatar is closely following, becoming the second-fastest-growing cryptocurrency market in the region in terms of on-chain value. While the Qatari government had previously banned the trading of cryptocurrency assets, the regulatory policies are now constantly being improved. The Qatar Financial Centre (QFC) launched a new digital asset regulatory framework in September this year, covering five aspects: the definition of digital assets, market access and compliance requirements, technical standards and security, consumer protection and education, and international cooperation and standardization, laying the legal and regulatory foundation for the development of digital assets.
South Africa: The Most Crypto-Friendly Country in Africa, with 248 Licenses Issued
Among African countries, South Africa is one of the most crypto-friendly nations. The South African Reserve Bank (SARB) has not explicitly prohibited the use of cryptocurrencies.
As of December 16, 2024, the Financial Sector Conduct Authority (FSCA) of South Africa has issued 248 licenses out of 420 Cryptocurrency Asset Service Provider (CASP) license applications received. According to a local report, there are still 56 applications under review, while 9 applications have been rejected. The report also indicates that 106 institutions withdrew their applications after the FSCA questioned their business models.
The Americas: Innovative National Cryptocurrency Policies
In the Americas, Argentina is actively promoting the adoption of cryptocurrencies. On October 22, Argentina's securities regulator (CNV) announced a public consultation on a draft regulation to govern the operations of Virtual Asset Service Providers (VASPs) in the country and impose new compliance requirements on these entities. At the same time, the Argentine securities regulator announced that it will allow foreign investment products related to various cryptocurrency ETFs to enter the market. President Milei plans to implement a free currency circulation policy in 2025, allowing Argentinians to choose any currency, including Bitcoin, for transactions, providing new opportunities for economic diversification.
Brazil has established friendly regulations and has immense potential to develop RWA (Real-World Assets), a diverse and vibrant community, and is in the pilot stage of a CBDC (called DREX).
In El Salvador, Bitcoin is legal tender, with the government encouraging adoption and incentivizing cryptocurrency tourism. On December 11, El Salvador signed an agreement with the Argentine regulator to support the development of the cryptocurrency industry in both countries.
Conclusion:
Overall, 2024 was a pivotal year for the global cryptocurrency and blockchain industry in terms of compliance. Although cryptocurrency companies and practitioners still face some uncertainty and challenges under the constantly evolving regulatory framework, the overall situation is positive, and cryptocurrencies are progressing towards mainstream financial systems and mass adoption. Looking ahead to 2025, how to balance regulation and innovation, as well as strengthen coordination and communication between the industry and regulators, will be key to the future development of the cryptocurrency industry.
