The top five regulatory changes for cryptocurrencies in 2022

    Simar Marwaha
    Simar Marwaha
    Published on December 28, 2022 6:55 AM

    Updated on January 16, 2023 8:26 AM

    2022 has so far seen some movement in terms of regulations, even if there are still a few days left. Let's go through the top 5 of them.
    The top five regulatory changes for cryptocurrencies in 2022
    Source: Unsplash

    The year 2022 was critical for global cryptocurrency regulation. Although certain legislative changes are concerning since they have a stricter attitude toward digital assets, their long-term effects may enable the sector to mature.

    The largest cryptocurrency by market capitalization, Bitcoin, was already in a downward spiral as the year got underway, but key investors, including El Salvador's President Nayib Bukele, were still certain that it would reach a price of $100,000 before 2023. Christmas 2022 saw the price of 1 BTC trading at a little under $17,000.

    Considering important regulatory occurrences in 2022 may increase one's hope for the future. A similar program to limit proof-of-work (PoW) mining was unsuccessful in the European Union, although it was supported in New York. Cryptocurrency is clearly gaining ground in several countries, like Brazil and Russia.

    Also read: Landscape of crypto regulation in Latin America

    Bill: Markets in Crypto-assets

    Given that the European Markets in Crypto Assets bill has cleared all voting phases in the European Parliament and is expected to become law in 2024, it is appropriate to rank it first.

    The comprehensive crypto framework has been under consideration at various phases of discussion since the European Commission originally put up its proposal in September 2020. Some in the sector, like Changpeng Zhao, the CEO of Binance, anticipate it to become a global regulatory standard.

    A clear licensing process is included in the law, with the European Securities and Markets Authority named as the accountable entity. Stablecoin operators must meet strict criteria, and influencers who use cryptocurrency are subject to more legal liability.

    Positively, a planned modification to the bill that would have essentially prohibited PoW mining and the absurd maximum for daily stablecoin transactions of 200 million euros ($212 million) did not make it into the final form. The proposed legislation takes a balanced stance and places a reasonable focus on investor protection.

    Lummis-Gillibrand Vs Warren-Marshall

    In contrast to the European Union, the United States has just recently started the race toward comprehensive law. There are many competitors, which is fantastic news.

    The competition was launched in June with a joint draught from Senators Cynthia Lummis and Kirsten Gillibrand. One of the most anticipated pieces of legislation, the Responsible Financial Innovation Act (RFIA), features a power split between federal regulatory agencies.

    Investment contracts, which the RFIA classifies as "ancillary assets" under the new term, would be governed by the Commodity Futures Trading Commission under the proposed legislation. Decentralized autonomous organizations are defined, the taxation of crypto mining and staking is made clear, and a report on the hotly debated subject of retirement investment in digital assets is started.

    Stablecoins are covered by a number of legislation. The Federal Deposit Insurance Corporation would support stablecoins like fiat deposits under the initial proposal, which was put up by New Jersey Representative Josh Gottheimer. The second, announced in September, seeks a two-year ban on algorithmic stablecoins.

    The Digital Asset Anti-Money Laundering Act, presented in December by Senators Elizabeth Warren and Roger Marshall, is the opposite of the Lummis-Gillibrand bill. It would regulate cryptocurrency ATMs and forbid financial institutions from utilizing digital asset mixers.

    Cryptominers, validators, and unhosted wallets would all need to disclose transactions above $10,000. Senator Warren has pledged to draught comprehensive crypto regulatory legislation that supports the role of regulation by the US Securities and Exchange Commission.

    Russia shifts its stance on cryptocurrency

    Russia, one of the biggest marketplaces for cryptocurrency mining, has left a bad impression on the world this year. It joined the group of nations that view cryptocurrency as a means to lessen their exclusion from the global financial system after becoming the state with the highest sanctions in the world.

