2021 proved to be a busy year for cryptocurrency regulation.<\/p>\n
Some countries also stepped up work on central bank digital currencies (CBDCs).<\/p>\n
ForkLog has examined in detail how the regulatory landscape for digital assets evolved.<\/p>\n
One of the most important events of 2021 was publication<\/a> of a revised and refined version of its guidance for the cryptocurrency industry by the Financial Action Task Force (FATF). The organisation set standards for the DeFi and NFT sectors.<\/p>\n In the document, supervised jurisdictions were advised to show flexibility at the initial stage of implementing the requirements. The organisation acknowledged that VASP<\/span> and other market participants face certain difficulties integrating the new systems needed to ensure compliance.<\/p>\n FATF emphasised that national regulators should interpret definitions used by firms broadly and classify them based on the services offered.<\/p>\n The group provided a definition of a \u201cvirtual asset\u201d and explained how NFTs relate to it.<\/p>\n It excluded decentralised applications from the VASP category. However, experts argue that developers, owners, operators or other persons who retain “control or sufficient influence over DeFi mechanisms” are highly likely to fall into such a category.<\/p>\n In the Bank for International Settlements (BIS) noted<\/a> that CBDCs were moving from conceptual projects to the stage of practical implementation. During the year the BIS actively participated<\/a> in testing these instruments, including cross-border settlements.<\/p>\n In autumn the BIS presented<\/a> recommendations for regulating stablecoins. Experts concluded that these assets are subject to the Principles for Financial Market Infrastructure.<\/p>\n In December the International Swaps and Derivatives Association (ISDA) began<\/a> developing global standards for derivatives tied to digital assets. The organisation recognised cryptocurrencies as a unique class of products.<\/p>\n ISDA highlighted potential risks in the crypto-derivatives market, including forks, cyberattacks, airdrops, regulatory changes, vulnerabilities in infrastructure providers, and a weak linkage between derivatives and their underlying assets.<\/p>\n In January 2021 the Office of the Comptroller of the Currency (OCC) allowed<\/a> national banks and federal savings associations to use public blockchains and stablecoins for settling transactions on behalf of customers.<\/p>\n In the same month the agency approved<\/a> the first nationwide digital-asset bank license \u2014 the holder was Anchorage, a custodial service.<\/p>\n In May the OCC said<\/a> it would revise the rules governing cryptocurrencies. Much of these provisions were issued under the leadership of Brian Brooks, who left<\/a> the post in January.<\/p>\n In early January President Joe Biden froze<\/a> proposed FinCEN rules for the cryptocurrency industry, which envisaged collecting personal information about the parties to deals and clients\u2019 transactions of the sector\u2019s companies. Earlier, experts criticised<\/a> these norms.<\/p>\n In April the new head of the U.S. Securities and Exchange Commission (SEC) was appointed<\/a> \u2014 the former chair of the CFTC<\/span>, Gary Gensler.<\/p>\n From the outset the official made clear that user interests would be paramount. In July he urged<\/a> expanding investor-protection rules for cryptocurrency exchanges and warned<\/a> that token issuers backed by stock must report to the agency.<\/p>\n Gensler also drew attention to decentralised finance. In his words, the structure of these products does not provide immunity<\/a> from SEC oversight.<\/p>\n Despite a relatively tough regulatory stance, Gensler stated that the SEC does not plan<\/a> to ban cryptocurrencies. Later the agency approved<\/a> ProShares\u2019 first bitcoin futures ETF.<\/p>\n Head of the Fed<\/span><\/strong> Jerome Powell stated<\/a> that his agency does not intend to ban digital assets. It is expected that the Fed will not change its stance \u2014 Biden plans<\/a> to keep Powell as chair.