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“Separation of currency chain” is China’s top-down supervision principle, and overseas focus is on formulating laws to regulate the issuance and trading of cryptocurrencies.
Original title: “Heavy Inventory! Keywords and Trends of Global Cryptocurrency Regulation in 2020
Written by: Carol
The development of blockchain is inseparable from the interaction with the global regulatory system.
According to the different identifications of the basic building blocks of the blockchain, the regulatory policies of various countries are also different. It is generally believed that the blockchain can be divided into two units: the underlying blockchain and the digital currency based on it. The Chinese government believes that the chain and the currency can be separated. Therefore, “the separation of the currency chain” is my country’s top-down supervision principle, that is, on the one hand, strictly supervise the development of digital currency in accordance with the law, and continue to tighten the supervision of digital currency On the other hand, actively encourage the development of blockchain technology.
Most overseas countries believe that the chain and currency are two inseparable parts of the blockchain, so their policies are mainly based on clear supervision of the currency, or define it as securities included in the existing regulatory system, or special Formulate laws to supervise the issuance and trading of digital currencies, and then allow blockchain to develop freely in the market. In general, overseas countries have paid general attention to the taxation, anti-money laundering and stable currency risks of cryptocurrencies this year.
In this article, PAData will review the regulatory attitudes and trends of major countries and regions on the blockchain industry this year based on the weekly review of important global regulatory policies by PA Weekly.
China: Pilot central bank digital currency to support non-coin blockchain applications
From the perspective of discourse analysis, the high-frequency words that appear in policies include “blockchain”, “finance”, “technology”, “digital (currency)”, “application”, “technology”, “industry”, and “innovation”. It is not difficult to see that my country’s policy direction is mainly to support the rapid development of the blockchain industry, with particular emphasis on the application of blockchain technology in the financial field, and to use blockchain technology as an important breakthrough in technological innovation.
This year, in addition to the 21 provinces mentioning blockchain in the 2020 government work report, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the People’s Bank of China, the China Banking Regulatory Commission, and the China Securities Regulatory Commission have also issued relevant documents to support and regulate the development of the blockchain industry. From the perspective of the main content of supervision, it mainly focuses on supporting the development of blockchain technology and industry. In addition, it includes the central bank digital currency pilot, blockchain standard formulation, “regulatory sandbox” pilot and digital currency risk warning.
Different regulatory agencies have issued regulatory policies for the areas involved in blockchain technology according to their responsibilities. Among them, the trends worthy of attention include:
People’s Bank of China: Pilot digital currency by the central bank, financial risk management and control
The People’s Bank of China has focused on the development and pilot work of the central bank’s digital currency this year. State-owned banks such as China Agricultural and Industrial Construction have tested digital currency wallets. Shenzhen and Suzhou have begun to experiment with digital currency application scenarios, such as digital RMB red envelopes.
The People’s Bank of China and the mutual fund group led by it, and the mutual fund association under it have repeatedly reminded the risk of virtual currency speculation this year. The Mutual Finance Association issued a document “Risk Reminders on Participating in Speculation in Overseas Virtual Currency Trading Platforms” and solemnly reminded that any institution and individual should strictly abide by national laws and regulations and not participate in virtual currency trading activities and related speculation. The Mutual Finance Remediation Leading Group and the Online Loan Remediation Leading Group jointly held a video conference on the special rectification of Internet finance and online lending risks, emphasizing the monitoring of new risks in other areas such as virtual currency speculation and illegal foreign exchange transactions, and always maintain a high-pressure situation. Fully implement the overall requirement of “Financial business must be licensed to operate”. The General Office of the People’s Bank of China issued the “Notice on Carrying out the Special Risk Analysis of Financial Technology Application” to require the risk analysis of financial applications involving blockchain and other new technologies.
