Solidus Labs Global Crypto Regulation Index

From the crypto and DeFi exponential growth to the dramatic downturn of the past quarter, the rapid volatility of digital asset markets have driven governments globally to respond through legislative, enforcement, regulatory and/or policy actions. 

Given our mission to enable safe and regulated crypto markets, Solidus Labs developed the GCR Index to provide a point-in-time snapshot of where digital asset regulations currently stand, ranking key countries that have taken effective approaches to regulation that both protect consumers and encourage innovation.

Top 5
Rank
Country
Total Score
1
🇧🇸
The Bahamas
4.90
2
🇧🇲
Bermuda
4.75
3
🇲🇹
Malta
4.70
4
🇨🇭
Switzerland
4.55
5
🇷🇸
Serbia
4.50
Bottom 5
Rank
Country
Total Score
38
🇹🇷
Turkey
2.10
39
🇦🇷
Argentina
1.85
40
🇷🇺
Russia
1.65
41
🇮🇳
India
1.60
42
🇨🇳
China
1.20

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Methodology

How we ranked them
zero-to-five

When determining which countries have implemented crypto regulatory regimes that protect investors and encourage innovation, we gave each country a score of 0 to 5 in each category, with 5 being the best, based on its actions in the following categories. 

Then the score was multiplied by the weight applied to that category. The scores were then added together resulting in a final score for each country on a scale of 0 to 5. That score resulted in a rank order for each country.

Regulatory Framework

The Regulatory Framework category considers whether the country has a regulated digital assets market with clear rules and regulatory oversight to ensure consumer protection and facilitate innovation.

Key Questions:

  • Has the country enacted regulatory requirements for the digital asset industry? 
  • How clear and comprehensive are the regulations?
  •  Do regulations include investor protection provisions?
  •  If regulations specific to digital assets are not in place, are traditional financial service laws clear and are digital asset firms expected to follow traditional market regulations? 
Countries given a 5 score:

Clear, comprehensive regulatory framework in place

  • A comprehensive digital asset regulatory framework is in place.
  • The regulations have been implemented, and digital asset market participants are operating under the regulations.
  • The regulations include a classification of digital assets, registration / licensing requirements,
Countries given a 4 score:

Robust financial regulations for traditional finance that cover digital asset markets.

Or

The country has enacted a regulatory framework, but the country does not have a history or tradition of robust financial regulations.

  • The country has in place a robust regulatory framework for traditional financial services that clearly covers digital assets.
  • The country has not necessarily enacted a regulatory framework specifically for digital assets, though may have instituted pieces of such a framework.
  • The regulations a country may have in place include a classification for digital assets, AML/CFT requirements and registration / licensing requirements.
Countries given a 3 score:

Limited or non-comprehensive digital asset regulations have been enacted.

Or

The country has enacted a regulatory framework, but the country does not have a history or tradition of robust financial regulations.

  • The country has enacted some aspects of digital asset regulations (such as classifying digital assets and AML/CFT requirements), but has not enacted a comprehensive regulatory framework and still lacks many regulations. These regulations include registration and licensing requirements, market integrity rules, among others.
  • Governments are utilizing digital assets or blockchain technology in notable ways (e.g, a Central Bank Digital Currency).
Countries given a 2 score:

Digital asset regulations have been drafted, but have not been enacted.

  • The country has introduced or proposed a digital asset regulatory framework, but has not enacted one yet.
  • The country has enacted some formal digital asset regulations (such as AML/CFT requirements), but still lacks many aspects. These regulations include registration and licensing requirements, a regulatory classification of digital assets, market integrity rules among others.
Countries given a 1 score:

The country has limited or unclear regulations.

  • The country has unclear digital asset regulations and the government has made no indication that they will be drafted or enacted in the near future.
  • The country’s regulatory activity includes banning digital asset activities.
Countries given a 0 score:

No regulatory framework in place for digital assets and traditional financial market regulations are not robust.

  • The country has no formal digital asset regulations.
  • The financial markets and the country’s financial regulatory structure are not robust.

Market Surveillance & Anti-Market Manipulation

The Market Surveillance and Anti-Market Manipulation category dives deeper into the substance of each country’s regulatory regime, ranking its inclusion market integrity aspects.

Key Questions:

  • Does the country have market integrity rules in place specifically for the digital asset space?
  • Does the country require that digital asset service providers monitor or surveil for market abuse and manipulation?
  • Has the country issued market integrity and market surveillance guidelines? 
Countries given a 5 score:
  • Law and/or regulations clearly require market participants to institute market surveillance and prevent market manipulation.
Countries given a 4 score:
  • Market surveillance requirements or anti-market manipulation rules for digital assets have been adopted through regulatory guidance rather than force of law.
Countries given a 3 score:
  • Market surveillance requirements or anti-market manipulation rules are currently in development as part of a larger digital asset regulatory framework.

Or

  • The country has already adopted market manipulation prohibitions for digital assets, but does not have a traditionally robust regulatory environment for financial markets.
Countries given a 2 score:
  • Market surveillance requirements or anti-market manipulation rules are in place for traditional financial markets, but do not necessarily cover digital assets.
Countries given a 1 score:
  • Market surveillance requirements or anti-market manipulation rules for digital assets are unclear or are not transparent.
Countries given a 0 score:
  • There are no market surveillance requirements or anti-market manipulation rules for digital assets.

Registration Requirements

The Registration Requirements category addresses another aspect of the regulatory regime, assessing licensing and registration processes and requirements.

Key Questions:

  • Does the country have clear registration or licensing requirements specifically for digital assets service providers? 
  • If so, is the process for registering or licensing efficient and timely?
Countries given a 5 score:
  • The country has enacted clear and timely digital asset registration and licensing requirements that cover multiple types of digital asset service providers.
  • The registration and licensing processes are efficient.
Countries given a 4 score:
  • The digital asset registration and licensing requirements have been enacted, but may lack some clarity and may not cover all types of digital asset service providers.
  • The registration and licensing processes are efficient.
Countries given a 3 score:
  • The digital asset registration and licensing requirements have been enacted, but are not sufficiently clear and timely.

Or

  • The registration and licensing processes for digital assets are expensive.
Countries given a 2 score:
  • The registration and licensing requirements are under development as part of a larger regulatory framework, but have not been enacted.
Countries given a 1 score:
  • The digital asset registration and licensing requirements are unclear or are not transparent.
Countries given a 0 score:
  • No digital asset registration requirement has been enacted, and there is no indication of one being enacted.

AML/CFT

The AML/CFT Requirements category considers a country’s AML/CFT regime.

Key Questions:

  • Does the country require digital asset service providers to follow traditional AML/CFT reporting requirements?
  • What is the country’s FATF rating for AML compliance?
  • Is the country a jurisdiction under enhanced monitoring as determined by FATF?
Countries given a 5 score:
  • Clear AML/CFT requirements have been adopted for digital assets in a country with traditionally robust AML/CFT compliance requirements.
Countries given a 4 score:
  • Clear AML/CFT requirements have been adopted for digital assets, but the country’s traditional AML/CFT compliance requirements are less robust than others.
Countries given a 3 score:
  • AML/CFT requirements are part of the traditional financial markets regulations and at least some types of digital assets fall under these regulations.
Countries given a 2 score:
  • AML/CFT requirements are being developed as part of a larger digital assets regulatory framework, but have not been enacted.
Countries given a 1 score:
  • AML/CFT requirements are unclear for digital assets.
  • The country has been placed on FATF’s most recent list of “Jurisdictions under Increased Monitoring.”
Countries given a 0 score:
  • AML/CFT requirements for digital assets have not been enacted.
  • The country has been placed on FATF’s most recent list of “Jurisdictions under Increased Monitoring” or are under international sanctions.

