Comparison of Various Countries' Encryption Regulatory Attitudes and Styles

Bitcoin was initially a niche currency within the geek community, but with the development of blockchain technology, the cryptocurrency market has been continuously expanding. Currently, the number of cryptocurrency holders worldwide has exceeded 200 million, with over 19 million users in China, achieving a transformation from niche to mainstream. In just a few years, the crypto market has developed to a level that cannot be ignored by various countries, and regulation has become a matter that governments must consider. However, there is still no consensus globally on cryptocurrencies, and the regulatory attitudes of different countries vary.

This article will outline the evolution of regulatory styles in five countries and regions that are highly concerned in the encryption field, as well as their current regulatory attitudes towards encryption.

USA: Control Risks to Promote Innovation

The United States has always been the most关注ed country in the global encryption field, but its regulatory policies are not leading. Compared to countries like Japan and Singapore, the United States' cryptocurrency regulatory policies are more ambiguous and difficult to predict.

Before 2017, encryption currencies were in a stage of free development, and the U.S. regulation mainly focused on controlling overall risks without implementing strict bans or accelerating legislation. After the ICO boom in 2017, the U.S. SEC issued its first announcement, bringing ICO activities under the jurisdiction of federal securities law, but the attitude remained to strengthen regulation rather than prohibit.

In early 2019, shortly after several exchanges reopened their IEO platforms, they were targeted by regulators. Subsequently, a well-known exchange was banned from operating in the United States, which began to crack down on encryption, regulating it as securities rather than assets or currency.

In February 2021, the more cryptocurrency-friendly Gary Gensler became the chairman of the SEC, accelerating the shift in the United States' attitude. Shortly thereafter, the U.S. allowed a certain exchange to list on Nasdaq, making it the first cryptocurrency exchange to be listed in the U.S. Since then, the U.S. has actively researched relevant regulations.

After multiple cryptocurrency projects collapsed in 2022, the United States became one of the most severely affected countries, leading to increased regulatory scrutiny. In September, the U.S. released its first draft regulatory framework for the cryptocurrency industry, but no laws have been passed to date. Recently, U.S. regulators have filed lawsuits against several well-known individuals in the industry, and the trend of regulation is becoming increasingly strict.

Currently, the United States is jointly regulated by the federal and state governments. At the federal level, the SEC and CFTC are primarily responsible, but the two have not yet reached an agreement on responsibilities and standards. States also have inconsistent attitudes and regulatory intensity towards encryption. There are reports that the U.S. government is considering establishing a unified framework to eliminate interstate differences.

There are differences between the two parties in the United States regarding regulatory legislation, and some local politicians do not regard it as an urgent matter. The legislation on encryption regulation is entangled in partisan disputes, making it difficult to reach a consensus in the short term.

U.S. President Biden once signed an executive order emphasizing that federal agencies should adopt a unified approach to regulate encryption and collectively address risks. At the same time, he expressed support for innovation and hopes that the U.S. will maintain a global leading position in encryption technology.

Overall, the United States has not taken the lead in encryption regulation globally. The U.S. prefers to lead the world in encryption technology rather than regulation, pursuing innovative development under manageable risks. The ambiguity of regulatory policies increases market uncertainty but also leaves some room for technological innovation.

Japan: Stable Regulations but Insufficient Appeal

Japan has always been one of the active countries in the encryption field, actively creating a sound regulatory environment for the industry since the early development of cryptocurrencies, and has specifically introduced laws and regulations to legalize Bitcoin and bring it under regulation.

In 2014, Japan experienced one of the most severe setbacks in encryption history when the largest Bitcoin exchange at the time collapsed. This event raised investor concerns about regulation and prompted Japan to implement stricter regulations on the encryption industry.

In 2016, the Japanese National Diet began actively legislating by adding a chapter on "virtual currency" to the "Fund Settlement Law", defining it and establishing regulatory details. In 2017, Japan amended the "Payment Services Act" to include encryption exchanges under regulation, becoming the first country to legalize Bitcoin. In December of the same year, Japan began taxing encryption income.

After the large-scale hacking attack on local exchanges in 2018, Japan strengthened its self-regulation, and institutions also carried out intensive supervision. Japan has always strictly regulated encryption and actively promoted relevant legislation.

In June 2022, Japan passed an amendment to the "Fund Settlement Law", officially legislating stablecoins and becoming the first country in the world to create a legal framework for stablecoins.

Overall, Japan's encryption regulation is clear and strict, focusing on industry guidance rather than prohibition. Japan is committed to protecting retail investors and continuously improving relevant legislation. Japan's clear regulatory stance provides more clarity for crypto companies in the local market.

