Updated 2021 Crypto Regulations in the USA, China, and the UK

Being on the wrong side of the law is never a good idea, not least when it could cause jeopardy to investments. Keeping tabs on what regulations demand is a wise step.

Cryptocurrencies are a relatively new means of trading and therefore keep changing in scope and tech. So in making the regulations regarding them, many governments take quite a combative position against them. 

Diving straight into the crypto trade without considering the underlying regulations is like walking on eggshells. Therefore, the article shall outline all the latest crypto regulations, emphasizing the ones employed in the USA, China, and the UK.

• Latest Regulations in the USA

The USA is the world’s largest economy and the largest global military power, with as many aircraft carriers as the rest of the world combined. US policy on cryptos is therefore of global importance.

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The prevailing standing of the US position on cryptos is that while they recognize them as a medium of exchange, they aren’t regular money. Several states have therefore passed or are in the process of passing different regulations in 2021 regarding cryptos.

• Revisions and Amendments of Previous Positions

Arkansas passed a clarification regulation regarding the control of cryptos. It includes the control of virtual currencies under the amended uniform money services act. Likewise, Indian revised its unclaimed property act to include virtual currency after repealing it.

The state of Hawaii adopted a resolution that requested the commerce and consumer affairs department to reconsider a 2016 ruling. Moreover, the verdict on asset reserve requirements for virtual currency companies is aligned with asset reserve requirements by other states.

• New Legislative Creations

Kentucky created a new section under the KRS 139 that defines several terms used in commercial crypto mining under blockchain tech. 

On the other hand, Wyoming created a new cryptocurrency staking program as well as an advisory council. The new creations are tasked with providing matching funds concerning carbon capture, utilization, and storage projects. They also provide for the establishment and management of decentralized autonomous organizations. 

• Commendation and Adoption Based Regulations

Louisiana commended Bitcoin on becoming the first decentralized trillion-dollar asset in an adopted resolution. In addition, the resolution encouraged the state and local governments to consider beneficial ways of using blockchain.

In North Dakota, the legislative council considered studying the feasibility and desirability of regulating virtual currency-based institutions and their regulation. Also, the 2021-22 interim requirement is to report its findings and give recommendations inclusive of attaching regulations to the 68th legislative assembly.

• Pending Bills

A total of 31 states have pending bills awaiting passing as updates to their regulations of cryptos. All these falls within the 2021 legislative session.

New York has the most pending bills at 8, all yet to go beyond the drafting phase. Kentucky has been busy with at least five bills, of which the governor has signed two, and one passed the Senate.

• China Still in the Quest to Ban Crypto Mining 

China is billed as the next global economic superpower, boasting of the largest value-added manufacturing and second-largest economy. It also has the world’s largest population. 

The country’s regulatory environment on cryptos, which has been increasingly negative, can’t be taken lightly. The latest legislative steps by the country this year include;

• Bans on Crypto-Related Services

A May legislation by the Chinese government placed a wide ban on financial institutions and payment companies, barring them from providing crypto-related services. It will also give a warning to investors against participating in speculative crypto trading.

The ban required institutions not to offer any services regarding cryptos. Services such as registration, trading, clearing, and settlement of any crypto-related actions are all banned.

In June, a more direct call by China’s central bank targeted key lenders to clamp down on crypto-related services. The lenders included the Industrial and Commercial Bank of China (the world’s largest bank by revenues). They also included the Agricultural Bank of China (the world’s third-largest by revenues) and Alipay by giant retail platform Alibaba. 

• Mass Arrests

As a follow-up to the previous month’s bans, massive arrests were made in China in June 2021. The crackdown aimed at addressing money laundering using cryptocurrencies. 

More than 1,100 suspects were arrested on allegations of laundering illegal earnings via telephone and internet scams. The money launderers charged clients who engaged in criminal activities anywhere between 1.5% and 5% commission. In agreement of the commission to be paid, money and other illegal contrabands were then converted into virtual currency.

• Direct Shutdown of Crypto Supporting Firm

The Chinese government dialed up its crackdown on crypto trading in July 2021. First, it ordered the shutdown of a company that breached its legislation against crypto-related services.

The company in question closed shop on being suspected of providing software services for virtual currency trade. Strict legislation by the Chinese government is seen as an attempt to reduce capital outflows through cryptos, especially stablecoins.

• Is the UK Watchdogs Warming up to Cryptocurrencies? 

As a leading financial center globally, crypto regulations in the UK concerning cryptocurrencies are vital in the financial world. The latest regulations by the UK government, which have largely been negative, include;

• Tougher Compliance Measures

The UK’s Financial Conduct Authority (FCA) created tougher compliance and regulatory measures for all firms dealing in cryptos. The January communique required all firms offering crypto-related to register and show how compliant they are with anti-money laundering rules.

A follow-up on the registration requirements by June, the UK financial watchdog found that firms fell short on anti-money laundering rules. Just five firms had fully registered, 90 only had temporary registrations, while 51 had withdrawn their registration applications altogether. The FCS extended the temporary registration regime as the last chance for compliance.

• Ban on the World’s Largest Crypto Exchange Platform

The UK’s financial regulator placed a ban on the world’s largest crypto exchange platform. Binance has been banned from any regulated business within the UK as per the FCA’s notice published on 25th June.

The ban targeted Binance Markets LTD, which was the only regulated entity by Binance in the UK. It was effective immediately, with warnings also issued to consumers about it and the entire Binance group.

Conclusion

The regulatory environment regarding cryptocurrencies has seen some notable changes in 2021. The changes are, however, not entirely for the better. The USA being a federation means that each state has passed different regulations regarding cryptos. Nevertheless, the regulations approved have been the most positive of the three selected countries. 

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China and the UK have increased their crackdown on cryptocurrencies by quite a notch. The UK has increased regulatory requirements for firms dealing in cryptos, going as far as banning the world’s largest crypto exchange platform. On the other hand, China outright banned the crypto trade, arresting offenders and shutting down a firm that violated its regulations.