Full Index

#
Country
Total
Legal
Regulation
Registration
Surveillance
AML/CFT
1
🇧🇸
4.90
5
5
5
5
4
2
🇧🇲
4.75
5
5
5
4
4
3
🇲🇹
4.70
5
5
4
5
3
4
🇨🇭
4.55
5
4
5
4
5
5
🇷🇸
4.50
5
4
4
5
4
6
🇬🇮
4.45
5
5
5
4
1
7
🇧🇭
4.35
5
4
4
4
4
7
🇲🇾
4.35
5
4
4
4
4
9
🇯🇵
4.25
5
4
5
2
5
10
🇰🇾
4.20
5
5
4
3
1
10
🇸🇬
4.20
5
4
3
3
5
12
🇹🇭
4.10
4
4
5
4
4
13
🇱🇮
3.85
5
3
4
2
5
13
🇦🇪
3.85
5
3
5
4
1
15
🇸🇻
3.80
5
4
4
1
3
16
🇫🇷
3.65
4
3
4
3
5
16
🇩🇪
3.65
4
3
4
3
5
16
🇰🇷
3.65
4
3
4
3
5
19
🇺🇸
3.55
4
3
3
3
5
20
🇦🇱
3.45
4
4
3
3
1
21
🇬🇧
3.40
4
3
3
2
5
22
🇮🇲
3.30
4
3
3
2
4
23
🇦🇺
3.25
4
2
3
3
5
23
🇪🇪
3.25
4
3
3
1
5
23
🇳🇬
3.25
3
3
3
4
4
23
🇺🇦
3.25
4
3
4
1
4
27
🇨🇦
3.20
4
2
4
2
5
27
🇳🇱
3.20
4
2
4
2
5
27
🇪🇸
3.20
3
3
3
3
5
30
🇱🇺
3.10
4
2
3
2
5
31
🇭🇰
3.05
3
3
4
2
4
32
🇲🇽
3.00
4
2
3
2
4
33
🇮🇱
2.95
4
2
3
1
5
34
🇧🇷
2.85
4
3
2
1
2
34
🇱🇹
2.85
4
2
2
1
5
36
🇨🇴
2.60
3
2
4
1
4
37
🇿🇦
2.20
3
2
2
1
2
38
🇹🇷
2.10
3
2
2
1
1
39
🇦🇷
1.85
2
2
2
1
2
40
🇷🇺
1.65
2
2
2
1
0
41
🇮🇳
1.60
1
2
2
1
3
42
🇨🇳
1.20
0
3
0
0
3

Albania

Crypto is Banned

Rank

20

Total Score

3.45

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Albania has instituted one of the more comprehensive digital asset regulatory frameworks in the world. The Law On Financial Markets Based on Distributed Ledger Technology established a legal framework, registration requirements, AML/CFT requirements, rules against market manipulation and other general requirements and rules for digital asset service providers operating in Albania. 

Albania is included on FATF’s list of “jurisdictions under increased monitoring” as of June 2022. According to FATF, since “February 2020, when Albania made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime, Albania has taken steps towards improving its AML/CFT regime…” If it weren’t for Albania’s inclusion on FATF’s list of “jurisdictions under increased monitoring” since February 2020, the country would have received a higher rating from this report.

Argentina

Crypto is Banned

Rank

39

Total Score

1.85

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

While Argentina is one of the fastest growing countries in the world for cryptocurrency adoption, it lacks a comprehensive regulatory framework for digital asset service providers. Furthermore, the use of digital assets has come under question as a result of recent government actions. In March of this year, Argentina’s Senate approved a $45 billion bailout deal with the International Monetary Fund (IMF) that included a provision that discouraged the use of cryptocurrencies in the country. Then in May, 

Argentina’s central bank (BCRA) announced that “Financial institutions may not carry out or facilitate their clients to carry out operations with digital assets, including cryptoassets…”

Recent reporting indicates that the country’s financial intelligence unit is working to implement AML reporting requirements on digital asset service providers. Argentina’s central bank is also working on improving KYC requirements for digital wallets. Tax compliance, meanwhile, has been a notable area of focus for Argentina’s government regarding virtual asset service providers. The country’s tax agency has asked virtual asset providers to maintain information on their clients for tax purposes and has announced, on multiple occasions, that it will strengthen the tax system to bring virtual assets more into tax compliance.

Australia

Crypto is Banned

Rank

23

Total Score

3.25

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Australia has adopted some regulatory requirements for the digital asset industry, but it has not enacted a comprehensive regulatory framework. The country’s current regulatory treatment of digital assets depends on whether it is classified as a financial product / service or not. If it is classified as a financial product or service, it is regulated by the Australian Securities and Investment Commission (ASIC). If it is not classified as a financial product or service, then it is considered a consumer product and is regulated by the Australian Competition and Consumer Commission (ACCC) under the Australian Consumer Law. Digital asset exchanges and trading platforms that use what are deemed to be financial products are required to be licensed by Australia’s ASIC, unless they obtain an exemption. Regardless of whether a digital asset service provider uses assets that are classified as a financial product or service, they must register with AUSTRAC and follow the government’s AML/CFT compliance and reporting obligations. 

Australia also notably approved spot bitcoin and digital asset ETFs for trading on public exchanges. The first ones went live in May 2022.

If Australia wants to move out of its current ranking in the middle of the pack, it needs to enact a comprehensive regulatory framework for digital assets that includes licensing requirements and market conduct rules. The Australian government has recently signaled that it plans to eventually adopt a regulatory framework for digital assets. In April 2022, the Australian Prudential Regulation Authority (APRA) issued a letter that set out a policy roadmap for prudential regulations of the financial institutions engaging in activity with crypto-assets for implementation by 2025. The policy roadmap is focusing on operational, investment, and credit risk addressing such issues as fraud, cyber, conduct, AML/CTF and technology risks.

Bahrain

Crypto is Banned

Rank

7

Total Score

4.35

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Bahrain’s central bank issued final rules for digital asset service providers and exchanges in February 2019 that created a comprehensive regulatory framework for the digital asset market. The Central Bank of Bahrain Rulebook: Crypto-Asset Module (CRA) provided rules for licensing, governance, minimum capital, risk management, AML/CFT, standards of business conduct, avoidance of conflicts of interest, reporting, and cyber security for digital asset services among other requirements. The CRA also has rules against market manipulation that require digital asset exchanges to “have in place effective systems, procedures and arrangements to monitor and detect market abuse.”