Local government: blockchain industry support policy
Since the central government’s active setting of blockchain technology and industrial development on October 24, 2019, local governments at all levels in my country have issued corresponding support policies. Only in the two sessions that ended in late January this year, the heads of 21 provinces, municipalities and autonomous regions, including Beijing, Shanghai, Guangdong, Fujian, Guizhou, Gansu, etc., mentioned blockchain in their government work reports. In addition, many places have also introduced more powerful financial subsidy policies. For example, Shenzhen Futian supports the settlement of blockchain companies and rewards up to 3 million yuan, Tianjin City will give up to 5 million yuan to support blockchain-related projects, and Wuhan City A one-time reward of 2 million yuan will be given to the enterprises that are among the top 100 national blockchain companies, Suzhou Xiangcheng has set up a 1 billion yuan blockchain guidance fund, and Hangzhou Xiacheng District has established a 1 billion yuan blockchain industry venture capital fund.
Judicial system: determine the attributes of Bitcoin and punish related illegal and criminal acts
The Supreme People’s Court and the National Development and Reform Commission jointly issued the “Opinions on Providing Judicial Services and Guarantees for Accelerating the Improvement of the Socialist Market Economic System in the New Era” in July, calling for strengthening of new rights and interests such as digital currency, online virtual property, and data. protection. In the “2019 Shanghai Financial Prosecution White Paper” released by the Shanghai People’s Procuratorate, it is clear that “virtual currency”, as a special virtual commodity, has property attributes but does not have the legal status of currency. On the other hand, Liao Jinrong, director of the International Cooperation Bureau of the Ministry of Public Security, stated at the 9th China Payment and Settlement Forum that more than one trillion yuan of gambling funds flow from China every year. Some gambling gangs use virtual currency to collect and transfer gambling funds. Work together to rectify virtual currency transfers.
Local public security has filed and investigated cases involving virtual currency crimes for many times. For example, the Ministry of Public Security commanded and uncovered the PlusToken case involving a super large multinational network pyramid scheme involving more than 40 billion yuan; Huizhou police detected the first case in the country using USDT to operate a running point platform; FCoin, the exchange of the thunderstorm, was filed a criminal case by Hunan police. In general, my country’s judicial supervision attitude towards virtual currencies is mainly to determine that Bitcoin is not legal currency but a virtual commodity, and the country prohibits token financing trading platforms from engaging in the exchange business between legal currency and tokens, virtual currency, etc. activity.
Other Ministries: Supervision in Subdivisions
Among the regulatory policies of other ministries and commissions, the most noteworthy is that the Office of Cyberspace Affairs continues to promote the blockchain filing system; the Ministry of Industry and Information Technology takes the lead in formulating a variety of blockchain standards, such as security standards, financial application standards, technical standards, etc.; the National Development and Reform Commission clarifies blocks The chain belongs to the category of new infrastructure.
U.S.: Swinging attitude towards central bank digital currency, strong supervision of ICO-related activities
This year, the high-frequency words that appeared in important U.S. policies mainly include “(crypto) currency”, “act”, “regulation”, “bank”, “stable currency”, “asset”, “transaction”, “rule”, ” Law” etc. On the whole, the U.S. regulatory policy treats cryptocurrency as an asset, and regulates the issuance and trading of cryptocurrency and its derivatives within the existing legal supervision system. Among them, the supervision of ICO and stable currency bank custody is especially important. In addition, the United States is also actively discussing the possibility of taxation of cryptocurrencies. However, the US government’s attitude towards the central bank’s digital currency/digital dollar is still swinging.
This year, many important departments including the Treasury Department, the Federal Reserve, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the New York State Department of Financial Services have released regulatory information in related fields. These fields mainly involve ICO and securities, and anti-money laundering. , Licenses, taxes, stablecoins, derivative transactions, privacy protection, etc.
Compared with other countries and regions, the U.S.’s supervision of the blockchain industry has obvious characteristics in two aspects. One is that from the perspective of the supervisory body, there are more departments and institutions involved in supervision. Second, from the perspective of regulatory tools, the current tendency to incorporate cryptocurrency into the existing legal framework, rather than rebuilding a new regulatory system. In terms of specific regulatory content, trends worthy of attention include:
Ministry of Finance: taxation, anti-money laundering, stable currency custody
The Financial Crime Enforcement Network (FinCEN), the State Administration of Taxation (TIGTA) and the Office of the Comptroller of the Currency (OCC) are the three main executive agencies of the Ministry of Finance to regulate digital currencies.
