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What Changes To Crypto Regulation Can We Expect In 2024?

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  • Image by succo from Pixabay
  • The global cryptocurrency sector is a large industry with many different tokens and coins. Since Satoshi Nakamoto published the Bitcoin whitepaper in October 2008 and launched Bitcoin the year after, several thousand new digital assets have emerged to perform various functions and tackle challenges common in the traditional sector. Cryptocurrencies have undoubtedly disrupted several industries, bringing improved security, speed, and decentralization to finance, commerce, healthcare, supply chain management, and several other industries. 
  • There has also been a recorded increase in cryptocurrency adoption over the years as digital assets become popular and attract more users. Notwithstanding these advantages and tremendous potential for growth, crypto regulation is potent enough to change the sector’s trajectory, either by providing the legal framework for increased growth or stifling the industry into stagnation.
  • Crypto Regulations Around The World
  • Some jurisdictions are popular for crypto-friendliness, while others are known for hostility. China, for instance, banned all cryptocurrency activity in 2021, including trading and mining. Interestingly, China’s ban was gradual. In May, China started by preventing financial institutions from providing services to individuals or entities engaging in crypto. It then banned all crypto mining in June, and eventually proscribed cryptocurrencies outright in September.
  • Africa’s largest economy, Nigeria, also enforced an implicit ban on cryptocurrency in 2021 through a directive from the Central Bank of Nigeria (CBN), ordering financial institutions to withdraw crypto services. In a statement from the then Acting Director of Corporate Communications, Osita Nwanisobi, using cryptocurrencies in Nigeria is “a direct contravention of existing law.” The statement cited the use of cryptocurrencies for illicit activities, specifically mentioning “Silk Road,” an online black market on the dark web where people used Bitcoin to buy and sell contraband items ranging from illicit drugs to fake driver’s licenses.
  • Like Nigeria, several countries, including Bahrain, Algeria, and Bolivia, have enforced implicit bans on cryptocurrencies, putting varying levels of restrictions on the sector. On the other hand, countries like Tunisia, Egypt, and Nepal, have banned crypto entirely.
  • However, these regulations are generally changing, with countries trying to regulate instead of repress. For instance, last year, the Financial Sector Conduct Authority (FSCA) in South Africa asked crypto exchanges to apply for and receive operating licenses before 2023 ended. Even Nigeria walked back its aversion to crypto, lifting the 2021 ban. In a December 22 circular, the CBN published guidelines for financial institutions, adding that it is necessary to regulate the activities of virtual asset service providers (VASPs).
  • In the United States, crypto regulations generally differ between states as the US has no standard crypto framework at the federal level. Nonetheless, cryptocurrency laws by state show that some states uphold supportive rules that encourage the growth and adoption of digital assets and blockchain technology. Texas, for instanceing it a tax haven for crypto companies. In addition, electricity is very cheap, an attractive fac, is one of the most crypto-friendly states in the US. Firstly, Texas has no state income tax, maktor for cryptocurrency miners looking to set up mining firms. 
  • There’s also Florida, which announced crypto state fee payments, and Kentucky extending tax incentives for mining farms. Notably, Kentucky has unused electrical infrastructure miners can tap into since the state has coal power plants that are now non-functional.
  • Crypto has also successfully hit legal tender status in two countries, El Salvador and the Central African Republic. El Salvador adopted Bitcoin as legal tender in September 2021, while CAR did the same in 2022. Despite criticism from several quarters, including the International Monetary Fund (IMF), President Nayib Bukele made the official announcement. According to the president, adopting Bitcoin as legal tender is aimed at financial inclusion, as more than 70% of the country’s local population has no bank account.
  • Advantages of Clear Crypto Regulations
  • Jurisdictions with clear crypto policy tend to enjoy perks that may be unavailable in non-supportive crypto climes. Firstly, there is an undeniable enhancement of the financial sector anywhere crypto is accepted. Cryptocurrencies are great for cross-border transactions since transfers are between wallets and do not need to meet regulatory requirements in multiple jurisdictions. Anyone can transfer funds from one wallet to another regardless of exchange, wallet service, or geographical location.
