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To ensure MiCA compliance, start by assessing the scope and potential impact on your business. If you need assistance with any aspect of MiCA compliance, our legal experts at Legal Nodes are here to help. Contact us today to discuss your specific requirements and how we can support your compliance journey. This includes securing appropriate licenses from their National Competent Authority, implementing robust security protocols, and establishing operational standards that prioritize consumer protection and transparency. In October 2022, the FSB published A proposed framework for the international regulation of crypto-asset activities, in the form of two separate sets of recommendations, blockchain payments for a public consultation that ran until 15 December 2022. A summary of the consultation responses, together with the individual responses, has been published separately.
The proposed Regulation covers entities issuing crypto-assets, firms providing services around these crypto-assets, firms operating digital wallets, and cryptocurrency exchanges. For crypto-assets that do not qualify as ‘financial instruments’ such as utility tokens https://www.xcritical.com/ or payment tokens, the Commission proposed a specific new framework This framework would replace all other EU and national rules currently governing the issuance, trading and storing of such crypto assets. On May 25, 2018, the EU’s normative legal document on the protection of personal data information, the General Data Protection Regulation (GDPR), was fully implemented.
Missouri’s legislature recently passed HB 1472, which was sent to the governor on May 18, 2022. This bill would modify the offense of money laundering to more broadly encompass financial transactions and adds a definition for cryptocurrency. HB 1053 mandates the Department of Agriculture to create an online program to educate agriculture producers about blockchain technology. SB 25 would allow the treasurer to sell digital security tokens using blockchain technology for state Cryptocurrency wallet financing.
The amendments introduced the term “crypto-asset” (instead of “virtual currency”), placed greater restrictions on managing users’ virtual money, and eased regulation on crypto derivatives trading. Under the new rules, cryptocurrency custody service providers (that do not sell or purchase crypto assets) are brought under the scope of the PSA while cryptocurrency derivatives businesses are brought under the scope of the FIEA. MAS has generally taken an accommodating approach to cryptocurrency exchange regulation, applying existing legal frameworks where possible.
The only solution to reconcile such rights with the very nature of blockchains may be to replace the right to have information “deleted” with a right to “prohibit the use” of personal information by third parties. This could be achieved by a combination of automatic data encrypting when certain conditions are in place (which could mean use of smart contracts) or alternative solutions to prevent said information being accessed when an individual decides to exercise their right. Tools and measures to mitigate cybersecurity risk for developers include audits so smart contracts function as intended, while consumers can stay updated on phishing and how mistakes in granting permissions occur. The considerations may differ when smart contracts are on a private rather than public blockchain.
Unlike traditional currencies, Bitcoin has neither central bank support nor any governmental authority support. Switzerland imposes a registration process on cryptocurrency exchanges, which must obtain a license from the Swiss Financial Market Supervisory Authority (FINMA) in order to operate. Cryptocurrency regulations in Switzerland are also in place for ICOs, and FINMA applies existing financial legislation to offerings in a range of fields – from banking, to securities trading and collective investment schemes (depending on the structure). In 2019, Switzerland’s government also approved a motion that directed the Federal Council to adapt existing financial regulatory provisions to include cryptocurrencies. In September 2020, Switzerland’s parliament passed the Blockchain Act, further defining the legalities of exchanging cryptocurrencies and running cryptocurrency exchanges, in Swiss Law.
In the Securities Law supporting regulations and regulatory document legislation, an investor suitability management system for virtual digital assets can be established so that those who can take risks and those who dare to take risks to become the subjects of innovation. While it is difficult to find a consistent legal approach at the state level, the US continues to progress in developing federal cryptocurrency legislation. As stated above, money transmission laws may apply to certain business activities involving cryptocurrencies. Cryptocurrencies and tokens used as means of payment (EMT) may trigger a licensing requirement if they are intended for payment at third parties, and the network within which they can be used to purchase goods/services is large in terms of geographical reach, type of products/services and/or number of accepting parties. Also, if accounts are operated in connection with currencies, payment instruments or means of payment through which payments are made, the entity holding such accounts may need to become licensed as a payment service provider.