FinCEN mainly focuses on anti-money laundering. The latest proposed rules require users who want to transfer cryptocurrencies from a centralized exchange to their own private wallets to provide personal information to the exchange. This is consistent with the overall regulatory trend that requires virtual asset service providers (VASP) to implement KYC rules.
TIGTA is mainly concerned with taxation issues. Taxpayers are asked to answer whether they have received, sold, sent, exchanged or otherwise obtained any virtual currency in 2020. This year, the State Administration of Taxation is evaluating different cryptocurrency taxation methods and intends to strengthen its review of crypto exchanges.
The main regulatory content of OCC is to legally link the use of cryptocurrency with traditional banking services. This year, OCC’s long-term plan aims to provide national bank licenses to payment companies that do not provide deposit services, and has announced that the National Bank of the United States and the Federal Reserve Association are allowed to custody cryptocurrencies, clarifying that such custody services are related to custody services Traditional banking activities in a modern and modern form provide a legal space for the issuance of stablecoins. OCC’s regulatory rules will enable cryptocurrency companies to use banking services more.
Securities and Exchange Commission: ICO and Securities
The Securities and Exchange Commission (SEC) is the main agency for digital currency regulation in the United States, and its law enforcement is mainly based on the Securities Act. The SEC believes that ICO (including IEO) issuances may involve the issuance and sale of securities, and therefore must comply with the registration requirements applicable to issuances under the Federal Securities Law. Since the beginning of this year, the SEC has repeatedly supervised ICOs. For example, it sued technology company Kik for a $100 million ICO for violating Article 5 of the Securities Act, providing and selling securities without submitting a registration statement or exemption from registration; suing John McAfee, claiming that it promoted the ICO without disclosing its remuneration, has been suspected of tax fraud; accusing Ripple of selling unregistered securities for $1.3 billion. In the future, the trend of strong supervision of ICOs may be strengthened.
Commodity Futures Trading Commission: Derivatives Trading
The Commodity Futures Trading Commission (CFTC) has made comprehensive cryptocurrency regulation a priority. In the recent guidelines, the rules for depositing virtual currencies of customers by “Futures Commission Merchants” (FCM) are clearly restricted. In addition, the CFTC also reminds the public of risks regarding cryptocurrency transactions.
Federal Reserve: Central Bank Digital Currency/Digital Dollar
The Fed focused on the central bank’s digital currency this year, but its attitude towards it is relatively volatile and not positive. Fed Chairman Powell acknowledged that the central bank digital currency (CBDC) may improve the US payment system. About 80% of the world’s central banks are exploring the concept of CBDC, but at the same time said that the Fed is not in a hurry to issue its own CBDC. Powell believes that there are many questions surrounding digital currencies that need to be answered, including network issues, privacy issues, etc., and whether digital currencies can maintain the central position of currency credibility is still doubtful.
Japan, South Korea, Singapore, Hong Kong: Positive attitude towards central bank digital currency, issuing blockchain-related licenses
Japan, South Korea, Singapore, and Hong Kong are the most important markets in Asia besides Mainland China. In the regulatory policies of these countries and regions, “cryptocurrency”, “blockchain”, “CBDC”, “asset”, “technology”, “payment”, “transaction”, “finance”, “regulation”, ” “Bill” and so on are high-frequency words. In general, these countries and regions have a very positive attitude towards issuing central bank digital currencies or participating in central bank digital currency research and cross-border cooperation. Japan, South Korea, and Singapore have gradually clarified the regulation of digital currency issuance and transactions, or included them in the scope of the original financial bill, or formulated special regulatory bills. In addition, the governments of South Korea and Singapore are very supportive of the application of blockchain technology.
From the perspective of regulatory agencies, this year, such as the Ministry of Finance of South Korea, the Korean Financial Services Commission, the Financial Services Agency of Japan, the Monetary Authority of Singapore, the Hong Kong Monetary Authority of China, and the Hong Kong Securities Regulatory Commission have issued relevant regulatory rules. Including anti-money laundering, licenses, taxation, stablecoins, derivatives transactions, etc.
