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2023 Cryptocurrency Regulation

4 Key Trends

The crypto industry started in 2009, and it has grown significantly – sometimes explosively – since then. The fintech industry reached $55.3 billion in investments in 2019. Notably, cryptocurrency laws or global crypto regulation have grown at a much slower pace, even though digital assets are popular worldwide. A 2022 report by Chainalysis lists these top 10 countries with the highest substantial rates of crypto adoption:

  1. Vietnam
  2. Philippines
  3. Ukraine
  4. India
  5. United States
  6. Pakistan
  7. Brazil
  8. Thailand
  9. Russia
  10. China

This remarkable global crypto market growth has triggered severe consequences, including the scandalous November 2022 arrest of FTX’s Sam Bankman Fried. In 2023, companies, individual investors, and their lawyers should prepare for unprecedented trends in cryptocurrency regulation. Considering the global nature of these new laws and requirements, it may be necessary to secure legal translation services or legal interpreting services, too. Here are four key trends in cryptocurrency regulation that will occur in 2023.

Trend #1 Cryptocurrency Regulation Will Become More Stringent Due to Recent Scandals

FTX’s multi-billion-dollar cryptocurrency exchange created a massive implosion. This costly scandal has sent ripples across the global financial community. There won’t just be legal action against specific companies or people. Many countries and financial regulatory organizations will be inspired to take action to protect investors. An article from the Financial Times covered the Financial Stability Board (FSB)’s intentions to expedite its work to create new regulations in response to the latest cryptocurrency scandal. Dietrich Domanski, Secretary General of the Financial Stability Board, said, “Recent events have reinforced the recognition that it is indeed urgent to address risks.” He said that their “work plan will reflect the urgency.”

Trend #2 IOSCO Will Push for More Global Cryptocurrency Regulation

The International Organization of Securities Commissions (IOSCO) is a powerful global financial organization with members from over 100 countries and the power to regulate at least 95% of global markets. Per a Reuters article, Ashley Alder, chairman of IOSCO, stated he thinks IOSCO should be regulating the crypto market in 2023. He sees the crypto industry as one of the important “three Cs” that IOSCO should focus on this coming year:

  • COVID-19
  • Climate
  • Cryptocurrency

Alder considers cryptocurrency regulation crucial for two reasons. Firstly, more stringent global regulation will fight ever-mounting cybersecurity challenges. Secondly, he sees this regulation as key for supporting vulnerable financial investors and climate finance initiatives. He seeks to create a global group, similar to the one for climate finance under the G20 leading economies group.

Checking financial reporting on a laptop

Trend #3 The IMF Will Work Towards Expedited Global Cryptocurrency Regulation

Since 2021, the International Monetary Fund (IMF) has made serious strides in global regulation of cryptocurrencies. In April 2022, it set forth a Proposal to Establish a Resilience and Sustainability Trust. In the same year, it required Argentina to “discourage” use of cryptocurrencies if it received a sizable IMF loan. The IMF objects to the “inadequate disclosure and oversight” of cryptocurrencies, as well as its “lack of strong operational governance and risk practices.” The organization is concerned about the crypto market’s potential for facilitating money laundering and terrorist financing. While its concerns about cryptocurrencies are held globally, the IMF’s solution is unique. It seeks a globally-coordinated effort, with standard rules that cross all borders to supervise crypto activities and standardize data. The IMF seeks a globally comprehensive solution ASAP before regulation becomes fragmented and complicated to enforce. (This effect may already be taking place, as discussed below.)

Trend #4 More Countries Will implement and Enforce Their Own Crypto Regulation

Due to the exponential crypto market growth in the past few years, many countries have created their own cryptocurrency regulation. Many countries are also planning to develop new regulations in 2023. It’s important to note how widely these rules vary. Some countries are crypto-friendly, while others are cracking down on it or even “discouraging” it. Here are some examples:

  • El Salvador: In 2021, El Salvador’s Bitcoin law recognized cryptocurrency as legal tender. It also mandated businesses to do so.

  • Saint Kitts and Nevis: In 2022, the Prime Minister declared cryptocurrencies legal tender.

  • Lugano, Switzerland: Plans to allow citizens to pay local taxes with cryptocurrencies.

  • Belarus: Offers tax incentives for private individuals who own digital assets.

  • Singapore: Offers tax incentives for private individuals who own digital assets.

  • Argentina: In 2022, Argentina agreed to “discourage” use of cryptocurrency to receive a $45 billion loan from the International Monetary Fund (IMF). The IMF has been unabashedly vocal about its concerns with cryptocurrency regulation. This development is highly impactful, as bitcoin has been heavily favored in a country with already-shaky currency and markets.

  • UK: In 2021, the Financial Conduct Authority (FCA) warned UK citizens about social media and the crypto industry. Charles Randell, chair of the FCA, said, “Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all.”

    In December 2022, the incoming FCA chair, Ashley Alder, made stronger remarks. He said that cryptocurrency businesses:

    • Often facilitate money laundering
    • Are “deliberately evasive”
    • Allow/execute activities that lead to “massively untoward risk”

    An article in Cointelegraph stated The UK Treasury is planning to implement a regulatory framework to increase cryptocurrency regulation, especially foreign companies’ operations. There is speculation these restrictions will require registration with the FCA, a process so tough that 85% of applicants don’t pass.

  • Europe: In 2020, the European Commission proposed a new framework, Markets in Crypto Assets regulation (MiCA). MiCA will subject crypto asset activities (including trading and investment) to the existing EU financial services regulatory framework. It will likely be in full force before the end of 2024. This timeline means it will probably start taking effect (at least partially) in 2023. This proposed legislation will aim to:
    • Protect investors
    • Fortify market integrity
    • Ensure orderly market functioning

  • U.S.: The United States Securities and Exchange Commission (SEC) considers crypto firms high risk. It issued December 2022 guidelines requiring companies subject to disclosure obligations under federal securities laws to disclose direct or indirect relations with crypto companies that have:
    • Been decreed insolvent
    • Been decreed bankrupt or filed for bankruptcy
    • Experienced excessive redemptions or suspended withdrawals
    • Handled customers’ unaccounted crypto assets
    • Experienced material or corporate compliance failures

    An article in Bitnation reveals that, furthermore, the SEC said companies should “consider the need to address crypto asset market developments in their filings generally, including their business descriptions, risk factors, and management’s discussions and analysis.”

    The Financial Crimes Enforcement Network (FinCEN) requires virtual currency exchanges to:
    • Register with them
    • Comply with anti-money laundering requirements (AML)
    • Comply with Know-Your-Customer (KYC) requirements

Get in touch 

Are you prepared to assist your clients with the patchwork of global cryptocurrency regulations and legal compliance in 2023? Will you need translation services for legal documents or legal interpretation services to help your clients with cryptocurrency compliance, new registration paperwork, and litigation across multiple countries and languages? Trust Lionbridge’s legal services team to support you and your clients with these complex matters. We can provide legal translation for:

  • Company policies for handling cryptocurrencies
  • Multilingual e-discovery material for investigations or litigation
  • Notices, correspondence, and documents related to cryptocurrency legal proceedings
  • Certified translation for official use

We can provide legal interpretation services for:

  • Depositions for cryptocurrency litigation and investigations
  • Simultaneous interpretation for witness interviews in cryptocurrency proceedings
  • Hearings for cryptocurrency litigation
  • Testimonies for government and regulatory bodies’ cryptocurrency proceedings and meetings
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