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Veriscope Regulatory Recap - 1st January to 21st January

Welcome to the latest edition of our Veriscope crypto regulatory newsletter!

Welcome to our latest edition of Veriscope Regulatory Recap. Today, we’ll be shedding light on how the beginning of 2024 is turning out to be in terms of cryptocurrency regulation. 

These past two weeks, the focus has been on the US and EU, with Thailand and South Korea also making advances in regulating the evolving crypto space. So, let's delve into these updates and discuss what they could mean for the future of the crypto world.

The Global Crypto Regulatory Landscape at a Glance

In Europe, policymakers have agreed on new rules that impose stricter regulation on cryptocurrency firms to enhance anti-money laundering (AML) measures and combat sanctions evasion in the sector.

Another country working on curbing crypto’s usage for money laundering is South Korea, where financial authorities are preparing to issue a legal framework targeting cryptocurrency mixing platforms so that criminals can’t use these tools to launder illegal funds. 

Meanwhile, Thailand has updated criteria for investing in crypto and related services to promote technological innovation and support the local digital economy while enhancing investor protection. With this move, the country’s SEC has removed previous investment restrictions on retail investors, capped at 300,000 baht per offering, for infrastructure and real estate-backed ICOs to encourage the use of digital fundraising. 

In the US, the Virginia State Senate has introduced legislation that establishes rights for crypto miners. Now, let’s take a closer look at two of these new developments. 

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn't final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The imposition of different thresholds on crypto firms compared to traditional financial institutions could create an uneven playing field, potentially disadvantaging crypto businesses.

Additionally, the requirement for basic KYC checks on even occasional transactions increases the operational burden on these firms, possibly affecting their competitiveness and innovation in the sector.

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts both individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Currently in the discussion stage, if the bill passes, it’ll be sent to the House of Delegates for consideration before it can be signed into law.

Virginia’s decision to support digital asset mining is certainly a great development for the sector and is in contrast to the federal antagonism the industry is facing from the SEC. This shows that as crypto continues to gain adoption and policymakers understand the benefits of the technology, we may finally see more clarity and even a shift in the US’s anti-crypto stance.

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