Among the more noteworthy trends include:
Actively explore the central bank digital currency
The Asian region’s attitude towards central bank digital currencies is generally more positive. This year, the Chief Financial Technology Officer of the Bank of Singapore and the Monetary Authority of Singapore stated that Singapore is ready to launch its own central bank digital currency (non-retail). The Bank of Korea stated that it had completed the CBDC-based design or requirements definition and implemented technical reviews in July, and carried out the second phase of the project “CBDC Work Process Analysis and External Consultation” on this basis. It plans to establish and test CBDC next year Pilot system. The Bank of Japan is preparing for the issuance of CBDC and established a CBDC working group in July to promote the digitization of the entire settlement system and the research on CBDC.
License and anti-money laundering
South Korea, Singapore and Hong Kong have actively explored and implemented regulatory licenses this year. The Hong Kong Securities Regulatory Commission plans to issue licenses for compliant exchanges. The virtual asset trading platform OSL Digital Securities Limited (OSL) recently obtained its first license; South Korea passed the “Reporting and Utilization of Specific Financial Transaction Information Law (Special Financial Law) )” includes the crypto exchange license system; the Monetary Authority of Singapore provides a compulsory license system for payment service providers in accordance with the Payment Services Act. Service providers need to apply for a “currency changer” license, a “standard payment institution” license, One of the licenses of major payment institutions.
In addition, South Korea and Hong Kong, China also emphasized anti-money laundering. The Korean Financial Services Commission is seeking legal amendments to require virtual asset service providers (VASP) to report the names of their customers; the Financial Affairs and Treasury Bureau of the Hong Kong Special Administrative Region Government issued a consultation document to amend Chapter 615 of Hong Kong Laws “Combating Money Laundering and Terrorism” The Regulations on Financing of Elements stipulates that licensees must comply with the anti-money laundering and terrorist financing regulations set out in Schedule 2 of the “Anti-Money Laundering Regulations” and other regulatory requirements aimed at protecting investors.
Clear regulatory framework
The governments of Japan and Singapore have clarified the legal framework for regulating digital currency transactions and services. Japan’s revised fund settlement algorithm that includes virtual currency-related regulations came into effect in May of this year. Crypto custody service providers and crypto derivatives businesses are now subject to the Payment Services Act, the Financial Instruments and Transaction Law, and the Fund Settlement Algorithm, respectively. “Supervision. Singapore’s “Payment Services Act” came into effect in February this year. The new “Payment Services Act” is the first comprehensive regulatory requirement for companies engaging in token transactions and other activities.
Encourage the application of blockchain technology
The governments of South Korea and Singapore particularly emphasize the application of blockchain technology. The South Korean government calls on private companies to use the potential of the blockchain to introduce a “Digital New Deal” and invest 20 billion won to cultivate AI and blockchain talents; the Singapore government-led blockchain project “Ubin Island Project” completed the testing work this year, and , Companies, the Information and Communication Media Development Agency and the National Research Foundation launched a 12 million SGD (approximately US$8.9 million) project to further strengthen Singapore’s blockchain ecosystem.
Europe: Legislation to enable digital currencies to obtain legal status, emphasizing the supervision of stablecoins
This year, many European countries including France, Spain, Germany, Switzerland, Italy, Sweden, Russia and Portugal have introduced relevant regulatory policies. In these policies, terms such as “(crypto) currency”, “central bank”, “asset”, “regulation”, “stable currency”, “CBDC”, “bank”, “act”, “finance”, “framework”, etc. The frequency of occurrence is higher.
From the perspective of regulatory agencies, central banks, congresses/parliaments/cabinets, and traditional financial regulatory agencies are deeply involved in the supervision of blockchain. These regulatory policies mainly target anti-money laundering, stablecoins and central bank digital currencies. On the whole, European countries have a relatively positive attitude towards central bank digital currencies, and the supervision of anti-money laundering and stablecoins is increasing.
