Meaningful controls on crypto are finally on their way

Meaningful controls on crypto are finally on their way
Meaningful controls on crypto are finally on their way


The EU recently adopted its 'Markets in Crypto Assets' regulation, while the US has taken a more interventionist approach, cracking down on two major crypto exchanges. The regulatory landscape is expected to continue evolving as cryptocurrencies become more mainstream.

Some nations see cryptocurrencies as a source of risk and instability, while others see it as an opportunity for economic growth and technological advancement. As this space evolves, it is expected that regulatory frameworks worldwide will gradually adapt to the realities and potential of cryptocurrencies.

According to the International Monetary Fund’s statements on the regulation of crypto currencies: “Crypto assets have been around for more than a decade, but it’s only now that efforts to regulate them have moved to the top of the policy agenda. This is partly because it’s only in the past few years that crypto assets have moved from being niche products in search of a purpose to having a more mainstream presence as speculative investments, hedges against weak currencies, and potential payment instruments." (

The regulatory landscape for crypto is dotted with contrasts that reflect each jurisdiction’s socio-economic realities, regulatory philosophies and risk appetites. The IMF says that the actual or intended use of crypto assets can attract at once the attention of multiple domestic regulators—for banks, commodities, securities and payments, among others—with different frameworks and objectives. Some regulators may prioritize consumer protection, others safety and soundness or financial integrity. And a range of crypto actors exists—miners, validators, protocol developers—that are not easily covered by traditional regulation.

At one extreme, there are countries like China and India that have imposed stringent regulatory controls on cryptocurrencies. China has banned crypto trading and initial coin offerings (ICOs) entirely. This stringent approach is rooted in concerns over potential financial risks, capital flight and its potential to facilitate illegal activities. India had initially banned banks from dealing with crypto businesses, citing similar concerns as China. Indian regulators’ hesitations reflect not just fears of financial instability, but also the wider context of the country’s struggle with issues such as money laundering and terror financing, which are undeniable national security concerns for the country. However, the ban was overturned by the Supreme Court in 2020, leaving cryptos in regulatory limbo, which the government has started to address sensibly. In the 2022 Union Budget, it announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source. The Centre, via a notification dated 7 March 2023, brought digital assets and fiat currencies, virtual digital assets (or VDAs), crypto currencies and other such digital assets, their trading, safe keeping and related financial services under the ambit of Prevention of Money Laundering Act. VDA service providers and businesses must now follow similar KYC and other reporting standards for traditional finance institutions such as banks.

On the other side of the spectrum, countries like Japan and Switzerland offer a much more permissive regulatory environment for cryptos. Japan was one of the first to recognize Bitcoin as a legal payment method in 2017 and has since developed a sophisticated licensing system for crypto exchanges. It is a balance of fostering innovation while ensuring customer protection and systemic stability. Similarly, Switzerland has embraced crypto by introducing progressive laws. The Swiss canton of Zug, known as ‘Crypto Valley’,is home to numerous blockchain startups. The Swiss Financial Market Supervisory Authority has provided clear guidelines on ICOs, making distinctions between payment tokens, utility tokens and asset tokens. The forward-looking approach reflects Switzerland’s aspiration to be a global hub for crypto and blockchain businesses.

Emerging economies display a dichotomy in crypto regulation. Some, like Nigeria and Venezuela, have embraced cryptos due to economic hardships and hyperinflation. Others, like South Africa and Brazil, are cautiously optimistic but are working on frameworks to regulate these digital assets better.

The EU took some time to create a process of developing a harmonized approach to crypto regulation. Some member states like Malta and Estonia had created crypto-friendly regulatory environments to attract businesses, while others like France and Germany were more cautious. On 16 May 2023, though, the EU said it would adopt its ‘Markets in Crypto Assets’ (MiCA) regulation, which aims at a comprehensive framework. A harmonized regulatory framework in the EU, given the global nature of crypto markets, is a clear move forward.

Within weeks of Europe’s laws becoming clearer, the US, which had largely taken a laissez faire approach to crypto, stepped in with sweeping action. Last week, the US’s Securities and Exchange Commission (SEC) cracked down on two of the world’s largest crypto exchanges, Binance and Coinbase. Binance has been charged with violating securities laws, as it lets customers in the US trade on its platform despite crypto’s status as a security being uncertain. Coinbase has been charged with operating in the US securities market as an ‘unregulated securities exchange’. Just days after suing them, SEC chief Gary Gensler was scathing in his criticism of crypto firms, saying that most crypto tokens are subject to US securities laws and crypto platforms need to comply (

The US stance will likely set the tone, given its leadership of crypto adoption. Since clarity was needed, the Indian, European and US moves are all welcome.

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