In a follow up article to February’s global regulatory review, we check in on the  progress Governments have made this year with regards to their crypto policies. In short, the love-hate relationship with crypto continued - some of the world’s regulators flirted hard with crypto, some strung it along, while others sent crypto the dreaded “break-up” text.  

THE UNITED STATES

This year’s award for “best drama” goes to the United States. The staggering $4.3 billion fine and subsequent resignation by Binance’s founder CZ (after pleading guilty to money laundering activities on the exchange) capped off a year marked by crackdowns, investigations, fines and lawsuits from the Federal regulator. The U.S. Securities and Exchange Commission (SEC) maintained a stern position throughout the year, defaulting to enforcement over ecosystem consultation and legislation, shaking confidence in an already tough bear market. The US revealed itself as a fractured market of mixed signals. Individual states like Wyoming, Florida, California, Nevada, Texas, Ohio and New Hampshire stood apart as safe jurisdictions for crypto entities. 

AUSTRALIA

The Australian Government started the year in a promising fashion with the release of a Token Mapping consultation paper as its first step in exploring best practice for a robust regulatory framework for crypto assets. What followed was a highly publicized government-backed pilot program that saw 16 companies and institutions test use cases for crypto currencies, using an Australian CBDC, the eAud. The pilot program yielded Australia’s first foreign exchange transaction of eAUD to USDC. The post-pilot report indicated several positive outcomes, but raised caution and recommended further investigation. This took the wind out of the sails, ending the year with Australia likely lagging behind, while other governments in the region, namely Singapore, have taken decisive steps to embed innovation from its pilot programs into its financial system. 

SINGAPORE

This year, the Monetary Authority of Singapore (MAS) put its digital money where its mouth is, moving quickly to take findings from its pilot programs and find practical uses for their implementation. The most notable is what Singapore has termed Purpose Bound Money - a way to program and send digital SGD to its citizens for a stated purpose, such as grants and community payments in voucher form. MAS holds a very positive view of blockchain technology as it pertains to unlocking efficiencies and opening new financial gateways throughout the Asian region, including with the use of CBDCs. In the words of outgoing MAS CEO, Ravi Menon, Singapore has positioned itself as a visionary jurisdiction on all things “digital assets, digital money, and digital infrastructure.

JAPAN

Looking to other jurisdictions for lessons and trends, Japan spent the year moving steadily forward with its exploration of a digital Yen. In July, the Bank of Japan launched a pilot program with 60 companies into the use cases for a digital yen. While the pilot process was expected to take up to a year to complete, there has been recent pressure to expedite the process. An expert panel convened under the Finance Ministry has called on the regulator to start planning for Japanese CBDC sooner rather than later, believing it can exist comfortably beside its fiat currency in a digital economy. The report recommends that public explanation and consultation should commence.  

HONG KONG

The Hong Kong Monetary Authority (HKMA) made bold moves in 2023 by announcing its intention to become a  progressive crypto hub for the Asian region - a bid to lure business back to the island post-Covid and the protests of 2019 - 2020. The initial buzz caused some crypto companies to seek a license to operate in Hong Kong. However, it appears that the high compliance and operating costs have turned many companies off and has not resulted in the expected boom. In a recent keynote speech, Eddie Yue, Chief Executive of the HKMA, noted that the government has two projects underway, MBridge and e-HKD. MBridge is a multi-CBDC platform experiment for cross-border payment in collaboration with the Central Bank of the United Arab Emirates, Digital Currency Institute of the People's Bank of China and Bank of Thailand. In October, The HKMA added a CBDC expert group to further develop its retail CBDC pilot, Project e-HKD. The Phase 1 Report released in October 2023 states that “HKMA has not reached a policy decision on when or whether to introduce an e-HKD.”

SOUTH KOREA

In July, in an effort to enhance investor protection, South Korea passed legislation pertaining to virtual assets, effectively bringing cryptocurrency markets under regulatory oversight. Known as the Virtual Asset Users Protection Act, this legislation is set to take effect in July 2024. Kim So-young, the Vice Chairman of the Financial Services Commission, emphasized the importance of balancing safeguards for investors with fostering technological innovation. With its pragmatic approach, Korea has emerged as a jurisdiction to watch. 

UNITED ARAB EMIRATES

The Central Bank of the UAE announced in March that it would be exploring both wholesale and retail CBDCs, with the first phase expected to be complete by early 2024. Two of the Emirates, Abu Dhabi and Dubai have spent the year establishing their reputations as safe and attractive jurisdictions, both vying to lure crypto companies. The UAE’s Virtual Asset Regulatory Authority (VARA) has been busy fielding license applications from virtual asset service providers. In April next year TOKEN2049, the world’s largest crypto conference will take place in Dubai, bringing thousands of visitors to the city for the first time. For those on the ground however, Abu Dhabi is viewed as the more serious base to do business. Nothing like a bit of healthy competition.

UNITED KINGDOM

As one of the world’s key financial services technology hubs, the UK has its sights set on becoming a global crypto technology hub. The year began with the UK Government’s announcement that it intends to regulate the crypto industry to be more in line with its regulatory frameworks for the traditional finance sector. It undertook a consultation process in the first quarter of the year and has moved quickly since, indicating it could be ready to introduce legislation in 2024. In October, the Financial Conduct Authority announced “that cryptoassets promotions targeting UK consumers now fall within our remit” and it published guidelines to help consumers understand the risks involved. 

KAZAKHSTAN

A surprising new entrant is Kazakhstan, which has emerged as the leading market in Central Asia. No stranger to crypto, Kazakhstan once had the largest community of Bitcoin miners. Since 2019, the Republic of Kazakhstan has been evolving its economy into a modern, safe and emerging crypto-friendly jurisdiction, governed by British law. In April, a new Digital Assets Law came into effect regulating digital assets. The crypto asset licensing process is managed by its regulator, the Astana Financial Services Authority. Commencing in mid 2022, a pilot program into use cases for a digital tenge continued through the year, with a group of sixteen exchanges and banks participating. Just this past week, The National Bank of Kazakhstan transacted its first retail CBDC payment using the digital tenge. Full implementation of the digital tenge is expected by 2025. 

Lead image created using DALL-E. Prompt: Create a magazine quality image showing the world's regulators deciding whether to embrace a crypto economy