  • There are also investment advantages. With crypto, countries can welcome foreign direct investment (FDI) much easier than fiat options. Furthermore, crypto creates a robust service industry, allowing merchants to receive customer payments for goods and services. In entertainment, crypto gambling is a fast-growing sector that merges the perks of digital assets and the blockchain with casino gameplay. Today, players have a wide range of crypto casino options to choose from, including sites listed here that are not in gamstop. These non-gamstop sites enjoy complete decentralization, allowing gamblers to play their favorite games with little to no government interference.
  • Expectations for Crypto Regulations in 2024
  • Authorities worldwide are likely to focus more on the crypto sector in 2024. Regulators closely monitoring the industry, who have noticed the increased volume of crypto projects, digital assets, and use cases over the last year, will likely try harder to create relevant laws. For crypto regulations in 2024, the following are expected outcomes:
  • More Enforcement Action
  • In the United States, the Securities and Exchange Commission (SEC) and the Commodities Futures Trade Commission (CFTC) indicted major regulated crypto exchanges Binance and Coinbase for various offenses. The SEC lawsuit against Binance ended with founder Changpeng Zhao leaving his CEO position after pleading guilty to money laundering charges.
  • Unfortunately, some observers expect crypto enforcement action to continue well into 2024. Last year, Democratic presidential candidate Robert Kennedy Jr. strongly criticized the Biden Administration for proposing an excise tax on crypto mining. In a thread on X, the presidential candidate explained that other sectors use the same amount of energy as crypto but go unnoticed. He added that advocating for tight control of cryptocurrencies because of criminals will negatively affect private citizens who also want privacy.
  • Uncertain Regulatory Progress
  • One reason why crypto enforcement could continue is that robust legislation may not come to fruition in 2024. US House Financial Services Committee Chairman Patrick McHenry has made efforts for crypto and stablecoin regulation to come to light in 2024. Unfortunately, McHenry’s crypto regulation bills are largely unpopular and may not gather enough support, especially in the primarily Democratic Senate. In addition, some Democrats believe the bill will give state regulators undue authority instead of giving power to federal agencies.
  • Another problem here is McHenry’s decision to leave Congress. In an official statement, McHenry said he would leave at the end of the current tenure, adding that “this season has come to an end.” The Rep’s departure makes the future of crypto bills uncertain as McHenry championed multiple crypto causes in the House. Considering his departure and 2024 being an election year, clear crypto regulations may not crystalize in the US.
  • Elsewhere, crypto regulation may be successful in 2024. In Hong Kong, authorities are proposing rules for stablecoins that could have extensive effects. However, there are concerns that the rules might be too difficult even for major players in the Hong Kong market. 
  • For instance, according to Chainalysis’ Head of APAC Policy, Chengyi Ong, the minimum paid-up capital requirement is HK$25 million (US$3.2 million). In addition, the Hong Kong Monetary Authority (HKMA), along with the Financial Services and the Treasury Bureau (FSTB), require companies selling stablecoins to acquire a license. However, these companies must meet specific requirements, including holding reserves with a minimum value equal to the issued stablecoins. In addition, the company must be incorporated in Hong Kong, with a chief executive and critical personnel based in the city.
  • European Union to Solidify Rules
  • Regulators in the EU are expected to clarify crypto rules by putting the finishing touches to regulations designed to fine-tune the Markets in Crypto Assets (MiCA) law. The European Securities Markets Authority is expected to publish a document on market abuse and investor protection, while the European Banking Authority will publish a consultation on plans for redemption. By June, the European public can expect a joint consultation on crypto classification. According to reports, stablecoin issuers in the EU should also expect new requirements, with specifics on liquidity and disclosure. For instance, issuers would have to design and publish a whitepaper for all assets available on crypto exchanges.
  • By June, MiCA’s rules on stablecoins should go live. Interestingly, the current specifications under MiCA do not cater to the decentralized finance (DeFi) sector. However, 2024 will see the European Commission publish an assessment of DeFi markets, which could precede a legislative proposal for regulation. Despite the progress with sanitizing the sector, European authorities are still worried about crypto’s carbon footprint.

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EU Reporter publishes articles from a variety of outside sources which express a wide range of viewpoints. The positions taken in these articles are not necessarily those of EU Reporter.
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