The dramatic increase of retail and institutional investor interest in the crypto markets has resulted in an unavoidable need to reposition the current financial regulatory platforms to integrate regulation of digital asset markets. Since the existing Bitcoin surge is above $10,000 per bitcoin, it quite obvious that crypto markets have become easily accessible and significant to the public for supervisions to not intrude.
Currently, crypto markets are facing many crucial operational challenges, resulting in undermined investor confidence. Most recently, many significantly serious cybersecurity breaches, hackers infiltrating crypto markets and exchanges, have been widely reported on. Millions of dollars’ of virtual currency have also been stolen in recent years. Moreover, many crypto exchanges are reported to be involved in voracious and unreliable practices, insider abuses, and market manipulations.
According to recent research conducted by TIE, 75% of crypto exchanges are reporting doubtful volumes. Hong Kong and Singapore have introduced new licensing compliance with a requirement to acquire approval from regulatory before trading is permitted. The assessment covers an evaluation of an exchange monitoring system – which further includes market supervision for the identification of market abuse behavior, along with KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Combating the Financing of Terrorism).
In Hong Kong, the Securities and Future Commission classifies ICOs as security, subject to the securities laws of the country. Cryptocurrency assets are treated no differently than any other regulated security assets. In Singapore, the Monetary Authority of Singapore (MAS) has issued several guidelines. These guidelines explain the ICO resembles capital market products’ regulation under the Securities and Future Act. Crypto platforms are subjected to a licensing acquiring regime and are limited to serve only accredited investors.
Similarly, other regions like China, South Korea, Taiwan, and the Philippines have issued different regulatory laws and guidelines for crypto exchanges and platforms. Some of them are comprehensively discussed in the following section
China
All the activities concerning Cryptocurrency have received a little amount of tolerance from the government of China. ICOs were banned in China in September 2017. Exchange platforms trading cryptocurrencies were not allowed to continue with the ICOs. Many exchange platforms decided to relocate to jurisdictions that are permitting cryptocurrencies than China.
In China, it is legitimate to hold Bitcoins and other types of cryptocurrencies. Moreover, buying and selling are also legal in China. Here, the government also supports the applications and development of blockchain technology. They have also made it quite clear that this technology must service the actual economy of China.
In September 2017, government agencies of China issued the Notice related to the Prevention of Token offering and financing risks. The notice banned ICOs and ordered that any firm or individual who had previously conducted or completed an ICO for making arrangements including the return of token assets to the investors to guide investor rights.
According to the Article-6 of PRC Criminal Law in China, if any illegal activities or consequences of such activities happen to occur in China, the crime is deemed to have occurred in China’s territory.
Policies for Exchanges
The issued by Government agencies of China ordered that any fundraising and traditional platforms must not provide exchange services between tokens, fiat currency, and virtual currencies. They are also not allowed to buy or sell tokens and virtual currencies, or buy or sell virtual currencies as a CCP (the central counterparty) or provide information intermediary or price determination services for virtual currencies or tokens.
As a result of this notice, many crypto exchanges shut down their platforms in China. Moreover, they made some significant adjustments to their business models. However, these improved business models are not completely safe from the criminal law perspective of China. Exchanges also continued their exchange business via platforms that were registered in foreign jurisdictions and were more biased to exchange business than China.
According to the law of China, no individual willing to invest in white label crypto exchange software is allowed to use the internet to check the information that violates Chinese laws and regulations. Therefore, Chinese investors cannot buy or trade cryptocurrencies on overseas exchanges.
Trading Ban – Yes
Banking Ban – yes
Best Place for License – No
Tax Haven Region – No
Japan
Japan’s Financial Services Agency (FSA) has set up a few guidelines to divide ICOs and denote investment limits to guard investors, having initially permitted its crypto market to operate on a self-regulatory basis. In 2018, a cybersecurity breach stole around $530 million of Coincheck – one of the biggest crypto exchanges of Japan. As a result, Japan’s Financial Services Agency has tightened regulations on crypto exchanges. This agency also introduced new screening requirements, along with a new licensing obligation.
Trading Ban – No
Banking Ban – No
Best Place for License – Yes
Tax Haven Region – No
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