How laws for digital assets changed in 2022
Effective regulations are one of the main gateways to cryptocurrency adoption. Due to greater compliance, crypto businesses saw wider acceptance from regulators around the world. While the crypto ecosystem was granted countless operational licenses and exposure to new markets, the downfall of Terraform Labs, FTX, and Celsius, among others, had a negative impact on the industry’s reputation with investors and regulators.
As we look back to 2022 and all it brought for the cryptocurrency industry, we’re highlighting how the regulatory landscape has changed for cryptocurrencies and the blockchain industry as a whole.
China’s blanket ban on crypto mining and trading by the end of 2021 positioned the United States as the torchbearer for crypto disruption by default. The US is not only home to the largest network of crypto ATMs, but is also the highest contributor to the Bitcoin (BTC) hash rate.
Of all crypto sub-ecosystems, non-fungible tokens (NFTs) took center stage in US politics. In what could be considered a clear victory for crypto, the Federal Election Commission (FEC) allowed the use of NFTs for political campaign fundraising incentives.
For many regulators, the collapse of FTX and the arrest of former CEO Sam Bankman-Fried were perceived as a representation of the misdeeds of the entire crypto community. As a result, it helped reinforce anti-crypto sentiment among many US politicians, such as Representative Brad Sherman. However, Representative Tom Emmer sided with the crypto community as he noted the community’s contribution in tracking Bankman-Fried’s illegal activities.
Rep. Brad Sherman during the FTX hearing before the US House Committee on Financial Services. Source: YouTube
Citing FTX’s collapse, the Canadian Securities Administrators — an umbrella group of securities regulators across Canada — banned crypto and leveraged trading to protect investors. Additionally, Canadian energy provider Hydro-Québec outlined plans to reallocate power supplied to crypto mining firms, citing high energy demands anticipated during the harsh Canadian winter.
Similarly, US regulators introduced the Crypto-Asset Environmental Transparency Act to direct the Environmental Protection Agency to report on the energy use and environmental impact of crypto miners.
Central and South America
Further south, El Salvador still maintains its position as the most important contributor to Bitcoin integration worldwide. While many pointed to the unrealized losses due to the drop in Bitcoin prices that the country is facing, President Nayib Bukele announced a new BTC investment strategy in which the country would buy 1 BTC per day starting November 17, 2022.
We are buying one #Bitcoin every day starting tomorrow.
— Nayib Bukele (@nayibbukele) November 17, 2022
Additionally, in November, Economy Minister Maria Luisa Hayem Brevé presented a bill confirming the government’s plan to raise $1 billion and invest it in building a “Bitcoin city.”
Despite a slow start, Brazil saw the introduction of a pro-crypto regulation. Late last year, before former president Jair Bolsonaro left office, a bill seeking to legalize the use of crypto as a payment method within Brazil was signed into law. Brazil recently issued a Payment Institution License to Crypto.com, allowing the crypto exchange to continue offering regulated fiat wallet services to Brazilians.
After careful consideration, many Asian regulators softened their anti-crypto stance and chose to allow crypto businesses to conduct operations. As China loosened its grip on its cryptopermaban, India has implemented a new tax regime for cryptos.
In the case of China, the Shanghai Supreme People’s Court issued a ruling stating that Bitcoin is subject to property rights laws and regulations. With the recognition of the value, scarcity and availability of the asset by the court, Bitcoin owners received the right to compensation in a case involving an unpaid loan.
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India introduced two new crypto tax policies at the start of the year – one imposing a 30% tax on crypto profits and the other imposing a 1% tax deduction at source on every crypto transaction. The laws had a negative impact on local trading volumes as investors continued to hold their assets in the hope of better regulations. India, during its presidency of the G20, which will last until November 30, 2023, has plans to pursue the development of standard operating procedures for cryptocurrencies.
Pakistan’s central bank, on the other hand, signed new laws to speed up the launch of a domestic central bank digital currency (CBDC) amid hyperinflation concerns.
As in the United States, the collapse of Terraform Labs left a bad taste in the mouths of South Korean regulators. For the island nation, much of 2022 was spent trying to find the bad actors responsible for investor losses. Additionally, the country’s implementation of Know Your Customer requirements in 2021 saw a drastic reduction in hacking activities throughout 2022.
Europe and the Middle East
The Russia-Ukraine war indirectly demonstrated the ability of cryptocurrency to serve the non-residents. As millions lost access to their life savings, cryptocurrencies came to the fore as saviors.
Displaced citizens received aid through crypto donations, while Russians fleeing the country used it to circumvent their country’s newly introduced currency controls. Just two weeks into the war, crowd funding helped raise over $108 million for war relief in Ukraine. Another organization raised $54 million worth of crypto funds to buy vests, facilities and drones for Ukrainian fighters.
With $54m raised by @_AidForUkraine, we’ve supplied our defenders with military equipment, body armor, medicine and even vehicles. Thanks to the crypto community for the support since the start of the full-scale invasion! Donation by donation for the big win. Report below. pic.twitter.com/lifHAP8R4f
— Mykhailo Fedorov (@FedorovMykhailo) August 17, 2022
The Committee of Permanent Representatives of the European Union adopted the framework of Markets in Crypto-Assets, which aims to create a stable regulatory framework for cryptocurrencies among the member states of the European Union.
The International Monetary Fund, a major financial agency of the United Nations, called for increased regulation of crypto markets in Africa. The Central African Republic has reportedly passed a bill to legalize the use of cryptocurrencies in financial markets.
The UK demanded regulatory changes to bring the crypto industry under tighter control. Reacting to the fall of FTX, the UK’s HM Treasury issued instructions to the Financial Conduct Authority to monitor the operations and advertising of crypto companies in the country. This further influenced an upcoming 2023 legislation to restrict overseas crypto services from operating in the UK
South Africa’s financial regulator, the Financial Sector Conduct Authority, updated the country’s Financial Advisory and Financial Intermediary Services Act of 2002 to declare crypto as a financial product subject to financial services law.
This is a historic moment for South Africa:
Today, the Financial Sector Conduct Authority (FSCA) declared a crypto asset as a financial product under the FAIS Act.
This Statement has been published in the Government Gazette as well as on the FSCA website.
— Farzam Ehsani (@farzamehsani) October 19, 2022
Nigeria banned ATM withdrawals above $225 (100,000 naira) per week to implement the use of its CBDC, eNaira. African crypto exchange Yellow Card received regulatory approval to expand its services across the African continent.
As the Dubai Virtual Asset Regulatory Authority issued multiple operational approvals for the crypto business in 2022, it had to revoke the minimum viable product license from FTX MENA.
Recently, Australia overtook El Salvador to become the fourth largest crypto ATM hub behind the United States, Canada and Spain. Australian financial regulators are continuing their efforts from 2022 to create a regulatory framework for stablecoins.
Africa and Oceania
While the aforementioned triumphs highlight only the cream of regulatory achievements, the crypto ecosystem made significant strides throughout the year. With the understanding that regulations are key drivers for mass adoption, crypto firms with robust compliance initiatives are setting the stage for mainstream adoption as we move into 2023.
Check out Cointelegraph’s 2022 crypto roundup and what it means for the community in 2023.