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Countries that Legalized the Cryptocurrency in 2022

Cryptocurrencies do not stand still, the technology is constantly evolving, and with it, the opportunities that cryptocurrencies have to offer the world are expanding. More and more people are using digital assets. 

This means that the need for regulation of cryptocurrencies is also growing. Cryptocurrency regulation isn't standing still either. It's evolving with technology and changing market needs. The year 2022 is called the year of cryptocurrency regulation.

This year, authorities in many countries have decided that cryptocurrencies need to be regulated or have changed legislation to govern digital assets.   

PwC has compiled a detailed report on cryptocurrency regulation around the world - PwC Global Crypto Regulation 2023, which provides an overview of the crypto regulatory landscape with a focus on financial services.

It provides insight into how the legal and regulatory framework is developing around the world, and analyzes how this may affect cryptocurrency market participants and virtual service providers.

International standards adopted in 2022

The Basel Committee on Banking Supervision (BCBS)

The Basel Committee on Banking Supervision (BCBS) published its final prudential treatment of crypto-asset risk regulation in December 2022. 

Accordingly, unsecured crypto assets and stable coins with ineffective stabilization mechanisms will be subject to conservative prudential treatment.

In July 2022, the Financial Action Task Force FATF reported that the vast majority of jurisdictions have not fully implemented their Recommendation 15 issued according guidance on a risk-based approach to virtual assets and virtual asset providers, which is designed to help regulators develop regulatory and supervisory guidelines for virtual asset activities and help Virtual Asset Service Providers (VASPs) understand and comply with their AML / CFT obligations. 

Recommendation 15 establishes global AML / CFT obligations standards for virtual assets and VASPs.

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (CPMI-IOSCO)

In July 2022, the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (CPMI-IOSCO) published a final report providing clarity on the application of principles for the financial market to stable coin arrangements, which are considered systemically important financial market infrastructures.

IOSCO's Fintech Task Force

In July 2022, IOSCO's Fintech Task Force released the Crypto Asset Roadmap 2022-2023. It outlines plans and activities for two work streams: 1) Crypto and Digital Assets and 2) DeFi.


Regulatory changes in different countries in 2022

USA

In the U.S., regulators continue to discuss regulatory powers, policymakers are developing proposals for digital asset legislation.

In March 2022, the Administration released an Executive Order, which outlines a whole-of-government approach to eliminate the risks associated with the growth of digital assets and blockchain technology, while supporting responsible innovation. 

There are still questions about which of the many regulators in the U.S. has the power and authority to manage digital assets.

In June 2022, the New York State Department of Financial Services issued guidance for Stablecoin issuers.

Like other digital assets, stablecoins backed by U.S. dollars, are generally viewed and regulated as payment instruments issued through government or licensed entities. Reserves are held in insured depository institutions that are under federal oversight.

The U.S. has not yet made a decision on the introduction of the CBDC. The Federal Reserve Bank continues to lead the CBDC study.

In January 2022, it published a discussion paper on the pros and cons of CBDCs in the United States.

The March 2022 Executive Order gives special relevance to CBDC research. The U.S. will continue its thorough research and take a wait-and-see attitude before making any decisions.

United Kingdom

In October 2022, the House of Commons voted to give HM Treasury (HMT) the power to consider crypto-assets a regulated financial instrument.

'Digital settlement assets' could be included within the coverage of the existing provisions of the Financial Services and Markets Act 2000. If enacted, crypto-assets would be treated as other forms of financial assets, allowing HMT and regulators to respond quickly to new developments.

The new legislation is included in the Financial Services and Markets Bill 2022 (FSMB), which also covers measures to bring stable coins into compliance with existing financial services legislation.

In June 2022, HMT confirmed that it would extend information exchange requirements for bank transfers to crypto-assets.

In 2022, The Prudential Regulation Authority (PRA) asked regulated firms to provide information about their current and planned exposure to crypto-assets.

