2022 was a challenge for the crypto industry. However, it also showed the need for better governance and crypto regulation in the sector from which positive outcomes could stem. Governments worldwide have continued to recognize the potential of crypto assets and their role in the global economy, which means the industry can continue to evolve and innovate.
International crypto regulatory developments in 2022
In 2022, governments worldwide have kept developing crypto regulation. The regulation aims to provide a framework for the industry that promotes innovation while also protecting consumers and preventing illegal activities such as money laundering and financing of terrorism. Let’s break down some of the biggest developments on the matter.
In the US, President Biden signed the Executive Order on digital assets in March 2022. The order defines a coordinated approach to addressing the risks and harnessing the benefits of digital assets and blockchain in the country. It paved the way for national legislation focusing on consumer protection, financial stability, illicit finance and risk mitigation, leadership position reinforcement, financial services accessibility, and technological advances.
In late November 2022, the Congress in Brazil signed a regulatory framework for crypto assets and service providers. The new rules define virtual assets as digital representations of value that can be used for payment and investment. The rules also require VASPs to secure regulatory approval before starting operations and apply AML/CFT policies, in line with international standards. The bill signed into law by President Jair Bolsonaro in December 2022 and will come into force 180 days after publication in the official journal (December 22, 2022).
At the European level
In March 2022, the president of Ukraine signed a virtual asset law adopted by the Parliament in February. The legislation established a framework for the crypto market in the country, giving virtual assets a legal status with the National Commission on Securities and Stock Market acting as a market regulator.
In Lithuania, the Ministry of Finance approved amendments to the country’s AML/CFT regulations aimed at increasing the transparency of the crypto industry in June 2022. The amendments brought forward stricter requirements, such as more stringent KYC processes and increased authorized capital of service providers. The draft regulation was fully enforced on January 1st, 2023, with some provisions already taking effect in late 2022.
Finally, the European Union committee voted in favor of the MiCA package in October 2022. The package that designed to combat the use of crypto assets for illicit activities under a coordinated approach in the union. It should be voted into law in 2023 by the Parliament.
In Asia, several countries have implemented regulations requiring cryptocurrency exchanges to register with their respective financial regulators.
Hong Kong announced its Priorities for 2022 and Beyond plan, which aims to establish the city as a leading FinTech hub in the region. The project expected to attract more FinTechs, crypto companies, and investors to Hong Kong, positioning it as a hub for innovation and growth in the financial technology sector. The Secretary for Financial Services and the Treasury for Hong Kong stated in an official statement that revealed new policy details on crypto assets would be during Fintech Week in November 2022.
South Korea has created a new regulatory framework for the local cryptocurrency industry called the Digital Asset Basic Act. The existing regulations on crypto primarily focused on anti-money laundering. The new legislation is expected to help authorities bring the crypto market to the same level as the stock market.
Japan has also implemented strict anti-money laundering regulations for cryptocurrency exchanges. Following the release of an NFT White Paper outlining plans to advance the national strategy on Web3 in April 2022, the Ministry of Economy, Trade, and Industry (METI) established a Web3 policy office.
In China, the government had taken a hard stance towards cryptocurrencies since 2017, when it banned crypto. In recent years, multiple government agencies have issued warnings about the risks of investing in crypto, and there has been a significant crackdown on mining within the country. Following the Terra breakdown in 2022, the government is considering introducing even stricter regulations on cryptocurrencies and stablecoins.
In the Middle East
Dubai approved the Dubai Virtual Asset Regulation Law (DVAL) on March 9 and established a legal framework focused on investors’ protection and implementing international standards for virtual assets to promote responsible business growth. Under the law, Dubai Virtual Assets Regulatory Authority (VARA) was appointed to supervise VASP registration and licensing, as well as the trading and issuance of virtual assets and tokens.
How will crypto regulation evolve in 2023?
Overall, the crypto regulatory landscape is constantly evolving, and different countries have different approaches to crypto AML regulations. Some countries have implemented strict regulations, while others have taken a more hands-off approach.
2022 has been a complicated year for the crypto industry. The unprecedented market events in the crypto industry, especially the collapses of Terra Luna and FTX, which considered two of the most significant in the industry.
However, they have shown the need for better governance and have fuelled increasing regulatory oversight in the industry. So, the increasing regulatory oversight of crypto assets is likely to continue, also favored by the growing adoption and usage of these assets in 2023, to enhance the protection of the industry, market players, and investors.
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Scorechain provides blockchain analytics and a transaction monitoring platform for crypto assets. As a leader in crypto compliance, the Luxembourgish company has helped over 200 customers in 45 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets, customers onboarding, audit and law firms, and some LEAs.
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