Will the future rise and fall of the encryption industry be influenced by the policies of these countries?

In the field of blockchain and cryptocurrency supervision, regulatory agencies in various countries have accumulated many years of experience. In terms of effectiveness and universality, they can be divided into two types of supervision methods: clear legal provisions supervision and sandbox supervision .

Practice has proved that combining the two types of regulatory measures to varying degrees is a relatively more effective regulatory approach, while maintaining the vitality of new industries.

However, the difficulty of supervision lies in achieving policy flexibility, risk control and encouraging innovation at the same time. This article combs the supervision situation of some mainstream economies with certain representativeness and reference significance.

United States: Federal and State Parallel Supervision

The United States is one of the active countries in the encrypted asset and blockchain industry. The government agencies here have been involved in the supervision of the blockchain field earlier than other countries, and have clearer regulatory ideas in controlling emerging industry risks and encouraging innovative development.

Therefore, the US regulatory policy has always been the focus of research and attention by many practitioners and regulatory agencies in various countries, including tax rules, the application of securities laws, investor education, and anti-money laundering .

The United States is a federal country, with 50 states and 1 special zone implementing their own regulatory policies, and operating related businesses needs to meet the legal regulatory requirements at the federal and state levels at the same time.

Federal level

Regarding the supervision of blockchain, the main regulatory agencies at the federal level include the U.S. Securities and Exchange Commission (SEC), the Inland Revenue Service (IRS), the Commodity Futures Trading Commission (CFTC), and the Financial Crime Enforcement Network (FinCEN). Each competent authority has different qualitative definitions of blockchain assets, so it has also formulated specific legal rules.

The SEC qualifies blockchain-based digital assets as “securities”. Therefore, the digital asset industry chain has been included in the supervision of the securities industry since 2017, and the American Digital Currency Exchange Commission (ASEC) was established in 2018 to be responsible for Clean up fraud and non-compliant items.

In addition, ETFs based on digital assets are also regulated by the SEC. On October 5, the SEC approved the application for an ETF product related to Bitcoin for the first time, but it did not mean that the SEC recognized the legality of Bitcoin because the ETF product does not hold any cryptocurrency, but is composed of approximately 30 shares of listed companies. Including MicroStrategy , Tesla, Square, Coinbase and PayPal.

The IRS believes that cryptocurrency belongs to the scope of “property”. Therefore, it has formulated detailed taxation rules and calculation methods for all the circulation links of cryptocurrency, which is almost the most comprehensive cryptocurrency tax system in the world.

For example, to pay employee salaries in cryptocurrency, employers must pay federal income tax and wage tax. For example, the gains or losses earned by trading cryptocurrency will constitute tax income or become a part of diminishing tax return income.

State level

As each state implements its own rules, it shows different attitudes and governance policies towards blockchain supervision. In addition, some states are even ahead of the federal government in legislation. For example, New York, North Carolina, and California have introduced special regulations for the commercial behavior of the blockchain industry.

Take New York State as an example. It is the first in the 50 states in the United States to legislate to implement a regulatory licensing system (BitLicense) in the field of cryptocurrency.

The competent authority of New York State is the New York State Department of Financial Services (NYDFS, the New York State Department of Financial Services). Due to the importance of New York State in the financial industry, the legislation of BitLicense is regarded as the US regulatory weather vane.

The scope covered by BitLicense is mainly the technical license to operate BTC and other cryptocurrency businesses within the state .

The BitLicense regulations are detailed and strict, with high requirements in terms of information disclosure and fund adequacy. For example, the operator is required to set up a performance guarantee account of US$1,000 for the customer, and to conduct a real-name KYC for the customer, and so on.

Although strict, because the regulations reflect the clear attitude of the regulators and the detailed rules are clear and easy to understand, they have attracted a large number of applications. In 2015, the Boston Bitcoin start-up Circle obtained the first BitLicense and obtained the early start of encryption in New York State. The right to operate currency services.

France: the permit system takes precedence

In Europe, the blockchain regulatory policies of France, Germany, and Switzerland have a strong trend, and they have been imitated by regulators in other European countries. Among them, France has the most friendly and complete blockchain legal framework in Europe.

French regulatory policies for blockchain and cryptocurrency mainly focus on “landing value” and “support for innovation” , covering areas including the circulation of non-listed company equity, cryptocurrency payments, and the Token financing visa system .

Financial Warrants Trading Act

In 2017, the French government promulgated the Act “Executive Order No. 2017-1674 of December 8, 2017 on the Use of DEEP for the Embodiment and Transfer of Financial Warrants” to promote the use of blockchain technology in the unlisted securities trading market:

Allows the issuance and transfer of financial warrants (Titres financiers, roughly equivalent to securities) to be registered on the blockchain network. This is the first time that the European securities market has adopted a bill to recognize the legality of blockchain technology in the securities market.