Australia

In March 2022, the Treasury Department's consultation established the following key objectives for regulating digital assets:

  • 	<p dir="ltr">Ensuring that regulation is fit for purpose, technology-neutral and risk-focused.</p>
    </li>
    <li aria-level="1" dir="ltr">
    
    	<p dir="ltr">Creating a predictable, consistent and straightforward legal framework.</p>
    </li>
    <li aria-level="1" dir="ltr">
    
    	<p dir="ltr">Avoiding unreasonable restrictions.</p>
    </li>
    <li aria-level="1" dir="ltr">
    
    	<p dir="ltr">Recognizing the unique nature of crypto-assets.</p>
    </li>
    <li aria-level="1" dir="ltr">
    
    	<p dir="ltr">Leveraging the power of the private sector.</p>
    </li>
    

In the September 2022 Draft Digital Assets (Market Regulation) Bill was published for parliamentary debate and public consultation on digital assets, including stablecoins.

It proposes that issuers of stablecoins hold Australian or foreign currency in reserve with an Australian bank and regularly report the assets held in reserve to APRA.

In its December 2022 report, the  Reserve Bank of Australia published the stablecoin market, risks and regulation.

In September 2022, the Reserve Bank of Australia (RBA) published a white paper on the potential Australian CBDC.

The Bahamas

The Digital Assets and Registered Exchanges (Anti-Money Laundering and Countering Financing of Terrorism and Countering Financing of Proliferation) Rules, 2022 (Rules) was passed in March 2022 to provide anti-money laundering rules for digital asset companies.

In April 2022, the government published a Policy White Paper on Future Digital Assets to clarify and expand the scope of the legal framework for digital asset transactions.

Canada

In November 2022, the federal government announced a review of legislation aimed at ensuring the stability and security of digital money and the financial sector.

In August 2022, the Canadian Securities Administrators' (CSA) provided guidance regarding crypto-asset trading platforms that operate in Canada but are not registered as their primary regulator.

In November 2022, the federal government began consultation on digital currencies, including Stablecoins and CBDCs.

Estonia

The Estonian government encourages innovation in the financial services sector and the cryptosphere. 

The strategy plan of the Estonian Financial Supervision and Resolution Authority (EFSRA) for 2022-2025 includes plans for issuing licenses to encourage the development of technologically innovative business models, including the crypto-asset sector.

The Virtual Asset Service Providers (VASPs) are required to be licensed by The Financial Intelligence Unit (FIU) and comply with the provisions set forth in the AML Act akin to financial institutions. 

From March 2022, VASPs are also subject to additional prudential requirements, the mandatory obligation to audit annual accounts and heightened requirements for company location, place of business, board members and the presence of a compliance officer.

Gibraltar

The DLT Regulations in April 2022 demonstrated the government's attitude toward the crypto industry, which aims to bring the right organizations into the jurisdiction and conduct the crypto business under regulatory oversight.

Both the government and the Global Financial Services Commission ('GFSC') continue to have a positive view of the crypto industry, while at the same time creating a solid regulatory framework to mitigate industry risks.

Hong Kong

In October 2022, the Financial Services and the Treasury Bureau (FSTB) issued a policy statement recognizing the potential of virtual assets, particularly with respect to Distributed Ledger Technology (DLT), Web3.0 and the Metaverse.

The policy statement provides for the licensing of virtual asset exchange operators and the ability to serve retail customers if certain conditions are met. The possibility of creating exchange-traded funds (ETFs) for retail investors is envisaged.

In January 2022, The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) expanded their jurisdiction over certain regulated activities related to VAS. These include distribution activities, dealer services and advisory services.

Service providers are required to comply with additional requirements, such as ensuring suitability, risk-related disclosures, and due diligence.

In June 2022, SFC announced a mandatory licensing regime for Virtual Asset Service Providers (VASPs) that store customer assets and provide services to sell or buy virtual assets electronically.

The regime goes into force in 2023, along with Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (Amendment Bill).

All SFC-licensed entities engaged in regulated activities are subject to the AML/CTF Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). As of June 2022, this includes Type 9 (Asset Management) licensed VASPs.

In January 2022, the HKMA stated the need for proper regulation of Stablecoins before they are sold to retail consumers.

Hong Kong continues to lead global CBDC research and testing. In September 2022, the HKMA announced that it would begin implementation of e-HKD. This was confirmed in a policy statement in October 2022.

Hungary

In 2022, the Ministry of Innovation and Technology and the National Data Economy Knowledge Centre established the Blockchain Coalition. 