<\/p>\n In March the IRS<\/span><\/strong> explained<\/a> that U.S. residents do not need to report obtaining cryptocurrency on the first page of Form 1040 if they adhere to a HODL<\/span> strategy. Later the service clarified<\/a> that it is only concerned with taxable transactions.<\/p>\n One of the most debated topics of 2021 was the US Infrastructure Plan of $1.2 trillion, agreed<\/a> by the Senate on July 28.<\/p>\n The document contains an expanded definition of the term \u201cbroker.\u201d Depending on interpretation, miners and node operators in blockchains, wallet developers, liquidity providers in DeFi protocols and other non-custodial players may be required to report to the IRS on their users\u2019 activities.<\/p>\n During the bill\u2019s progression the initiative was criticised<\/a> by industry representatives and experts, as well as some politicians<\/a>. The latter proposed<\/a> amendments, but failed<\/a> to reach a consensus, so on November 16 Biden signed<\/a> the document without changes in this respect.<\/p>\n In November the U.S. Treasury<\/strong> issued<\/a> guidance on sanctions compliance by participants in the crypto industry, and also published<\/a> a report on the risks of stablecoins, which it considers<\/a> a threat to financial stability.<\/p>\n In February 2021 the Ontario Securities Commission<\/strong> registered<\/a> the first Bitcoin ETF in North America. The approval went to Purpose Investments, and the fund\u2019s units were listed on the Toronto Stock Exchange.<\/p>\n Two months later Canadian regulators approved<\/a> the launch of several spot Ethereum-based ETFs.<\/p>\n In April the Canadian Securities Administrators (CSA)<\/strong> and the Investment Industry Regulatory Organization of Canada (IIROC)<\/strong> published<\/a> the regulatory framework for crypto firms\u2019 regulatory compliance.<\/p>\n In June the Financial Transactions and Reports Analysis Centre of Canada<\/strong> tightened<\/a> client-verification rules for firms dealing with digital assets.<\/p>\n In September the CSA and IIROC issued<\/a> guidance on the use of social media, advertising and marketing for cryptocurrency exchanges.<\/p>\n In early June President Nayib Bukele spoke at the Bitcoin 2021 conference, announcing his intention to legalise digital gold. A few days later the Parliament passed<\/a> the corresponding law, and on 7 September it came into force<\/a>.<\/p>\n To support liquidity the government approved<\/a> a Bitcoin fund of $150 million. The fund\u2019s balance holds 1,220 BTC.<\/p>\n To attract additional capital, the government decided to exempt<\/a> foreign investors from capital gains tax and the tax on Bitcoin transactions.<\/p>\n In June the Bank of Mexico, the Ministry of Finance and the National Banking and Securities Commission issued<\/a> a joint statement reminding that cryptocurrencies are not legal tender in the country.<\/p>\n The Brazilian Securities and Exchange Commission (CVM)<\/strong> approved<\/a> the first Bitcoin ETF in Latin America. The fund\u2019s shares belong to the asset-management company QR Asset Management.<\/p>\n In July the CVM registered<\/a> a second exchange-traded fund from QR Asset Management \u2014 this time based on Ethereum.<\/p>\n A month earlier the Central Bank of Brazil delayed<\/a> the launch of the digital real, with completion planned for the end of 2022.<\/p>\n In autumn the Central Bank of Venezuela launched<\/a> the digital bolivar. After the CBDC\u2019s release some experts noted that it lacked digital components that would distinguish it from fiat currency.<\/p>\n In June a bill was introduced in the Parliament of Paraguay aimed at developing a regulatory framework for cryptocurrency regulation<\/a>.<\/p>\n The author, Carlos Rejala, clarified that there is no talk of legalising Bitcoin as in El Salvador.<\/p>\n In August the Senate of Uruguay presented<\/a> a bill regulating cryptocurrencies and allowing payments in digital assets, including by companies. The document contemplates that their use will become legal in any business.<\/p>\n In 2021 European regulators gave substantial attention to CBDC development. Several countries ran pilots, and international regulators launched initiatives aimed at digitalising the euro.