The scope of coverage mainly includes securities that are not traded on the open market:

The most complete legal framework for token financing issued by capital warrants issued
by joint-
stock companies of transferable debt joint investment institutions

In order to further protect the interests of market participants and support the promotion of the development and implementation of innovative projects in a compliant environment, the French regulatory authorities have decided to thoroughly incorporate token financing activities into the scope of supervision.

In 2019, the French Monetary Authority (AMF) promulgated the French Act No. 2019-486, referred to as Pacte Act (Paris Agreement Act). The highlight of the “Paris Agreement Act” is the licensing system based on the “pass”, mainly in three aspects:

1. Optional Visa (financing license)

France is a typical government with a “residence card” system. For foreigners who want to stay in the local area, there are extremely rich types of residence that cover different purposes and durations to choose from.

Therefore, it also refers to the idea of ​​personal residence card in the designation of the regulatory policy for token financing, and introduces a financing license, commonly known as the “pass for token financing”, with a maximum validity period of 6 months.

Will the future rise and fall of the encryption industry be influenced by the policies of these countries?

It should be noted that the pass is only open to utility tokens (Utility Token) , and the project subject must be registered in France.

Applicants need to use the project as the subject of the application and submit the following materials: white paper, certificate of registration, description letter of functional token, safe custody process of token assets, publicity materials, anti-money laundering regulations and other core materials.

However, the pass is not compulsory and requires the project sponsor to be free to choose. However, if there is no Visa, the bank account opening and marketing activities will be strictly restricted.

2. UNI CORN (Tutoring Plan for Token Financing Projects)

The French regulatory agency is a learning regulatory organization. In order to provide more appropriate supervision, it launched the “Universal Node to ICO’s Research & Network” to collect opinions on blockchain technology and token financing from global experts and scholars.

It aims to combine the opinions of industry experts in law, technology and business to formulate regulatory rules suitable for cryptocurrency financing business. This is a long-term ongoing project. The specific regulatory rules will be updated from time to time based on the research results of UNICORN.

3. DASP (digital asset service provider business license)

The full name of DASP is Digital Assets Services Providers, which embodies France’s efforts to adhere to the license regulatory approach. DASP refers to digital asset service providers in general. Specifically, anyone who operates and keeps third-party private keys, fiat currencies and digital tokens in France Businesses such as trading, investment advice and sales must apply for a DASP license.

The threshold for obtaining a DASP license is mainly fund sufficiency and compliance competence , such as the implementation of a liability insurance system or a minimum reserve system, as well as adequate compliance procedures (claim processing procedures, anti-money laundering and anti-terrorism financing procedures) .

Switzerland: European Crypto Valley

In terms of the degree of activity and regulatory friendliness of the blockchain industry, it not only recognizes the legal status of cryptocurrency payments, but also attracts many leading blockchain companies through comprehensive policies. ) Was built into the “Crypto Valley”, a demonstration area similar to the Silicon Valley in Europe.

The Swiss Financial Market Authority (FINMA) is responsible for sorting out the regulatory policies related to blockchain and cryptocurrency activities. In order to solve the problem of the lack of effective classification of digital assets worldwide, FINMA divides digital assets into different functional categories for targeted supervision based on the use of encrypted currencies, namely payment, asset, application and hybrid.

Among them, asset classes need to meet stricter regulatory requirements:

First, it needs to be included in the supervision of the “Securities Law”, which is regarded as securities management;

In addition, if the issued asset class has the characteristics of debt capital, such as a commitment to guarantee capital and interest, it needs to follow the provisions of the “Banking Law”, and it is necessary to apply for operating permits in advance;

If it involves the transfer of assets through distributed ledgers, it needs to comply with the relevant provisions of the Anti-Money Laundering Law for payment.

Because FINMA’s classification of cryptocurrencies is very detailed, in order to balance regulatory costs and benefits, FINMA provides paid “compliance counseling” for blockchain projects.

The Swiss regulatory framework embodies humane thinking and clearly categorizes digital assets, which solves the problem of legal regulatory gaps in innovative industries, but at the same time increases the costs that companies need to bear in order to meet compliance requirements.

Japan: Active legislation

Japan is one of the first countries in Asia to establish a regulatory mechanism for blockchain and cryptocurrency, and it is also one of the few countries in the world that recognizes the legality of BTC payments through legal forms.

Payment Services Act

Regarding the regulation of cryptocurrency, Japan officially launched the “Payment Service Act” on April 1, 2017, which included the legal payment of cryptocurrency into the legal system and provided a legal basis.

In addition to the “Payment Services Act”, Japan issued the “Fund Settlement Algorithm Implementation Order” in the same year. As a supporting law of the “Payment Act”, it provided detailed legal interpretations on issues such as fund transfer, liquidation, and dispute resolution.

As a former financially developed country, although Japan’s regulatory rules are not the most complete, they are quite enlightening.