This has led to exploration for wider governmentally accepted adoption in the form of CBDCs (Central Bank Digital Currencies), which are crypto token forms of a country’s official currency issued and governed by the country’s central bank29. Therefore, regulations often include AML and KYC requirements for cryptocurrency exchanges and businesses involved in decentralized payments. DeFi platforms leverage blockchain to offer decentralized financial services, including lending, borrowing, and trading, so users can participate in financial activities without relying on traditional banks. Unlike legacy institutions, DeFi entities such as Maker (developers of DeFi app Oasis) accept cryptocurrency security on the platform, with straightforward systems to establish creditworthiness. China’s third-party payment, represented by Alipay and WeChat Pay, has grown into a global benchmark for inclusive finance under a relatively loose regulatory environment. As of the end of 2018, the proportion of adults using electronic payments was 82.39 % (PBC 2019), which is far ahead in the world.
Although most blockchain projects were historically open source, some projects are now prohibiting commercial use – in part, to avoid “vampire attacks” and to develop a proprietary “moat”. As projects will have to refer to each other to ensure compatibility and to adhere to a developing industry standard, there is potential for IP infringement. Our flagship Central Bank Digital Currency (CBDC) Tracker takes you inside the rapid evolution of money all over the world.
To obtain authorization, CASPs must have at least one EU-based director and maintain a registered office within the EU. Once authorized, CASPs can passport their services across all EU member states, though non-EU providers are limited to reverse solicitation to offer their crypto services to EU residents. The Markets in Crypto-Assets Act is a comprehensive regulatory framework established by the European Union to govern crypto assets in Europe. The act is part of a broader European strategy (the European Commission’s Digital Finance Strategy) and applies to crypto assets that fall outside the scope of traditional EU financial regulations. Exactly how digital assets integrate with existing financial systems can also be directed by lawmakers or government agencies. GAO recommends Congress consider legislation for federal oversight of nonsecurity crypto asset spot markets and stablecoins.
However, the supervision and regulation of cryptocurrency in China are still encountered some problems, such as consumer protection, the opposition between the global asset flow and the supervision of a single sovereign state, and the difficulty in determining the subject of legal responsibility. To seek solutions to these problems in China, the primary task is to define the legal attribute of cryptocurrency, to balance blockchain innovation and financial risk. At the same time, the regulatory sandbox can be used to regulate blockchain-based cryptocurrency. Among others, the core regulatory measures are establishing the technical standard access system, financing audit registration system, and investor suitability management system of blockchain financial enterprises. Recent regulations include amendments to the PSA and to the Financial Instruments and Exchange Act (FIEA), which took effect in May 2020.
An exchange for digital payment tokens is regulated under the PSA as a digital payment services provider or under the FSMA as a digital token services provider. For the purposes of income tax, IRAS views transactions that involve payment tokens for goods or services as barter trade. If businesses receive payment tokens for the goods or services provided, they will be taxed on the value of the underlying goods provided or services performed. The MAS is supportive of the use of blockchain for tokenising assets to create digital assets but is critical of speculation in cryptocurrencies.
Some regions have specific regulations governing cryptocurrency and blockchain transactions, and abiding by them is crucial for a smooth cross-border payment experience. Blockchain enables micropayments, or, in other words, transactions involving minimal amounts of money. Content creators, for example, can benefit as consumers pay small amounts for access to digital content, articles, and other online services. Especially when data becomes the fifth element after land, labor, capital, science, and technology, the protection for it will be unprecedentedly increased. Whether a property can become the object of ownership is not a key factor in how it behaves physically, but whether it can be controlled exclusively by its power without relying on external forces.
The Fifth and Sixth Money Laundering Directives (AMLD 5, AMLD 6) in Europe and FinCEN’s Final Rule in the USA make it clear that virtual currencies and their trade exchanges are subject to anti-money laundering legislation (AML). Blockchain-based payment solutions can be integrated into point-of-sale systems, allowing merchants to accept cryptocurrency payments directly from customers. GoCrypto, a leading crypto payment provider, offers merchants various PoS solutions, such as all-in-one devices and apps that enable merchants to accept bank cards, digital payments, and cryptocurrencies — blockchain-based banking payments included. This package updates certain financial market rules for crypto-assets, and creates a legal framework for regulatory sandboxes of financial supervisors in the EU for using blockchains in the trading and post-trading of securities.
The official timeline is set out by ESMA, and although it is unlikely to change substantially, businesses should keep an eye on ESMA’s website for updates, including on any consultations or adaptations that may be introduced at the last minute. Given the complexity of TFR requirements, implementing all necessary system changes well in advance is crucial. Organizations need to upgrade their infrastructure to properly handle sender and recipient data verification, while ensuring their platforms can seamlessly integrate with inter-CASP data exchange protocols for transaction processing. Asset-referenced tokens may represent a value, a right, or a mix of both, stabilizing their value by using one or more official currencies.