<\/p>\n In January the European Central Bank (ECB)<\/strong> concluded<\/a> public consultations on a digital euro. The majority of respondents identified data privacy as the most important feature of a CBDC.<\/p>\n In spring the regulator\u2019s head Christine Lagarde stated<\/a> that a digital euro could appear within four years if policymakers approve the project.<\/p>\n In July the ECB began<\/a> the CBDC research phase. In autumn the regulator identified<\/a> members of the advisory group on potential development and distribution of a CBDC.<\/p>\n Despite a focus on CBDC, the private market did not escape attention either.<\/p>\n The European Commission<\/strong> introduced<\/a> a bill proposing a ban on anonymous transactions with digital assets.<\/p>\n In November the ECB Governing Council<\/strong> approved<\/a> a new supervisory framework for electronic payments, which included assessment of the effectiveness and safety of wallets and services linked to cryptocurrencies.<\/p>\n In January the Bank of France<\/strong> tested<\/a> a CBDC in a pilot project issuing tokenised shares of a currency fund. For the first time in the country a private blockchain platform was used.<\/p>\n In the summer the regulator, together with the Swiss crypto-bank SEBA, completed<\/a> testing of securities transactions based on a CBDC.<\/p>\n Thereafter the Bank of France and the Monetary Authority of Singapore (MAS) conducted<\/a> a successful experiment in cross-border settlement. <\/p>\n In November the French regulator tested<\/a> a digital euro in government-bond transactions. In conjunction with a group of dealers, it conducted 500 operations on primary and secondary markets.<\/p>\n In July German institutional funds were allowed to invest up to 20% of assets in cryptocurrencies. In April the Bundestag<\/strong> approved the corresponding bill, which was subsequently adopted<\/a> by the Bundesrat<\/strong>.<\/p>\n At the end of the year the parties forming Germany\u2019s new government signed a coalition agreement, in which cryptocurrencies and blockchain technology are listed among the country’s priority development areas for the next four years.<\/p>\n In June Denmark announced<\/a> its intention to amend the 1922 tax code to correctly reflect residents\u2019 dealings with digital assets. Authorities concluded that existing rules lead to miscalculations of the tax base and risks of tax evasion.<\/p>\n In April the Central Bank of Ireland<\/strong> extended<\/a> the anti-money-laundering and counter-terrorist-financing regime to the crypto industry.<\/p>\n The Dutch Central Bank<\/strong> reversed<\/a> the 2020 decision to impose stricter requirements on crypto-asset service providers. The regulator said the tightening was \u201cnot sufficiently fair.\u201d<\/p>\n In June the Central Bank of Portugal<\/strong> issued<\/a> the first licenses to two bitcoin exchanges \u2014 Criptoloja and Mind the Coin. The trading platforms were recognised as \u201cvirtual asset service providers.\u201d<\/p>\n In 2021 China began yet another crusade against the cryptocurrency industry, culminating in a ban on mining and all digital-asset activities.<\/p>\n In May the CITIC Bank forbade<\/a> individuals and legal entities from using accounts to purchase and trade digital assets. In the same month, media reported<\/a> on a notice issued by three associations under the People\u2019s Bank of China (PBoC). The document prohibited local companies from supporting cryptocurrency-related businesses.<\/p>\n At the same time authorities in Inner Mongolia began cracking down<\/a> on illicit mining, and the State Council\u2019s Vice Premier Liu He stated<\/a> intent to take measures against mining and trading Bitcoin.<\/p>\nBIS Recommendations<\/h3>\n
ISDA Standards<\/h3>\n
North America<\/h2>\n
USA<\/h3>\n
Canada<\/h3>\n
Central America<\/h2>\n
El Salvador<\/h3>\n
Mexico<\/h3>\n
South America<\/h2>\n
Brazil<\/h3>\n
Venezuela<\/h3>\n
Paraguay<\/h3>\n
Uruguay<\/h3>\n
European Union<\/h2>\n
France<\/h3>\n
Germany<\/h3>\n
Denmark<\/h3>\n
Ireland<\/h3>\n
Netherlands<\/h3>\n
Portugal<\/h3>\n
Asia<\/h2>\n
China<\/h3>\n