Its goal is to help identify opportunities for domestic economic use and develop an appropriate legal framework. Hungary's goal is to create a legislative package that facilitates the MiCA preparation and addresses various aspects of blockchain technology.

India

Since June 2022, the Computer Emergency Response Team (CERT) has been appointed as the key cybersecurity agency.

In April 2022, the Advertising Standards Council of India (ASCI), published a guide on advertising and promotion of virtual digital assets and services (VDA Ad Guidelines).

In the Union Budget of FY23, the government announced that the Reserve Bank of India (RBI) has begun the phased implementation of CBDC in 2022.  The digital rupee will facilitate the introduction of digital financial services, targeted execution of government projects, and improved cross-border payments.

In November 2022, RBI initiated a pilot project for wholesale CBDC with the intention of testing infrastructure and banking capabilities. Banks will trade in government securities through a CBDC-based account.

In December 2022, RBI also launched a retail CBDC pilot with a select group of banks, merchants and customers.

Italy

In June 2022, the Bank of Italy issued non-binding guidelines for market participants in the digital asset market.

Japan

In June 2022, the Diet passed a bill defining the status of stablecoins denominated in legal currency and separating them from other digital assets.

Issuers are limited to banks, money transmitters and trust companies. Intermediaries must also register with regulators and follow strict AML / KYC guidelines.

Luxembourg

In 2022, the Commission de Surveillance du Secteur Financier (CSSF) published a white paper on technological risks and recommendations for the use of DLT and blockchain in the

financial sector.

Mauritius

Mauritius is one of the first countries in the Eastern and South Africa region to pass comprehensive legislation on virtual assets and initial token offerings. 

In February 2022, Mauritius passed the Virtual Asset and Initial Token Offerings Act 2021 (VAITOS Act), which established a virtual asset regime under the supervision of the Financial Services Commission (FSC). It demonstrates the government's commitment to developing the sector.

The Financial Services Commission (FSC) issued VAITOS (Publication of Advertisements) Rules 2022, which went into force in July 2022. These rules apply to any VASP and any ITO issuer wishing to advertise and sell relevant products/services in Mauritius.

The VAITOS (Capital and other Financial Requirements) Rules 2022 apply to all VASPs (Capital and other Financial Requirements) Rules 2022 apply to all VASPs doing business in Mauritius.

Singapore

In October 2022, The Monetary Authority of Singapore (MAS) published a consultation paper proposing several regulatory measures for Digital Payment Token Service Providers (DPTSPs) in key areas of consumer access, business behavior and technology.

The Financial Markets and Services Bill (FSM Bill), passed in April 2022, expanded the scope of regulated digital token services to bring it in line with FATF standards. 

The FSM Bill regulates the licensing of Virtual Asset Service Providers (VASP) that are Singapore corporations or do business in Singapore.

In October 2022, MAS published a consultation paper proposing a specific regulatory regime for issuers and intermediaries of  pegged stable coins issued in Singapore that meet certain criteria.

In November 2022, MAS launched Ubin +, which was built on the foundation started with the Ubin project (2016-2020) and lessons learned from the Dunbar project to leverage CBDC. This project should strengthen Singapore's ability to use digital currency-based infrastructure for cross-border transactions.

South Africa

In August 2022, the Prudential Authority (PA) issued a Guidance note for banks on AML / CFT controls on crypto assets and crypto asset service providers (CASPs).

In October 2022, the Financial Services Conduct Authority (FSCA) declared crypto assets a "financial product" under the Financial Advisory and Intermediary Services Act of 2002. Companies that perform advisory or intermediary services for cryptocurrencies are subject to licensing.

In November 2022, the Financial Intelligence Center Act of 2001 was amended to include persons who engage in the exchange of crypto assets and fiat or are involved in providing financial services related to the issuance or sale of crypto assets.

Conclusion

The year 2022 can be called the year of cryptocurrency regulation. Because of the increasing use of digital assets, the need to regulate them has increased, and the authorities of many countries have begun to understand this. 

The need for legal regulation of digital assets became even more acute after the collapse of FTX and large investment funds. 

However, much remains to be done and regulation has only just begun. Cryptocurrencies are actively developing, which means that authorities will have to adjust legislation to the changing needs of the industry.

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