Bermuda

Crypto is Banned

Rank

2

Total Score

4.75

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Bermuda is one of the select number of countries that has enacted a comprehensive regulatory framework for digital assets. The Digital Asset Business Act 2018 (DABA) provides a classification for digital assets, establishes registration requirements for digital asset businesses and AML/CFT requirements for digital asset service providers. DABA also established a Code of Practice that provides guidance on the duties, requirements, procedures, standards and sound principles for digital asset businesses including having “policies related to market manipulation and the appropriate use of its products and services,” as well as other consumer protection policies.

Regarding its AML/CFT compliance specifically, a January 2020 CFATF report found that Bermuda made significant improvements in the area of FATF recommendation compliance.

As a result of having one of the most clear and open digital asset regulatory environments, the country has become a popular destination for digital asset firms to operate in. Among the digital asset firms with operations in Bermuda are Bittrex Global, BlockFi International, Circle and CrossTower. In addition, the Bermuda Monetary Authority (BMA), the agency that regulates Bermuda's financial services sector, has licensed 14 digital asset businesses as of mid-June 2022.

Brazil

Crypto is Banned

Rank

34

Total Score

2.85

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Brazil’s regulatory requirements have not kept pace with digital asset adoption among its population and businesses. The number of cryptocurrency exchanges operating in the country has increased dramatically in recent years, with companies like Binance, Coinbase, FTX, Kraken and Crypto.com expanding into the country. Only recently has Brazil begun a legislative process to address digital assets. In April 2022, Brazil’s Senate passed a bill that would provide a regulatory framework for the digital asset industry. Until that regulatory framework is enacted, Brazil does not have AML/KYC requirements specifically for digital asset companies in place nor does it have licensing requirements for digital asset exchanges. 

Despite a lack of regulatory clarity, the country has been a leader in digital asset ETFs. In March 2021, Brazil became the second country in the Americas (after Canada) to approve a Bitcoin ETF and recently launched the world’s first DeFi ETF on the country’s stock exchange. The country’s central bank is also planning a CBDC pilot project for sometime in 2022.

Brazil’s rating would improve once it enacts a comprehensive digital asset regulatory framework that includes a clear regulatory classification of digital assets, who the industry’s regulator is and their regulatory powers, registration and licensing requirements, market conduct and consumer protection rules such as prohibitions against market manipulation, and AML/CFT compliance requirements.

Canada

Crypto is Banned

Rank

27

Total Score

3.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Despite not having a comprehensive digital asset regulatory framework, the Canadian government at the federal and provincial levels has been actively involved in regulating the industry. In June 2014, Canada became one of the first countries in the world to amend its AML laws to include virtual currencies and required digital asset service providers to register with FinTRAC as money services businesses (MSB). In 2021, it became the first country to approve a physically-backed Bitcoin ETF. Regulators have also approved an Ethereum ETF. 

All 13 provincial and territorial securities regulators work together under the Canadian Securities Administrators (CSA). Provincial securities agencies generally oversee digital assets firms in Canada. However, due to each provincial regulator taking their own enforcement actions, certain provinces are more welcoming of digital asset entities than others. For example, Bitfinex and Binance have each announced that they will no longer service customers in the Ontario Province, with Binance referencing “compliance efforts” as the reason for its withdrawal. 

Digital asset entities have received mixed engagement from Canada political leaders and regulators. In the Province of Alberta, for example, Premier Jason Kenney tweeted in March of this year that “Alberta is open for crypto.” While the Ontario Securities Commission (OSC) has taken a hardline stance against digital asset entities and has frequently initiated enforcement actions against them. “Foreign crypto asset trading platforms that want to operate in Ontario must play by the rules or face enforcement action… we refuse to tolerate non-compliance with Ontario securities law.” said Jeff Kehoe, Director of Enforcement at the OSC.

Cayman Islands

Crypto is Banned

Rank

10

Total Score

4.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The Cayman Islands has enacted a comprehensive digital asset regulatory framework called the Virtual Asset (Service Providers) Law, 2020 (VASP Act). The VASP Act implemented registration requirements, AML/CFT requirements and general obligations for digital asset service providers. The Cayman Islands Monetary Authority (CIMA), the country’s digital assets regulator, has issued a supplemental document to the VASP Act called the “Statement of Principles for the Conduct of Virtual Asset Services” that sets out standards digital asset service providers should follow and is used as a measure by CIMA to assess compliance. For example, digital asset service providers must have “price discovery mechanisms to prevent price manipulation and other unfair trading practices including collusion and front-running” as well as protections for customer data and assets.

Despite its robust regulatory framework enacted, the Cayman Islands’ rating in this report is affected by AML/CFT concerns outlined in FATF’s latest list of jurisdictions under increased monitoring. According to FATF, “In February 2021, the Cayman Islands made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime.”

China

Crypto is Banned

Rank

42

Total Score

1.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

China has banned all digital asset-related activity in the country, including exchange and mining activities. "Virtual currency-related business activities are illegal financial activities," the People's Bank of China said in September 2021. The most recent ban is one of several digital asset bans that China has enacted over the years. The Chinese government also instituted notable bans in 2013 and 2017. As digital asset businesses cannot legally operate in China, its rating is low in this report. At the same time, China is moving forward with digital yuan, expanding its trial to more cities and reaching 140 mln users.

Colombia

Crypto is Banned

Rank

36

Total Score

2.60

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Colombian regulators were cautious in their approach to digital assets and acted early compared to other markets regulators. In 2014, the Superintendencia Financiera de 

Colombia (SFC) issued digital asset guidance that blocked financial institutions from holding, investing in or brokering Bitcoin transactions. That was followed by the Central Bank of Colombia issuing a statement clarifying that Bitcoin is not a currency and not a means of payment in Colombia. Recently, Colombia has signalled a more open regulatory stance by launching a program to allow Colombian banks to test services with digital asset service providers. Partnership examples include Banco De Bogota partnering with Bitso and buda.com and Bancocolombia partnering with Gemini.

Colombia’s regulators have also enacted AML/CFT requirements for digital asset service providers. This includes Resolution 314, which establishes that cryptocurrency transactions over $150 have to be reported to the Financial Information and Analysis Unit (UIAF), the anti-money laundering watchdog of Colombia. 

Overall, Colombia’s digital asset regulations are still far from complete as the country lacks a comprehensive regulatory framework, registration requirements and anti-market manipulations rules for digital asset activity.

El Salvador

Crypto is Banned

Rank

15

Total Score

3.80

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

El Salvador has embraced digital assets and cryptocurrencies as no other country in the world has. With its recognition of Bitcoin as legal tender under law, Bitcoin and cryptocurrencies have quickly become a major pillar of the country's economy. From its future Bitcoin city, to Bitcoin bonds, to an animal hospital built with Bitcoin funding, to the rise of Bitcoin communities like Bitcoin Beach in El Zonte, the country is and will be heavily invested in the future of digital assets. 

El Salvador’s Bitcoin law also created a variety of regulatory requirements for Bitcoin service providers. For example, under Article 3, exchanges that offer Bitcoin are required to register with El Salvador’s Central Reserve Bank (BCR) as part of the “Registry of Bitcoin Service Providers.” Other provisions provide for AML compliance, record keeping requirements and more.