Clarify regulatory bills and regulatory innovation
Many European countries have made clearer regulations on digital currencies this year. For example, the German Financial Supervisory Authority has mandated that the installation of digital currency ATM machines requires the approval of the institution, and the relevant provisions are set under the German Banking Act; the Ukrainian Ministry of Digital Transformation issued a new virtual asset draft in May. In determining the legal status of encrypted assets and the rules of circulation and issuance; the Russian Digital Currency and Blockchain Association plans to consider drafting a new digital currency law. In addition, this year Russian President Putin signed a bill that clearly allows cryptocurrency transactions However, it is prohibited to use regulatory guidelines as a means of payment; Portugal issued a regulatory sandbox framework in April that will test emerging technologies including blockchain.
Positive attitude towards central bank digital currency
European countries have generally more positive attitudes towards central bank digital currencies. Among them, Sweden and Lithuania are more advanced in the practice of central bank digital currencies. Lithuania issued 24,000 digital currency LBCoins issued by its central bank in July this year. Although this is only a commemorative coin, its issuance is part of the national central bank digital currency pilot program. It is also the first central bank in the Eurozone. Digital currency issued. The Riksbank conducted an in-depth study this year on the feasibility of the four Swedish Krona electronic models in the domestic market, and outlined how the different models meet its policy goals.
In addition, France, Germany and Italy are all actively connecting with the “digital euro.” The Italian Banking Association (ABI) has set up a working group to study digital assets, hoping to help accelerate the implementation of the European Central Bank’s digital currency by participating in related projects and experiments; the Bank of France has chosen to include HSBC, Accenture, and Swiss crypto bank SEBA. The eight partners of Germany test CBDC; the Bundesbank also expressed support for international cooperation between central banks, deeming it necessary to analyze and evaluate CBDC, especially in fulfilling its mandate.
Pay attention to the risks of stablecoins
The most important change in the European regulatory trend this year is that European countries emphasize the risk of fiat currency stable currencies. The Central Bank of Russia stated that it prohibits private companies from providing stablecoins backed by Russian legal tender, but can only use the digital ruble of the Bank of Russia; the Bank of France believes that although stablecoins provide opportunities for improving the payment system, they may also bring considerable risks .
France, Spain and Ireland have focused on anti-money laundering regulations this year. The French Ministry of Finance announced comprehensive KYC requirements for all cryptocurrency companies operating in and providing services to the country; the Irish Cabinet issued the “Money Laundering and Terrorist Financing Amendment Act 2020” to make market participants “obligatory entities” The Spanish Ministry of Economic Affairs and Digital Transformation has prepared a draft bill to regulate trading platforms. The bill will compel crypto exchanges, wallet providers, and wallet providers operating in Spain. Crypto-custodial service providers comply with new anti-money laundering and terrorist financing agreements.
West Asia and the Middle East: Actively develop mining and explore cryptocurrency related taxes
In the blockchain-related policies promulgated by countries in West Asia and the Middle East, “cryptocurrency”, “acts”, “mining”, “central banks”, “financial assets”, “banks”, “mines”, and “miners” The frequency of such words is higher. It is not difficult to see the positive attitude of countries in West Asia and the Middle East towards mining. In addition, the central banks of these countries also have a very positive attitude towards central bank digital currencies. In general, countries in the region hope to promote the development of blockchain-related industries through a friendly policy environment to benefit their own economies.
Central banks and economic development departments in West Asia and the Middle East have actively participated in the supervision of the blockchain industry. The main areas of supervision include mining, taxation and central bank digital currencies.
Allow and actively develop mining and collect mining-based taxes
The development of the blockchain industry in West Asia and the Middle East is mainly concentrated in mining, which is related to the abundant energy in the region. Iran, Kazakhstan, and Uzbekistan have successively issued documents allowing cryptocurrency mining. The Iranian government has issued operating licenses to 14 crypto mining farms, the peak electricity bill can be reduced by 47%, and power plants are allowed to mine cryptocurrencies; Kazakhstan’s bill defines mining as a technical process and mining services as a business Activities and plans to double its digital currency mining investment by the end of this year; while Uzbekistan is more active. The National Project Administration plans to establish a national mining pool and cooperate with compliant cryptocurrency exchanges to facilitate mining companies Able to circulate cryptocurrency to the market.
