Cryptocurrency Regulation is an area of law that is constantly shifting. Stay ahead with its development by staying current with Bloomberg Law’s news and insights.
In the US, cryptocurrency regulation falls primarily to two organizations: SEC and CFTC, each of whom have specific areas of responsibility. For example, trading falls under CFTC supervision if it’s considered a commodity.
Switzerland has long been at the forefront of crypto, offering investors an attractive regulatory environment that fosters growth and stability within the industry. This has allowed Switzerland to establish itself as a global crypto hub while simultaneously foiling fraudulent schemes and scams. Furthermore, Switzerland maintains a positive view towards blockchain and cryptocurrency technology – an attractive environment in which to set up business.
FINMA (the Swiss Financial Market Supervisory Authority) regulates all matters concerning cryptocurrency and digital assets like decentralised finance (Defi). They treat them like assets or property and apply the same regulations that pertain to traditional financial instruments like stocks and bonds. Furthermore, they recently updated their AML regulations, lowering thresholds where businesses must perform customer identification verification when trading Bitcoins and conducting crypto transactions.
Switzerland regulates initial coin offerings (ICOs) through anti-money laundering (AML) laws and licensing requirements. These can vary depending on the type of ICO; payment ICOs must adhere to AML laws while utility tokens or asset tokens require additional licenses in Switzerland to operate legally.
To conduct cryptocurrency business in Switzerland, one must obtain a license issued by FINMA. This can include exchange, brokerage or crypto bank licenses designed to protect customers while simultaneously encouraging innovation within the industry.
El Salvador stands to gain much from cryptocurrency technology, yet many of its citizens remain skeptical. Their country suffered through a similar economic trauma in 2001 when their government forced people to switch from colons to US dollars; now many fear that Bukele’s Bitcoin law will have similar unintended repercussions.
President Nayib Bukele made headlines worldwide when he announced at a cryptocurrency conference in Miami that Bitcoin would become legal tender alongside US dollars – taking cryptocurrency communities by surprise and creating ripples throughout global cryptocurrency communities. The purpose of the law was to digitize economy operations, reduce money remittance fees, and stimulate investments.
The law also imposes financial compliance regulations on Bitcoin service providers such as exchanges, wallets, payment processors and custodians, similar to what traditional financial institutions must meet. The law mandates implementation of procedures for protecting customer assets as well as keeping records of customer accounts and transactions; additionally it mandates disaster recovery plans be developed along with records pertaining to assets, liabilities and equity for these firms.
Six months since its implementation, most Salvadorans still do not use Bitcoin. Even on “Bitcoin Beach”, an area known for attracting crypto enthusiasts, many residents remain unfamiliar with its technologies.
Mexico has taken another step toward cryptocurrency regulation after passing a law outlining their position through their lower house on Thursday, according to Reuters. The new law forms part of a larger set of resolutions on fintech more generally that also covers crowdfunding and various aspects of cryptocurrency businesses; now only the president Enrique Pena Nieto must sign it for full effectiveness.
The new regulations establish a series of terms, conditions and restrictions that companies must abide by in order to carry out activities with virtual assets in Mexico. They also set minimum disclosure requirements. This regulation covers financial entities as well as credit institutions when purchasing, selling, custodialising or otherwise handling virtual assets (transactions with virtual assets).
Any platform providing services for safeguarding, storing or transferring virtual assets must register with Mexico’s Tax Administration Service (SAT) and report transactions exceeding certain thresholds. Furthermore, investment advisory platforms must register as investment advisers according to Securities Market Law and adhere to its guidelines.
Cryptocurrency trading in Mexico does not incur tax at the point of purchase or sale, but gains and losses should be recognized according to general principles established in Mexico Income Tax Law. These include acknowledging fluctuations in value as they occur for property assets and applying the capital gain rate on transfers when exchanging them for goods or services.
The United States has been slow to develop clear regulations for virtual currencies, but is making strides. There are multiple regulatory bodies within its borders such as Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Treasury Department through Internal Revenue Service (IRS), as well as several agencies that oversee crypto activities including Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC).
An increasingly contentious battle between the SEC and CFTC over how to regulate digital assets has emerged, with each entity taking differing positions on how best to do this. While some digital assets fall under CFTC jurisdiction for trading purposes, while investors and compliance are the priorities for the latter.
The US has also implemented anti-money laundering/countering the financing of terrorism (AML/CFT) regulations which require certain companies to report suspicious activity. These regulations aim to stop money flowing overseas to criminals. These measures are only partially effective, as they require American companies to monitor their activities and refer to OFAC lists of sanctioned intermediaries for sanctioned intermediaries. An extensive evaluation of these measures would be necessary in order to gauge their effects, in terms of both illicit funds flowing to criminals and costs imposed on U.S. businesses and individuals. Furthermore, in 2022 the Financial Accounting Standards Board (FASB) proposed that companies disclose information regarding crypto investments within their financial statements.