El Salvador’s ambitious adoption of bitcoin as legal tender as well as its Bitcoin Law that established a digital asset regulatory framework raised its ranking significantly. However, due to the country’s uncertain political climate, the country is not ranked as highly as it otherwise would be.

Estonia

Crypto is Banned

Rank

23

Total Score

3.25

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Estonia does not have a comprehensive digital asset regulatory framework enacted, but has implemented registration and AML/CFT requirements for digital asset providers. After originally having easy and open registration policies in place, Estonia tightened and restricted digital asset registration requirements. In December 2020, Estonia’s Financial Intelligence Unit (FIU) announced that it had withdrawn more than 1,000 activity licenses of digital asset companies in 2020. In October 2021, Matis Mäeker, head of the Estonian Financial Intelligence Unit (FIU), said in an interview that all cryptocurrency operating licenses in Estonia should be revoked, and the system rebuilt from scratch.

Estonia has also added restrictions to its AML/CFT requirements for digital asset providers. The new rule requires authorities to fine digital asset service providers who offer anonymous accounts or wallets or who are anonymous themselves.

As a member of the European Union (EU), Estonia is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

France

Crypto is Banned

Rank

16

Total Score

3.65

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

France has implemented digital asset regulations through the PACTE Act that was enacted in May 2019. The PACTE Act established a status of digital asset service provider in France and made it mandatory for digital asset service providers (DASPs) who provide digital asset custody services to third parties or exchange digital assets for legal tender are subject to registration with the AMF

France has also implemented KYC requirements and AML/CFT requirements for DASPs. 

In addition to the digital asset regulations in place, France has a robust financial and securities regulatory infrastructure for traditional securities markets. As a member of the European Union (EU), France is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Germany

Crypto is Banned

Rank

16

Total Score

3.65

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Despite not having a comprehensive regulatory framework enacted yet, the German government has actively implemented regulations and rules for the digital asset space.

Germany was one of the first countries in the world to give Bitcoin a classification in August 2011 when it qualified the new asset as a unit of account and, therefore, a financial instrument. Since January 2020, when Germany enacted the German Act Implementing the Amending Directive on the Fourth EU Anti-Money Laundering Directive, financial institutions that engage in crypto custody activities (including trading) are required to be licensed by BaFin. Most recently, in May of this year, digital asset investors in Germany received good news when the government announced that the sale of virtual currencies, such as Bitcoin, will not be taxed if held for one year or more.

In addition to the digital asset regulations in place, Germany has a robust financial and securities regulatory infrastructure for traditional securities markets. As a member of the EU, Germany is subject to all EU regulations regarding financial and securities markets, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Gibraltar

Crypto is Banned

Rank

6

Total Score

4.45

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

With comprehensive regulations enacted, clear registration and market integrity rules in place and positively engaged government leaders, Gibraltar received one of the highest ratings in the report. In January 2018, Gibraltar became one of the first countries in Europe to enact a regulatory framework for digital asset service providers. The Digital Ledger Technology (DLT) Regulatory Framework requires any firm carrying out activities in distributed ledger technology (DLT) to be registered with the Gibraltar Financial Services Commission (GFSC) as a DLT Provider. In addition, the GFSC’s Guidance Note on market integrity that was released in April, provided comprehensive “requirements and considerations” about preventing market manipulation and implementing consumer protection standards that are expected of digital asset service providers by the GFSC.

Hong Kong

Crypto is Banned

Rank

31

Total Score

3.05

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Hong Kong does not yet have a comprehensive digital asset regulatory framework implemented, but expects to introduce a framework in July 2022. If a digital asset provider offers digital assets that are considered “securities” by the Securities & Futures Commission of Hong Kong (SFC), then the digital asset service provider has the same regulatory and licensing requirements as any other platform that offers securities. However, the SFC currently does not have power to grant a license to or supervise a platform that only trades non-security virtual assets or tokens. Virtual assets of this type are not “securities” or “futures contracts” under the Securities and Futures Ordinance (SFO). Regarding AML/CFT requirements, the SFC expects digital asset service providers to establish and implement adequate and appropriate AML/CFT policies, procedures and controls. 

Looking ahead, in addition to its plan to introduce a regulatory framework and licensing regime for digital assets, Hong Kong is planning to introduce a stablecoin regulatory regime by 2023 or 2024.

While Hong Kong was seen as an innovation and crypto hub when the industry first stood up, it has recently been criticized as having “unfriendly crypto rules” that have led digital asset service providers such as Crypto.com and FTX to shift their business to other countries. Giving further credence to the criticism, Hong Kong’s regulators issued a circular earlier this year that said digital assets “which are considered complex products should only be offered to professional investors.”

India

Crypto is Banned

Rank

41

Total Score

1.60

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Currently, India does not have a comprehensive regulatory framework governing the use of digital assets. Companies dealing in cryptocurrencies are required to disclose their holdings, profits and losses and deposits or advances of cryptocurrencies to the Indian government’s Registrar of Companies (ROC). Digital asset service providers  “may” follow AML, CFT, and KYC obligations under the country’s Prevention of Money Laundering Act (PMLA). 

The legal status of digital assets in India has changed over the years. In April 2018, the Reserve Bank of India announced that entities regulated by the central bank are prohibited from dealing in or facilitating any dealing in virtual currencies. However, that policy was overturned by India’s Supreme Court in May 2020. In March 2021, India’s Minister of Finance, Nirmala Sitharaman, gave some legal clarity to the digital asset space when she said in an interview with India Today that India will “allow a certain amount of a window for people to use...cryptocurrency…and fintech, which depend on those experiments, will have that window available for them. [We’re] not going to shut it off.” Recently, the government enacted a new tax law on digital asset transactions, giving the industry a little additional legal certainty on the industry’s status.

Isle of Man

Crypto is Banned

Rank

22

Total Score

3.30

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

No comprehensive regulatory framework for digital assets has been enacted in the Isle of Man as of July 2022. Unless an entity is dealing in digital assets that are considered “security tokens,” it is not required to obtain an additional license from the Isle of Man’s Financial Services Authority (FSA). Security tokens are defined as tokens that provide rights and obligations akin to ‘investments’, according to the FSA. 

The Isle of Man has enacted AML/CFT requirements for digital asset service providers, including registration requirements. All digital asset service providers, regardless of whether they offer digital assets that are considered to be security tokens or not, are required to register with the FSA for AML/CFT purposes and follow all requirements.

At the beginning of 2021, the FSA helped blockchain businesses through its ‘subject to’ registration regime, which allowed entities who met all registration requirements except a real presence (residency) in the Isle of Man to have an offer of registration should they meet the real presence/residency requirements within a set deadline. 

The Isle Man established the Digital Isle of Man, a private-public partnership executive agency, that offers an “Accelerator Program” to help guide blockchain companies through the regulatory process (such as relocation and access to the sandbox). According to the Regulatory Lead at the Digital Isle of Man Steve Billinghurst, the “FSA continues to support good quality crypto business being able to work within a leading regulatory jurisdiction in a way that maintains the fight against financial crime, supports the positive reputation of the Isle of Man and provides consumer protection.”