Singapore: Flexible Regulation

Will the future rise and fall of the encryption industry be influenced by the policies of these countries?

Singapore is a representative country of “sandbox supervision”, and is relatively at the forefront of regulatory policy formulation around encouraging innovation and controlling risks .

Its series of blockchain and cryptocurrency business activities involving financial behaviors are mainly formulated and implemented by the Financial Supervisory Authority of Singapore (MAS). MAS has two major functions: financial regulation and supervision, similar to those of the People’s Bank of China and the China Banking Regulatory Commission. Combined body.

Regarding cryptocurrencies, MAS first put forward regulatory requirements in 2014 in the form of “MAS Regulating Digital Currency Intermediaries’ Statement on Money Laundering and Terrorist Financing Risks”, requiring service agencies to proactively report suspicious transactions.

Subsequently, the “sandbox supervision” system was successively implemented, as well as the “Cryptocurrency Issuance Guidelines” and the “Payment Service Act” around Token financing and sales were released, which improved the regulatory rules for cryptocurrency business.

Sandbox supervision (sandbox)

In 2016, MAS launched a “regulatory sandbox” system. The sandbox system allows FinTech companies to implement projects within a limited scope. That is, MAS allows innovative projects to be provided with a green environment for experimentation without the introduction of specific regulatory rules. The premise is Projects must be sandboxed in advance.

A project licensed by the sandbox is equivalent to receiving moderate regulatory support and has the right to engage in business that may conflict with the current law within the specified time and area. All data must be disclosed during the period, but the greater advantage is that even if the project is terminated , And will not be held accountable.

Payment Services Act

In 2017, MAS issued the “Guidelines for Issuing Encrypted Currency”, which aims to fill the gap in the legislation of Token issuance, and for the first time explained the Token transaction behavior that needs to be included in the jurisdiction of the Securities Law.

Subsequently, in 2019, MAS formally passed the “Payment Services Act” to comprehensively supervise Token payment services, and proposed a licensing system (licensingregime) that allows service providers to provide the following 7 types of services under the condition of obtaining a license: Account Set up, domestic remittance, cross-border remittance, commercial acquisition, cryptocurrency issuance, payment-type digital Token transaction and trading platform, currency exchange.

The licenses required by MAS are mainly divided into three categories:

  • The money changer license is mainly for business providers of exchange services.
  • Standard payment institution license, for institutions holding cryptocurrency not exceeding 5 million U.S. dollars and monthly transaction volume not exceeding 3 million U.S. dollars, it can provide any combination of all 7 types of payment services.
  • Major payment institution licenses are for large service providers whose scale exceeds standard payment institutions, and have stricter requirements in terms of registered capital, reserve funds, and place of registration.

Since Singapore’s relevant bills did not regulate digital payment Token transactions and platform businesses at that time, the “Payment Services Act” filled this gap very well.

After that, all platforms, wallets and OTC platforms that provide Token payment services must meet relevant anti-money laundering regulations and apply for corresponding licenses before they can operate in compliance.

Malta: Legislation to create a European blockchain island

Will the future rise and fall of the encryption industry be influenced by the policies of these countries?

Malta is the first country in the Mediterranean region to include blockchain technology as a national key development project. It hopes to legislate to expand the industrial economy dominated by blockchain and cryptocurrency, which has attracted Binance and Okex to move their headquarters and registration locations. to here.

The Maltese government has successively passed three important bills, enacting legislation and formulating supporting policies around cryptocurrency, blockchain and distributed ledger technology . They are the Virtual Financial Assets Act and the Maltese The Malta Digital Innovation Authority Act and the Innovative Technology Arrangement and Services Act.

In addition, the Maltese government established the Digital Innovation Authority (MDIA) to provide process specifications including technical standards and specifications, business registration, and official certification around the content of the three major bills.

summary

In the face of innovative technologies, supervision needs to consider the impact of two aspects: the economic dividends that innovative technologies may bring to the economy, and the potential risks brought to the existing economic system. Therefore, reasonable supervision and active legislation are needed to avoid a regulatory vacuum.

Regardless of the benefits of emerging technologies, the only constant is that the regulatory authorities strictly adhere to the bottom line of regulation to prevent the stability of the existing system from being undermined. On this basis, the regulatory authorities try to promote the convergence and integration of new regulations and existing regulations, and explore more flexible implementation plans in practice.

Looking forward to the future, in the face of the increasingly globalized blockchain industry, supervision is also evolving, and the gradual blurring of regional business exchanges will inevitably promote the integration of supervision and closer collaboration between countries. Only when the spirit of supervision is clear and feasible In order to achieve stable and long-term development, the innovation of the blockchain industry can only be achieved through the necessary methods.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/will-the-future-rise-and-fall-of-the-encryption-industry-be-influenced-by-the-policies-of-these-countries/
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