    The contrasting stances of the central bank and the finance ministry defined the national crypto regulatory debate before the invasion of Ukraine on February 24. The finance ministry has adopted a more moderate stance than the central bank, which has vehemently opposed proposals to legitimize cryptocurrency.

    When the central bank gave the first license for a digital asset in the spring, the equilibrium was altered. The deputy minister of energy suggested legalizing cryptocurrency mining, while top authorities openly teased the possibility of using Bitcoin as a medium of exchange.

    Since then, at least three pieces of legislation have been discussed in the Russian State Duma. Both bills would include cryptocurrency in the federal tax code, while one would experimentally allow mining. The third had already received the president's signature and forbade the use of digital currency for domestic payments.

    Canada and the US have bans on cryptocurrency mining

    The most unsettling regulatory changes this year may have taken place in the Canadian province of Manitoba and the U.S. state of New York. Both areas, renowned for having ideal natural conditions for cryptocurrency mining, chose to impose moratoria on mining activities.

    Since the beginning of the worldwide debate over the negative environmental effects of proof-of-work cryptocurrency mining, this option has been on the table, with the less energy-intensive proof-of-stake (PoS) consensus mechanism being promoted as a more sustainable substitute.

    Interestingly, the New York moratorium does not outright forbid PoW mining; rather, it only restricts its use of sources of energy that are 100 percent renewable. It once more connects the issue to the "clean energy" controversy as proponents and crypto miners prepare their cases to sway the public.

    Even though just two little regions have started the moratoriums, the huge conflict between advocates of PoW and PoS has not yet been resolved.

    Brazil now accepts bitcoin as a form of payment

    The Brazilian Chamber of Deputies approved a legislative framework at the end of November that makes it lawful to use cryptocurrency as a form of payment there. Although the measure does not make cryptocurrency legal cash, as it did in El Salvador, it is nonetheless important because it lays the groundwork for a thoroughly regulated system.

    The story may seem little in comparison to the major stories regarding regulation in the US or Europe. Nevertheless, it illustrates a persistent pattern of crypto-friendly actions in Latin America.

    While Washington and Brussels have been busy implementing their cautious approaches to digital assets over the last several years, Asian jurisdictions have been sending restrictive signals, Latin American nations have demonstrated aggressive steps toward adoption.

    The countries of El Salvador, Honduras, Paraguay, and Argentina have all begun to accept cryptocurrency as payment for taxes and other expenses. El Salvador continues to promote Bitcoin.

    Cryptocurrency Regulations FAQs

    Is there any regulation on cryptocurrency?

    A unified framework for regulating cryptocurrency would be helpful. This legal latitude allows cryptocurrency firms to innovate and expand fast, but it also means that hazardous business practices that expose customers to danger might go unchecked. In 2021, Kurt Woock began contributing to NerdWallet.

    What happens if cryptocurrency is regulated?

    If properly targeted, more regulatory advice might aid in reducing crypto asset speculation. Increased investor confidence brought on by less speculative activity may entice additional long-term investors who have previously shunned the extremely volatile and speculative crypto sector.

    Who regulates crypto?

    Commission for Trading in Commodities Futures (CFTC): Trading in commodities and futures is governed by the CFTC. These asset class categories allow for the trading of certain cryptocurrencies, placing them under CFTC regulation.

    Why crypto cannot be regulated?

    In essence, a central body or government does not control the issuance of bitcoin tokens. Additionally, it has to do with cryptocurrencies as a form of trade. Without the involvement of a third party, transactions utilizing the blockchain may be carried out, verified, and added to the public ledger.

    Can government seize my crypto?

    Law enforcement can obtain seizure orders for any illegal monies that ultimately end up on compliant exchanges—and many funds eventually do—after satisfying the probable cause and burden-of-proof standards.

    What is the biggest issue that regulators have with cryptocurrencies?

    Whether crypto-based instruments, such as cryptocurrency coins, tokens, and other offers backed by these coins or tokens, fulfill the definition of a "security" under securities legislation is one of the key issues at the root of the conflicts between the crypto sector and financial authorities.