Israel

Crypto is Banned

Rank

33

Total Score

2.95

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Israel does not have a comprehensive digital asset regulatory framework enacted and its regulatory structure is still developing. The country’s regulators have implemented and are enforcing AML/CFT requirements for virtual asset service providers (VASPs) and in December 2020, the Israel Securities Authority (ISA) ruled that cryptocurrencies issued by companies are securities, not assets and therefore they will be regulated as securities. 

According to the current head of the ISA, Anat Guetta, the regulator is waiting to see what other regulators do regarding digital asset regulation. Guetta said, “I believe that we will have to learn the state-of-the-art regulations by watching regulatory updates worldwide and learn how to adopt the rules for Israel.”

Japan

Crypto is Banned

Rank

9

Total Score

4.25

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The Japanese government has put into place almost all of the regulatory criteria that this report takes into consideration when rating a country. The government has enacted a comprehensive digital asset regulatory framework (the Payment Services Act), digital asset registration requirements, digital asset AML/CFT requirements and, most recently, a regulatory framework for stablecoins that will take effect in 2023. The only regulatory requirement the country still lacks is market surveillance or anti-market manipulation rules for digital asset providers to follow. 

The stablecoin regulatory framework that Japan’s parliament passed is particularly notable since it is one of the first countries in the world to institute a regulatory framework for stablecoins. The new law will require that stablecoins be linked to the yen or another legal tender and guarantee holders the right to redeem them at face value.

Overall, Japan’s regulations and requirements provide clarity and certainty to the regulatory environment that those entities should expect.

Liechtenstein

Crypto is Banned

Rank

13

Total Score

3.85

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Liechtenstein passed a digital asset regulatory framework law in January 2020 that provides basic requirements of digital asset service providers. The Token and Trusted Technology Service Provider Act (TVTG) - also known as the "Blockchain Act" - provides a legal classification of blockchain systems and defines the term “token” as a new construct to ensure legal certainty. It also gives regulatory oversight of the digital asset industry to the Financial Market Authority (FMA) and requires all digital asset service providers to register with the FMA for AML/CFT purposes. However, the law does not include market surveillance requirements, rules against market manipulation, comprehensive rules on market integrity or consumer protection requirements. Overall, the law does not make digital asset service providers subject to the same regulatory requirements as traditional financial service providers.

As a member of the European Economic Area (EEA), Liechtenstein is subject to certain EU financial and securities regulations, including the upcoming MiCA rules.

Lithuania

Crypto is Banned

Rank

34

Total Score

2.85

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Lithuania has not enacted a comprehensive digital asset regulatory framework, but is currently in the process of developing regulations for the sector. In June of this year, the government announced that it approved amendments to the country’s Law on the Prevention of Money Laundering and Terrorist Financing regarding digital assets. The law could be submitted to the parliament for approval this year. The government already has in place comprehensive AML/CFT requirements for digital asset service providers and a requirement that digital asset service providers notify the Register of Legal Entities of their activities.

As a member of the European Union (EU), Lithuania is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Luxembourg

Crypto is Banned

Rank

30

Total Score

3.10

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Luxembourg does not have a comprehensive digital asset regulatory framework enacted. Digital asset service providers are required to register with the CSSF, but only for AML/CFT purposes. Digital asset licensing requirements specifically for financial regulatory purposes have not been enacted. Luxembourg’s Parliament did pass a bill, titled the Law of 1 March 2019, that gave legal certainty to the transfer of securities via the blockchain. The bill stated that securities accounts recorded on “distributed electronic registers or databases” are considered securities accounts.

Other regulations in place regarding digital assets include requiring credit institutions to segregate digital asset accounts from a bank’s own assets and for fund managers that invest in digital assets to obtain prior authorization from the country’s financial regulator, the CSSF.

Despite the lack of digital asset regulations in place, Luxembourg has a robust financial and securities regulatory infrastructure for traditional securities markets. Included among its regulations for traditional markets are anti-market manipulation rules and consumer protection requirements. In addition, as a member of the EU, Luxembourg is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Malaysia

Crypto is Banned

Rank

7

Total Score

4.35

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Malaysia is among the select number of countries that have already enacted a digital asset regulatory framework or instituted comprehensive bespoke regulations on digital assets. In the country’s Guidelines on Recognized Markets, entities involved in digital asset activities are provided with a clear list of requirements and rules to follow in order to operate in the country. These include registration requirements, AML/CFT requirements, consumer protection rules, market surveillance requirements and rules against market manipulation. Additionally, the Securities Commission Malaysia makes clear that the trading of digital assets on digital asset exchanges (DAXs) are open to all investors and not just institutional investors.

Malta

Crypto is Banned

Rank

3

Total Score

4.70

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The country once known as “Blockchain Island” used to be considered a top location for digital asset entities. Malta was one of the first countries in the world to develop a regulatory framework for digital assets and, even today, it remains one of the most comprehensive in the world. The framework, titled the Virtual Financial Assets Act (VFA), includes all of the necessary regulatory criteria for the country to receive a high rating in this report. Registration and licensing requirements, AML/CFT compliance requirements, market integrity and market manipulation rules and advertisements involving digital assets, are all covered in the framework. For those reasons, Malta has received a high rating in this report. However, with the rise of countries like The Bahamas, Bermuda and Gibraltar and jurisdictions like Abu Dhabi and Dubai, Malta seems to have lost, at least temporarily, its status as one of the most desired locations for participants of the digital asset industry. 

As a member of the European Union (EU), Malta is under the jurisdiction of the EU and is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Mexico

Crypto is Banned

Rank

32

Total Score

3.00

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Mexico is one of the more relatively mature digital asset regulatory environments in Latin America. In March 2018, it became one of the first countries in Latin America to establish formal regulatory requirements for entities involved in digital asset transactions when the government enacted the “Fintech Law.” This implemented requirements for virtual asset service providers (VASPs) to report to the Mexican government transactions that reach or exceed an amount equivalent to approximately $2,700. The country has plans to launch a CBDC by 2024. 

Mexico’s cryptocurrency regulations have even been praised by FATF. According to a FATF report in June 2021, Mexico’s “regulatory framework covers all activities captured by the FATF definition of VASPs and extends to legal and natural persons. Mexico has taken steps to identify persons carrying out unauthorized VASP activity and has seen several VASPs cease operating due to requirements of the registration regime.”

Netherlands

Crypto is Banned

Rank

27

Total Score

3.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The Netherlands does not have a digital asset regulatory framework enacted. Virtual asset service providers are required to register with the central bank - De Nederlandsche Bank (DNB) - but only for AML purposes. Among the AML requirements for digital asset providers are integrity risk analysis, customer due diligence, transaction monitoring and reporting duties. Currently, there are no consumer protections or anti-market manipulation rules specifically for digital asset services.

As a member of the European Union (EU), the Netherlands is under the jurisdiction of the EU and is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

Nigeria

Crypto is Banned

Rank

23

Total Score

3.25

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Nigeria’s SEC recently implemented comprehensive rules for the digital asset industry, including registration requirements, market surveillance and anti-market manipulation clarity and AML/CFT requirements. The country’s new “Rules on Issuance Offering and Custody of Digital Assets” contain comprehensive requirements for virtual asset service providers (VASPs) including additional requirements for digital asset offering platforms (DAOPs), digital asset custodians (DACs) and digital asset exchanges (DAXs).