South Korea: Tighten Regulations Likely to Legalize

As the fourth largest economy in Asia, South Korea is one of the most active countries in cryptocurrency trading, with 20% of young people participating in trading. Despite the high penetration rate, South Korea has not yet incorporated it into law like Japan.

Since 2017, South Korea has banned various forms of token issuance and imposed penalties for engaging in illegal activities with virtual currencies. Regulations to protect investors include real-name systems, prohibition of account openings for minors and non-Korean residents, among others. South Korea's regulatory policies are somewhat rigid, only addressing significant violations while lacking detailed guidelines.

In February 2021, South Korea first showed signs of encryption legislation. Regulatory agencies began to consider incorporating cryptocurrencies into legislation. After the collapse of Terra in June 2022, South Korea accelerated the pace of legislation.

The South Korean government has announced the establishment of a "Digital Asset Committee" and proposed policy recommendations. The Financial Supervisory Service plans to establish a "Virtual Asset Risk Committee." Since 2022, South Korea has begun to implement more intensive regulatory measures.

The newly elected president Yoon Seok-yeol is seen as "encryption-friendly". He has promised to lift regulations on the encryption industry and stated that he will take legal measures to confiscate illegally obtained encryption profits. South Korean media reports that the market is moving towards significant legalization.

Singapore: Predictable but not Loose

Globally, Singapore has maintained a friendly and open attitude towards encryption. Similar to Japan, cryptocurrencies are also recognized as legal in Singapore.

In 2014, the Monetary Authority of Singapore (MAS) issued a statement on the risks of money laundering and terrorist financing associated with virtual currencies, becoming one of the first countries in the world to regulate virtual currencies.

Between 2016 and 2017, as many countries began to implement strict regulations on cryptocurrencies, MAS's stance was to warn about risks, but it did not deem them illegal.

In 2019, the Singapore Parliament passed the Payment Services Act, marking the first legislative regulation. Due to a relatively loose regulatory environment and lower taxes, Singapore attracted numerous encryption companies, becoming a hotbed for the industry. In January 2021, Singapore further revised and improved the Payment Services Act, continuously expanding the scope of regulation.

In 2022, Singapore continued to improve its regulatory environment, hoping to maintain financial market stability while being open. The regulatory focus has shifted to retail investors, with relevant legislation being drafted to further restrict retail investment. The government has also been guiding retail investors to recognize risks and does not encourage participation in encryption investments.

In 2023, Singapore maintains its encryption-friendly image, providing tax incentives for individuals holding digital assets.

Despite the freedom of trading, Singapore has also been affected after the FTX collapse. Previously, Singapore was mainly focused on money laundering and terrorist financing risks, but after the collapse, it began to tighten policies to protect investors.

Overall, Singapore's attitude towards encryption assets has been friendly but not lenient, opposing fraud, speculation, money laundering, and irresponsible promotion. Its policies are stable and consistent, flexibly adjusted according to market conditions. To control financial risks, Singapore is gradually tightening regulatory policies.

Hong Kong: Strive to Catch Up and Actively Legislate

Hong Kong, which originally held an opposing stance on cryptocurrency, has undergone changes after the new Special Administrative Region government took office. After a few years of observation, Hong Kong seems to have found a regulatory path suitable for itself based on the experiences of other countries.

Before 2018, Hong Kong had a cautious attitude towards encryption and regulation was in an exploratory phase. In November 2018, Hong Kong became the first to incorporate virtual assets into regulation. Since then, Hong Kong has regarded encryption as "securities" and incorporated it into the existing legal system for regulation, but does not regulate non-security type encryption.

This situation continued until 2021, when Hong Kong released a consultation summary on relevant legislative proposals, indicating signs of encryption regulatory legislation.

In October 2022, the Hong Kong Financial Secretary officially released a policy declaration, changing its stance to actively embrace virtual assets, with the expectation of legalizing encryption assets thereafter.

In 2023, Hong Kong has been continuously releasing legislative signals. At the end of January, the Monetary Authority announced plans to regulate stablecoins. In mid-April, the Monetary Authority released a consultation summary, expecting to implement regulatory arrangements in 2023 or 2024. This indicates that Hong Kong is actively joining the ranks of encryption regulatory legislation.

In recent years, Hong Kong has been in a wait-and-see state, losing its leading position. However, drawing lessons from the experiences of other countries, Hong Kong is seizing the opportunity of web3 development to showcase its ambition to return to the encryption field, with the hope of becoming a market leader. However, the final outcome will depend on the implementation of relevant regulations.

Summary

Although there is still no consensus on cryptocurrency globally, strengthening regulation remains a future trend. In the early stages of industry development, strict regulation may hinder innovation. However, as the industry matures, a lack of regulation can cause harm. The issue of encryption regulatory legislation is gradually gaining attention, indicating that the entire industry is moving in a positive direction.