The positive attitude towards mining is mainly for taxation services. Iran, Kazakhstan and Kyrgyzstan have all expressed their views this year (proposed) to tax mining income. Iran requires mining entities outside the bonded zone to comply with the tariff regulations on crypto mining; Kazakhstan plans to impose a 15% tax on Bitcoin mining; the Kyrgyz Republic’s tax law supplements Chapter 61, which provides for a taxation system for cryptocurrency mining . However, Uzbeks is an exception in this region. This year, it exempted the taxation of income derived from cryptocurrency operations, clarifying that the businesses of legal persons and individuals (including businesses conducted by non-residents) related to the circulation of crypto assets are not Tax objects.
Positive attitude towards central bank digital currency
The UAE, Saudi Arabia, Kazakhstan, and Lebanon announced the development of central bank digital currencies this year. The Lebanese Central Bank plans to launch digital currency in 2021 to restore people’s confidence in the banking industry; Kazakhstan plans to introduce central bank digital currency, is analyzing various technical infrastructure and regulatory measures, and formulating a report on the scenario plan for Kazakhstan’s introduction of digital currency ; Saudi Arabia and the United Arab Emirates jointly announced the success of the central bank’s digital currency trial operation. The project aims to settle cross-border transactions between commercial banks in the two jurisdictions through a cross-border joint CBDC.
International organizations: consider the risks of stablecoins and coordinate the global regulatory framework
In addition to various countries and regions, this year, international organizations such as the OECD, G7, G20, European Union, Financial Action Task Force FATF, International Monetary Fund IMF, OMFIF, the official forum of international monetary and financial institutions, and the Capital Market and Technology Association CMTA, also Actively exploring and coordinating blockchain regulatory policies.
From the high-frequency terms of related policies, “digital currency”, “regulation”, “stable currency”, “assets”, “framework”, “finance”, “euro”, “standards”, “laws”, and “central banks “”, “Payment” and other words are more common.
The European Union is the organization that discloses the most regulatory policies or regulatory intentions. Its subordinate European Commission, European Central Bank, Research Service Center, Securities and Markets Authority and other institutions have actively participated in international blockchain supervision this year. Judging from the content of international organizations’ concerns, stablecoins, anti-money laundering and regulatory frameworks are the three main content.
Of particular note is the regulatory attitude of international organizations towards stable currencies. G7 opposes stablecoins such as Libra and emphasizes that such payment services must be properly supervised so as not to undermine financial stability, consumer protection, privacy, taxation or network security; the G20 Financial Stability Board also emphasized the supervision of “Global Stable Coins” (Global Stable Coins). Stablecoin, GSC)’s proposal that it hopes to implement international regulatory standards in various jurisdictions, including effective cooperation, coordination and information sharing arrangements; the finance ministers of the five EU countries (Germany, France, Italy, Spain and the Netherlands) call on the European Commission Regulate stablecoins to protect consumers and maintain monetary sovereignty.
In addition, international organizations have also made efforts in anti-money laundering and coordination of regulatory frameworks. The G20 will fully begin to explore regulatory measures such as the prevention of money laundering; the Financial Action Task Force plans to strengthen the global regulatory framework for crypto exchanges to coordinate and share information about virtual asset service providers (VASP); the EU regulatory agency announced a three-year strategic policy It is clear that a legal framework will be introduced for digital currency.
Looking at the regulation of the blockchain industry in major countries and regions around the world, from the perspective of regulatory bodies, more and more diversified institutions have begun to participate in regulation, not only within the country, but also internationally; from the perspective of regulatory tools, more and more More countries have clarified the legal status of cryptocurrency/virtual currency/digital currency, or incorporated it into the existing legal framework to supervise, or formulate new special laws to supervise; from the perspective of supervision, it has covered a wide range of Of market participants, including companies and individuals. Increasingly clear regulatory rules can regulate the industry’s continued development in the direction of legal compliance.