Nigeria could have received a higher rating in this report, however, due to its lack of a notable traditional financial regulatory infrastructure and its uncertain political environment, it received a lower rating on several key categories.

Russia

Crypto is Banned

Rank

40

Total Score

1.65

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Russia adopted law No. 419059-7 on digital assets and cryptocurrencies in July 2020 providing the main definitions and reference to the regulatory framework of the Russian Central Bank’s Rules of trading with digital currencies, regulatory framework for securities markets, as well as AML law. However, the defined digital asset regulatory framework is not yet implemented. 

Prior to its invasion of Ukraine, Russia had been moving forward with putting into place a cryptocurrency regulatory framework. In late January, it was reported that a road map for regulation had been signed by Dmitry Chernyshenko, the deputy chairman of the government that included introducing KYC and AML rules for crypto platforms. 

Additionally, Russia’s Finance Ministry submitted a draft proposal of cryptocurrency regulations to the government in February 2022. According to the draft law the crypto assets cannot be used as a mean of payment, but can be used as an investment instrument. In its later version in May 2022, the Ministry of Finance included the possibility to use crypto assets to settle payment under international contracts, while the Central Bank of Russia is opposing this draft law. The Central Bank would like to ban issuing and trading of digital currency, as well as prohibit banks to transact in crypto.

Meanwhile, the market shows signs of activity. Sber (formerly known as Sberbank) has announced plans for completing its first digital currency by mid-July. The second-largest second tier bank in Russia, VTB, announced its plans to test using a digital ruble to purchase digital assets in September 2022.

Serbia

Crypto is Banned

Rank

5

Total Score

4.50

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Serbia has enacted a comprehensive regulatory framework for digital assets that has been in force since June 2021. The Law on Digital Assets enacted clear registration and licensing requirements, AML/CFT compliance requirements, user protections, rules prohibiting market manipulation and other general regulatory requirements for the digital asset industry. Serbia’s digital assets regulator, the National Bank of Serbia, has also issued additional regulations and decisions covering digital assets, including the licensing process and the prevention of abuse in the digital asset market.

Serbia has received mostly “compliant” ratings from FATF regarding AML/CFT compliance recommendations that cover digital assets and digital asset providers and Serbia is not listed on FATF’s “grey list.”

Singapore

Crypto is Banned

Rank

10

Total Score

4.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Included in the PS Act are registration, licensing, AML compliance requirements and other general regulations for entities involved in digital asset activity. The regulations lack specific prohibitions against market manipulation in digital asset markets. However, if a digital payment token (DPT) falls under the definition of a “capital markets product,” they are regulated by the Securities and Futures Act 2001, which contains prohibitions against market manipulation.

While Singapore’s licensing regime is considered productive for institutional digital asset entities, the Monetary Authority of Singapore (MAS) is opposed to retail involvement in the asset class. In Guidelines published in January, the MAS clarified that “[digital payment token (DPT)] service providers should conduct themselves with the understanding that trading of DPTs is not suitable for the general public.”

The MAS has reportedly made it very difficult for digital asset firms to obtain registration as a digital payment token service. In December 2021, it was reported that more than “100 out of 170 “digital payment token services” in Singapore have reportedly failed to obtain licenses from the local financial regulator.” Earlier this year, Bybit announced it will move its headquarters from Singapore to Dubai. “For a while, Singapore was making pro-crypto decisions, but now something’s changed course,” said Kyle Samani, founder of the crypto venture capital firm Multicoin Capital in April 2022

It is important to note, however, that in March 2022, multiple notable crypto exchange platforms, including Paxos, Sygnum and Hodlnaut, received in-principle approval from the MAS to operate digital payment token services in the country. 

South Africa

Crypto is Banned

Rank

37

Total Score

2.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

South Africa has not enacted a regulatory framework or clear regulations for the digital asset space. Formal regulations are currently in development and a digital asset regulatory framework could be introduced sometime this year, according to the Financial Sector Conduct Authority (FSCA) Commissioner Unathi Kamlana. 

South Africa also lacks clear registration requirements for entities involved in digital asset activity. The FSCA has issued warnings against digital asset exchanges such as Binance and FTX for not being registered as an FSP, but the registration process for digital asset service providers is not clear, transparent or efficient for firms to follow and has not been clearly formalized into law or in regulations. In April 2022, the FSCA issued a request for information from financial service providers (FSPs) operating in the country about digital asset related activities in order to “assist the FSCA in obtaining a better understanding of the extent to which FSPs are currently operating in the crypto asset environment.”

Even though South Africa is not listed on FATF’s “grey list,” the country has received “no compliance” ratings on two FATF recommendations (12 and 15) regarding virtual asset service providers (VASPs) and a score of only “partially compliant” on recommendation 10. Combining its FATF rating with its lack of regulatory clarity on AML/CFT requirements for digital asset service providers has resulted in South Africa receiving a lower rating in the AML/CFT category.

South Korea

Crypto is Banned

Rank

16

Total Score

3.65

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

There is currently serious regulatory uncertainty in South Korea due to the recent collapse of Terra (UST) and questions about what new regulations will be enacted in response. Following the collapse of Terra, the Korean government has begun taking additional regulatory action to address stablecoin and digital asset risks. The Financial Services Commission (FSC) issued a report to South Korea’s National Assembly in May 2022 that recommends the domestic crypto industry adopt a licensing system for exchanges and calls for new regulations to mitigate insider trading, pump-and-dump schemes and wash trading. According to recent news reports, two of South Korea’s financial regulators - the FSC and the Financial Supervisory Service (FSS) -  asked crypto exchanges to share information on transactions linked to UST and Luna, including their trading volumes and the number of relevant investors. Other reports said that the South Korean government plans to form a committee, the Digital Assets Committee, to oversee the digital assets market. The Committee would provide criteria for the listing of coins by exchanges, introduce investor protections measures and monitor unfair trading, according to the news reports. 

Prior to the collapse of Terra, there was optimism about the country’s digital asset regulatory future. The newly elected President Yoon Suk-yeol, who only took power in May, campaigned on a pro-cryptocurrency platform and pledged to ease digital asset regulations, including reducing taxation on crypto gains. This stands in contrast to the previous presidential administration of Moon Jae-in, whose government had regulated the digital asset market with what was described as ‘heavy-handed regulations’. 

Regardless of the questions surrounding South Korea’s future digital asset regulations, the country currently only has AML/CFT regulations in place for digital assets, including registration requirements. No digital asset regulatory framework has been enacted, nor does the country have license requirements or anti-market manipulations rules for digital assets. However, reports indicate that the government plans to introduce a comprehensive digital asset regulatory framework called the Digital Asset Basic Act (DABA) in the next year.

Spain

Crypto is Banned

Rank

27

Total Score

3.20

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Spain does not have a digital asset regulatory framework in place. However, the country has put in place several registration requirements that digital asset firms and exchanges must complete. Digital asset firms are required to register with the financial intelligence unit SEPBLAC for AML and CFT purposes. Digital asset exchanges are also required to register with the Bank of Spain before beginning operations in the country. The Spanish government also requires that virtual asset service providers report the balances held by users of their platforms to the Spanish Tax Agency.

