A tidal wave of tighter crypto asset regulation swept across the globe in 2023, following seismic collapses like FTX that shattered confidence in digital assets.
According to a new report from blockchain intelligence firm TRM Labs, over 80% of the 21 jurisdictions reviewed have ratcheted up oversight of the sector over the past year.
With influential global standard-setting bodies like the Financial Action Task Force (FATF) also gearing up implementation monitoring, this swell of stricter rules could help restore battered faith in crypto markets. Indeed, early evidence suggests regulatory action may already be helping to reduce financial crime.
Specifically, TRM Labs found that anti-money laundering rules seem to correlate with lower rates of illicit crypto activity. Virtual asset service providers licensed in jurisdictions with mandatory registration or licensing regimes display markedly less exposure to high-risk counterparts than those operating in unregulated safe-havens.
Mirroring this regulatory drive, 2023 also saw a jump in the amount of licensing for crypto firms. Notably, the EU passed its sweeping Market in Crypto Assets (MiCA) legislation, which covers 450 million people across 27 countries. New licensing frameworks also launched in Hong Kong and South Korea, allowing firms to become fully compliant. Meanwhile, the likes of Germany, South Africa and Spain registered many new crypto firms or unfurled licenses.
Critically, several jurisdictions including the US and EU advanced crypto-specific bills for the first time, including rules around stablecoins.
On the global front, the Financial Stability Board (FSB) finalized pivotal recommendations centered on applying its high-level “same activity, same risk, same rules” principle to crypto. FATF provided further updates on minimizing the risks of financial crime, and the IMF called for “comprehensive” crypto regulation balancing innovation with financial stability.
The takeaway? Whether on a national or supranational level, 2023 was the year jurisdictions began seriously codifying their crypto rules.
Looking ahead, 2024 promises further milestones. The US is ending its period for accepting comments on its proposed rule for crypto mixers on January 22. The EU’s MiCA stablecoin rules will come into effect on June 30. The end of the grace period for Hong Kong’s virtual asset licensing comes on May 31.
While diverging national philosophies endure, TRM Labs spotted one big theme: a move towards consistent global regulatory norms. This year looks likely to be more of the same.