Recently, many countries, such as the United States, China, and India, have tightened regulations on virtual assets. In the case of China, even mining is banned and strict regulations are enforced at the level of withdrawal.
In Korea, too, according to the revision of the Specific Act, virtual asset business cannot be conducted unless it is reported as a virtual asset business operator by September.
What is the progress of virtual asset regulation in major countries?
List of countries where virtual assets are banned
US, EU – Separation of securities-type and non-securities-type virtual assets
The United States and the EU separate and regulate virtual assets into ‘securities-type’ and ‘non-securities-type’. In both, securities-type virtual assets are regulated by the existing securities laws, but non-security virtual assets are different.
The US is regulated by the Commodity Futures Trading Commission (CFTC). On the other hand, the EU plans to introduce and apply the Markets in Crypto-assets (MiCA)' that will be applied to all 27 EU member countries by 2024.
In other words, in the case of the United States, there is no separate virtual asset-related law, and the existing commodity transaction laws are being used. Therefore, criticism has been raised that the regulation on it is loose.
The US is building a regulatory system for virtual assets, including the suspension of the launch of exchange traded funds (ETFs)
and mandatory reporting of all transactions over $10,000 to the National Tax Service
Of course, since the States has the largest market for it in the world, it is expected that such criticism will be quickly replenished. In addition, stricter regulations and judgments on securities and non-securities virtual assets are expected to become more concrete.
What is worrisome, however, is that the Biden administration's virtual asset regulations focus solely on national security, such as China's central bank digital currency (CBDC) and ransomware attacks, rather than it markets and commodities. Experts are of the opinion that clear and consistent regulations are needed.
Experts evaluate the EU's virtual asset regulation as the most ideal legalization model
On the contrary, the MiCA, which the EU is planning to introduce, manages the transaction process more comprehensively than the US Commodity Exchange Act. Issuer regulation, disclosure obligation, unfair trade, etc. are subject to regulation. Also anyone who engages in market price manipulation or insider trading with the publisher obligated to disclose information related to inside information and sanctions, as well as the obligation to publish white papers and good faith, will be punished.
In addition, they introduce a ‘Sandbox’ that flexibly applies regulations to experiments attempted in a systematic and strict supervisory environment, and establish a system to help understand the risks of virtual assets.
Depending on the level of risk of virtual assets, the strength of regulation also varies. If the ripple effect of global virtual assets such as Facebook's Libra is large, it is subject to high-strength regulations.
Japan suffered from the Mt. Gox hacking, the world's largest virtual asset exchange at the time, in 2013, and quickly discussed the institutionalization and regulation of countable assets.
In 2018, the Financial Services Agency of Japan certifies the Japan Virtual and Crypto asset Exchange Association (JVCEA) as a self-regulatory institution under the Fund Settlement Act and announced a plan to strengthen the exchange registration review process. In other words, it means that the industry is primarily managed through self-regulation.
The association carries out monitoring functions for member companies, including granting the authority to inspect and suspend member companies' qualifications, prepare an investor protection fund, and make it mandatory to hold safe assets such as bank deposits and government bonds.
However, the general consensus is that the JVCEA is actually being moved by the blow of the authorities, and it is evaluated that the Financial Instrument Transaction Act, which applies to all virtual assets, has become useless as the bill is revised whenever problems arise.
Japan is also trying to strictly control virtual assets. The authorities have prepared not only the IPO of virtual assets and whether there is an unfair transaction, but also the investment leverage (debt) ratio and regulations related to the corporate trustee.
In addition, when a suspicious transaction occurs on all virtual asset exchanges, it is mandatory to verify and track the identity of the customer, keep the transaction history and report it to the authorities.
In fact, China was one of the countries with the largest share of the virtual asset industry. China was the leading country in the industry, with 65.08% of global virtual asset mining taking place.
However, the industry is in danger of disappearing from China due to the government's strong regulations on it.
The authorities have banned virtual asset mining in whole China
Since 2017, China has banned virtual asset trading and new issuance. In May 2021, all financial institutions' virtual asset-related services (insurance, account opening, currency exchange, etc.) were banned, and more than 90% of mining farms in were closed.
China believes that it will have an adverse effect on its financial system. Since it is a country that does not tolerate anything outside the control of the state, it seems difficult for decentralized virtual assets to be recognized in the future.
Regulations on virtual assets in India began with a circular issued by the Central Bank of India in April 2018. The circular prohibits banks and financial institutions from trading virtual assets or providing services to traders. The central bank maintains its stance on banning virtual assets, but the situation is somewhat confusing when the Supreme Court has ruled that the central bank's circulation is unconstitutional.
A sharp conflict between the central bank and exchanges continues, but there is no official policy or law on this.
Recently, however, the Indian Parliament has shown a move to ban it through the ‘2021 Virtual Assets and Official Digital Currency Regulation Act’. Although a detailed outline has not been released yet, it seems that the content of the bill proposing a ban on virtual assets in 2019 has become more concrete.
The 2019 bill proposes a fine or imprisonment of up to 10 years for mining, holding, selling, issuing, transferring and using, as well as bans on trading. A new law for 2021 will also ban all private virtual assets in India. (Some exceptions are allowed to promote blockchain and distributed ledger technology)
Therefore, if this bill is enacted, India is expected to become the country with the most stringent policies on virtual assets. It will become the second major country to legally ban virtual assets after China.
Countries that allowed virtual assets on a state initiative
Unlike most countries, which are unilaterally regulating virtual assets, there are countries that allow virtual assets under the initiative of the state.
In the case of Uzbekistan, a decree allowing citizens to trade virtual assets has been promulgated. According to the decree, residents of Uzbekistan have the right to conduct all kinds of virtual asset transactions on the exchange.
Indonesia plans to launch a state-run virtual asset exchange within this year. The Indonesian Commodity Futures Trading Regulatory Agency (Bappebti) is in the process of establishing a virtual asset exchange at the end of the year. Indonesia legalized trading in 2018 and considers virtual assets one of the investment products.
Latin America is also favorable to virtual assets.
Brazil is the second country to approve a Bitcoin ETF after Canada, and El Salvador, a Latin American country, is the first country in the world to approve BTC as a fiat currency.
El Salvador's President Nayib Bukele has approved Bitcoin as a legal tender
Economic factors are playing a major role in this virtual asset-friendly move in Latin American countries. Most countries in Latin America are experiencing economic difficulties, and the value of fiat currency is so serious that it is only a piece of tissue paper, so virtual assets are considered as a solution to the collapsed monetary system.
Experts predict that more Latin American countries, such as El Salvador, will designate virtual assets as fiat currencies.