Recently, Spain’s financial regulator, the CNMV, imposed new restrictions on influencers promoting cryptocurrencies. The requirements include influencers and their sponsors to pre-notify CNMV authorities with at least 10 days of notice of some posts and to include a warning of the risks involved in cryptocurrencies. 

Additionally, as a member of the EU, Spain is subject to all EU financial and securities regulations, including requirements for digital assets. This includes EU AMLD5 rules, MiFID II rules and the upcoming MiCA rules.

In order for Spain to receive a higher rating, it will need to enact a comprehensive digital asset regulatory framework that includes a clear classification of digital assets, registration and licensing requirements and market conduct and consumer protection rules such as prohibitions against market manipulation.

Switzerland

Crypto is Banned

Rank

4

Total Score

4.55

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Switzerland has implemented a digital asset regulatory structure that is among the most comprehensive in the world. The country established a comprehensive regulatory framework for digital assets and service providers through the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT Act) in August 2021. The law implemented digital asset registration requirements and AML/CFT requirements. FINMA released further digital asset guidelines that include rules against market manipulation, but the guidelines do not “give rise to any legal claim.

Switzerland also provides what is considered to be a politically friendly environment for entities operating in the digital asset space. Various cities and other administrative jurisdictions within Switzerland have enacted policies that embrace the new technology and attempt to attract more digital asset industry participants. For example, the Canton of Zug, known as “crypto valley,” has allowed citizens of the jurisdiction to pay their taxes in cryptocurrency since 2021. Switzerland’s city of Lugano has launched several projects that embrace the digital asset industry, including a project called “Plan B” in partnership with Tether that aims to attract blockchain startups and turn the city into the “European Capital of Crypto.” 

Combining Switzerland’s clear digital asset regulations with its embrace of the industry gives the country a very high rating in this report.

Thailand

Crypto is Banned

Rank

12

Total Score

4.10

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Thailand has been very active in regulating the digital asset space. They enacted a digital asset regulatory framework that contains a definition and classification for digital assets, registration requirements, market integrity rules (including rules against market manipulation) and AML/CFT requirements. However, Thailand has made some policy decisions to limit certain activities by  "by banning NFT trading and the use of cryptocurrencies as payment methods

Thailand’s Emergency Decree on Digital Asset Business B.E. 2561 (or Digital Assets Act) provides Thailand with a digital asset regulatory framework.

The Bahamas

Crypto is Banned

Rank

1

Total Score

4.90

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The Bahamas has received a high rating because it provides a comprehensive and progressive regulatory regime, clear registration requirements and a positive environment set by government action and rhetoric to foster economic growth through a robust digital asset industry. 

In December 2020, the government established one of the world’s few comprehensive regulatory frameworks for digital assets. The landmark law, called the Digital Assets and Registered Exchanges Act (DARE), includes a legal definition for digital assets, licensing and registration requirements for exchanges, and investor protection standards, as well as compliance standards in line with the Financial Action Task Force (FATF) recommendations for anti-money laundering measures and the relevant principles of the International Organization of Securities Commissions. In fact, in its latest mutual evaluation report (MER), FATF noted that The Bahamas “has made significant progress in addressing technical compliance deficiencies” and several of the country’s ratings on compliance requirements were upgraded. The Bahamas is also the first country in the world to launch a nationwide CBDC, the “Sand Dollar.”

Turkey

Crypto is Banned

Rank

38

Total Score

2.10

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Turkey is not rated highly as a destination for digital asset service providers for a number of reasons. Specifically, Turkey does not have a regulatory framework in place (other than AML/CFT requirements) and its registration requirements are unclear. Further, Turkey instituted a ban on digital assets use as a means of payment, and President Erdogan has said, “we have absolutely no intention of embracing cryptocurrencies.” 

Recent reports indicate there may be some legislative action in Turkey, though it may prove to be onerous. In May 2022, it was reported that Turkey’s governing AK Party (and President Erdogan’s party) is expected in the coming weeks to submit bills to parliament setting out new rules for local cryptocurrency exchange platforms. The new rules will include:

  • A requirement that companies have a minimum of 100 million liras ($6 million) in capital;
  • A mandate that global cryptocurrency platforms open branch offices that can be taxed in Turkey;
  • Taxes on cryptocurrencies; and
  • Ways to store cryptocurrency safely, possibly within the banking sector to prevent abuses.

Ukraine

Crypto is Banned

Rank

23

Total Score

3.25

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Ukraine is among the few countries that has already enacted a digital asset regulatory framework. The Law On Virtual Assets, signed in March of this year, set the legal status, classification and ownership of digital assets, registration requirements, consumer protection requirements and designated the National Commission on Securities and Stock Market (NSSMC) as the regulator of the digital asset industry. Among its regulatory directives, the NSSMC is tasked with determining “the procedure for combating abuse in the market of virtual assets.”

In addition, Ukraine imposes AML/KYC requirements on virtual asset service providers and has received mostly “compliant” ratings from the FATF on recommendations relating to digital assets.

United Arab Emirates

Crypto is Banned

Rank

13

Total Score

3.85

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The United Arab Emirates has not enacted a regulatory framework for digital assets, but the country’s securities regulator, the Securities and Commodities Authority (SCA), recently stated that a digital asset regulatory framework is closer to being issued. Two of the country’s seven emirates, Abu Dhabi (through its Global Market ADGM) and Dubai, have already enacted digital asset regulatory frameworks for their respective jurisdictions that are among the most comprehensive in the world. For that reason, additional information is noted here on both sub-jurisdictions. 

The UAE’s overall rating includes digital asset regulations in the local jurisdictions of the Dubai World Trade Center (DWTC), the Dubai International Financial Center (DIFC) and Abu Dhabi's ADGM. All three of those jurisdictions are “Financial Free Zones'' and are exempt from all UAE federal civil and commercial laws, but not criminal laws. This autonomy is greater than that afforded to US states. Taking these three jurisdictions into consideration raised the ranking of the UAE higher than it otherwise would have been.

ADGM formally implemented its framework to regulate spot crypto asset activities, including those undertaken by exchanges, custodians and other intermediaries in ADGM, in June 2018. The Financial Services Regulatory Authority (FSRA) released its first update to the Virtual Assets Guidance in May 2019. In February 2020, Abu Dhabi’s FSRA published guidance on virtual assets. Included in the guidance was the requirement that “any market operator, custodian or intermediary dealing in Virtual Assets is required to be approved by FSRA as a Financial Services Permission (FSP) holder in relation to the applicable Regulated Activity.” Most recently, in March 2022, the FSRA issued a Consultation Paper that included draft guidelines on Non-Fungible Tokens (NFTs).

Dubai has been forward leaning in digital asset promotion for some time, having instituted a comprehensive digital asset regulatory framework, clear registration requirements, anti-market manipulation rules and its positive policy engagement with the digital asset industry. In March 2022, Dubai took a step even further by establishing the Virtual Assets Regulatory Authority (VARA) through Law No. (4) of 2022, its comprehensive regulatory digital asset framework for the jurisdiction (except for the DIFC). The law includes licensing and registration requirements, trading rules that include a prohibition on market manipulation as well as other requirements for digital asset companies.

Due to its inclusion on FATF’s list of jurisdictions under increased monitoring, the UAE received a low rating on its AML/CFT requirements which lowered its overall rating considerably. Were it not for the UAE’s listing on FATF’s list of jurisdictions under increased monitoring since March 2022, the UAE would have received a higher AML/CFT compliance score and therefore higher rating in our report. The UAE seems to be addressing these AML/CFT shortcomings in its upcoming regulatory framework. In March 2022, the UAE’s SCA stated that it completed its “consultation with the concerned authorities to develop the regulatory framework to address the risks of money laundering and terrorist financing related to virtual assets and to ensure they adhere to FATF requirements.”

United Kingdom

Crypto is Banned

Rank

21

Total Score

3.40

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

The UK’s overall digital asset regulatory structure is still in development. Registration with the FCA for AML/CFT purposes only is a requirement for digital asset service providers, but the process has been plagued by a backlog of firms trying to register. Multiple digital assets firms, including Blockchain.com, B2C2 and Wirex, withdrew their FCA registration applications due to the uncertainty caused by the registration backlog. Additional regulations depend on whether a service provider is involved with digital assets that are considered ‘regulated’ or ‘unregulated’. Companies involved with regulated cryptoassets (such as, security tokens and e-money tokens) fall under the jurisdiction of the FCA, while companies involved with unregulated cryptoassets (such as, exchange tokens and utility tokens) are not regulated by the FCA (except for AML registration requirements). Therefore, anti-market manipulation rules are only required for firms involved with regulated cryptoassets and not for unregulated cryptoassets. 

In an effort to provide more regulatory clarity, the UK government has been developing policy for the digital asset space in 2022. In March, the Bank of England, the PRA and Financial Conduct Authority (FCA) separately issued a report, a letter and a notice, respectively, analyzing risks and requirements of digital asset firms. In April, Chancellor of the Exchequer Rishi Sunak announced in a press release plans to recognize stablecoins as a valid form of payment, as well as plans to make Britain a global hub for cryptoasset technology and investment. In May, the UK’s HM Treasury published multiple consultations, including a proposal to expand the Investment Manager Exemption (IME) to include types of cryptoassets. A goal of the proposal is to provide tax certainty to UK investment managers seeking to include types of cryptoassets within their investors’ portfolios. The other published consultation provided a strategy on how to reduce the risks of stablecoins. The government also held its first CryptoSprint event in May of this year. Despite recent positive signs, the Johnson government’s lame duck status is likely to stall progress.

United States

Crypto is Banned

Rank

19

Total Score

3.55

Legal Status

Regulatory Framework

Registration Requirements

AML/CFT Requirements

Market Surveillance and Anti-Market Manipulation

Given the complexities of the United States’ financial regulatory system (with myriad federal agencies and regulators in 50 states playing significant roles), the report rates the United States based on its environment and framework at the federal level.

The United States has not enacted a comprehensive regulatory framework for digital assets. While dozens of bills have been introduced in Congress related to digital asset regulation, only one attempts to provide a comprehensive framework. Introduced in June 2022 by Senators Cynthia Lummis (R-WY) and Kirsten Gilibrand (D-NY), the Responsible Financial Innovation Act seeks to address the broad array of issues affecting regulatory clarity and clarify responsibilities among federal and state regulators in these markets. Despite the activity, it is unlikely that digital asset legislation will pass this year (with a bill on stablecoins having the best of slim odds).

To provide broad policy direction to the executive branch, President Biden issued an Executive Order in March that directed various federal government agencies to examine digital assets and develop policy recommendations for digital assets based upon six basic principles: consumer and investor protection, financial stability, stopping illicit finance, U.S. economic competitiveness, financial inclusion and responsible innovation. The EO was a positive, albeit limited, step.

Currently, digital asset service providers operating in the U.S. are required to register with the Financial Enforcement Network (FinCEN) for AML/CFT purposes. The U.S. has received ratings of “largely compliant” and “partially compliant” from FATF on its recommendations that cover digital assets. With respect to the travel rule, FinCEN’s proposal to apply travel regulations to digital assets and to lower travel rule reporting requirements from $3,000 to $250 on international transactions has yet to be implemented

The U.S. maintains one of the most robust financial regulatory infrastructures in the entire world. Federal oversight of digital asset market participants has largely been handled by the SEC and the CFTC through enforcement action. As of June 2022, the SEC and CFTC have imposed at least $3.3 billion in fines, penalties, settlements and disgorgements against entities involved in or dealing in digital assets. Ongoing litigation also could impact digital asset markets, including notably the SEC’s $1.3 billion lawsuit against Ripple.

With respect to agency regulatory agendas, the SEC has issued a series of proposed rules that could significantly impact digital assets. Two, notably, do not explicitly state they intend to cover digital asset markets and participants (see the SEC’s proposed rules amending the definition of Dealer and amending Reg ATS). However, the SEC will face challenges finalizing and implementing these rules as proposed.

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About the regulatory report series

Solidus Labs supports the wave of innovation that digital assets have introduced and is committed to supporting the markets’ growth through enhanced market integrity. Governments play a key role in enabling smart growth - by allowing digital asset service providers to operate with legal certainty and regulatory legitimacy, while enabling consumers to participate in the markets more confidently knowing that protections are in place. In our assessment, countries that provide for the following are doing just that:

  1. Establishing a legal and business environment that permits and facilitates digital asset operations; 
  2. Enacting a comprehensive regulatory framework;
  3. instituting market conduct and surveillance policies (such as prohibiting market manipulation) for digital asset market participants; 
  4. Employing efficient registration and licensing requirements for market participants; and 
  5. Establishing/enforcing AML/CFT compliance requirements for digital asset service providers.

Why you should trust us

The aim of this report is to rate countries’ efforts in adopting legal and regulatory frameworks consistent with the above. The report intends to cover countries that have introduced rules, regulations or restrictions for digital asset markets, though it does not provide an exhaustive list of all jurisdictions. Moreover, the report includes countries that have significant crypto market growth potential, either due to the size of the population or a good track record of innovation. The rationale for each country’s respective ranking is included in the country summaries section of the report.

Kathy Kraninger
Vice President of Regulatory Affairs, Solidus Labs
Disclaimer
This report is our best effort, based on readily available information and data, to provide a point-in-time snapshot of where digital asset regulations currently stand. The markets, products, and services continue to evolve, and regulations are evolving to respond. The nature of our review will inevitably include subjective impressions.

The report does not cover countries or jurisdictions where access to digital asset regulatory information is limited. While regulatory information is included for some jurisdictions that do not provide official translations of their regulatory documents in English, the accuracy of that information is subject to the accuracy of Google Translate.

This report has been compiled for informational and educational purposes only and should not be construed as personal investment advice or legal advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. Any investments, trades, regulatory and legal actions, speculations, or decisions made on the basis of any information in this report, expressed or implied herein, are committed at your own risk, financial or otherwise. We always recommend you consult with experienced outside experts and/or consultants who can discuss your specific situation.

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