Since the first Bitcoin exchange Bitcoin Market was born in Japan in 2010, the name of virtual currency has been associated with black market, money laundering, and fraud. Its characteristics of decentralization and anonymous transactions seem to be inherently contrary to government supervision, but it also meets the "various needs" of speculators.
Before the era of decentralized exchanges really comes, virtual currency and regulation, the fantasy of speculators getting rich overnight and the government's fear of systemic financial risks coexist in such a way that "the road goes up and the magic goes up". , total length.
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Technology is constantly upgrading and regulation is always becoming stricter
Bitcoin has never left the sight of regulators since its inception. From 2011, when black market transactions were included in the vision of the FBI in the United States, from 2013 to 2014, governments of various countries warned against virtual currency transactions, and then in September 2017, there was a wave of global regulation. There is no doubt that global regulation is always tightening.
The most essential subjects of transactions are always people. When the technology was immature, the Bitcoin black market ushered in the FBI's "human flesh" undercover agents. As time went by, the means of regulators continued to upgrade.
In February 2011, when Bitcoin was just emerging, an anonymous black market website in the United States called "Silk Road" used Bitcoin for illegal transactions. According to BBC reports, shortly after the website was established, the FBI entered the trading website as an undercover agent. The "Silk Road" has only been in existence for two years, and it has been seized by multiple law enforcement agencies in the United States.
The technical means of bitcoin transactions are still being upgraded. By the beginning of August 2017, the US Internal Revenue Service has announced that it has collaborated with the bitcoin security company Chainalysis to invent tools that can know the owner of bitcoin wallets and monitor money laundering activities. Meanwhile, CNBC reported that the Department of Homeland Security has upgraded its technology to better track criminal activity using bitcoin.
So what about virtual currency investment transactions?
In December 2013, the People's Bank of China and other five ministries and commissions jointly issued the "Notice on Preventing Bitcoin Risks", which clearly regards Bitcoin as a virtual commodity and requires Internet companies that provide services such as Bitcoin registration and transactions to effectively implement anti-money laundering and other requirements.
In 2014, the U.S. Federal Consumer Financial Protection Agency and corresponding state agencies issued multiple announcements to introduce the possible risks of virtual currency to financial investors, and at the same time accept investors’ reports on virtual currency and virtual currency service agencies .
Larger-scale virtual currency-related laws and regulations appeared from 2015 to 2016. In 2015, New York State took the lead in bringing virtual currency into legal supervision. In 2016, several states in the United States passed bills related to virtual currency transactions, bringing them into the regulatory system by extending the definition of currency to any kind of virtual currency. In December 2016, Japan revised the "Payment Service Law" to add a chapter on virtual currency.
The world's largest and most stringent round of virtual currency regulation occurred in September 2017. In this month, China and South Korea successively banned ICOs, and China also shut down virtual currency exchanges such as Bitcoin. The United States brought ICO into the supervision of the SEC (Securities Regulatory Commission), while the United Kingdom and Australia successively issued warnings on virtual currency transactions.
In March 2018, the virtual currency supervision "tone" in the United States, Japan and China continued to tighten. The United States brought virtual currency into SEC supervision, and the Japanese virtual currency trading market, which has always been considered friendly to exchanges, was eliminated. Two exchanges were shut down and five exchanges were ordered to rectify. And China's calls for the supervision of cross-border transactions of virtual currencies have also become louder.
Stephen Innes, head of trading in the Asia-Pacific region of the foreign exchange trader Anda, once told Fortune that regulators are paying more and more attention to (cryptocurrency), "not only in Asia, but also globally. I didn’t fully understand what the complete collapse of digital currency would mean for the economy.”
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legislation, or on the road to legislation
Regarding virtual currency, the United States and Japan have clearly legislated, and the U.S. Taxation Service and the SEC have included virtual currency in their regulatory scope. China and South Korea are regulated through relevant policies. France and Germany are pushing for global regulation, while Russia is trying to complete a regulatory framework by July this year.
According to the author's analysis, both the United States and Japan have legislated to bring exchanges into the regulatory system and clarify the positioning of virtual currencies.
In 2016, Japan's "Payment Services Law" was revised to add a chapter of "Virtual Currency". A new chapter introduces the registration system to supervise platforms engaged in digital asset transactions such as Bitcoin. Since then, major Japanese shopping malls have accepted virtual currency as a means of payment. Since then, Japan has also specifically formulated and announced the "Cabinet Office Order Regarding Virtual Currency Exchange Practitioners" and the "Third Booklet of the Regulations (Relationship between Virtual Currency Exchange Practitioners)". The so-called "virtual currency exchange practitioners" in the bill are exchanges. As a result, the exchange is also under the supervision of the Japanese government.
The legislation of the United States also takes the exchange as the main starting point. In July 2017, the National Uniform State Law Commission passed the Uniform Regulation of Virtual Currency Business Act. The bill has seven chapters, including the application and approval of virtual currency service and product supplier licenses, consumer rights protection, network security, anti-money laundering and continuous supervision. In addition, the U.S. Securities Regulatory Commission and the U.S. Taxation Service have included virtual currencies in the scope of supervision.
For more countries, legislation is still on the way, but regulators are not stopping.
In February 2018, France and Germany urged countries to discuss cryptocurrency regulatory policies at the G20 finance ministers meeting in March, while Russia plans to complete a regulatory framework for cryptocurrencies and ICOs by July 2018.
Although China and South Korea have not made clear legislation, they also supervise ICO and virtual currency transactions through announcements and other means.
On September 4, 2017, seven departments including the People's Bank of China (PBOC) jointly issued the "Announcement on Preventing Financing Risks of Token Issuance" (hereinafter referred to as the "Announcement"). After the "Announcement" was released, China's ICOs were released and all trading platforms were shut down. In mid-September, the storm spread to bitcoin, and the leading group of China's national Internet financial risk special rectification work asked bitcoin exchanges to stop trading and shut down.
After China, South Korea has also banned ICOs. South Korea’s Financial Services Commission (FSC) banned all forms of token financing on September 29, 2017. In December 2017, the South Korean government introduced the most stringent virtual currency restrictions known as "prohibited in principle", including prohibiting financial institutions from holding virtual currencies and investing in virtual currencies, seeking to prevent minors and non-residents from conducting cryptocurrency transactions . At the same time, the South Korean Ministry of Finance will consider the possibility of taxing virtual currencies.
It is worth noting that just recently, South Korea’s attitude towards ICO has become ambiguous. On the evening of March 13, Beijing time, according to South Korean media reports, the South Korean government is starting to formulate ICO-related policies. This will open the door for South Korean companies to raise funds in the cryptocurrency market.
Regardless of the attitude towards ICO, legislating to establish the status of virtual currency, supervising virtual currency exchanges, and taxing virtual currency have become the mainstream of the world's regulatory policies. South Korea's ambiguous attitude towards ICO is even more worth pondering.
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Where does Chinese regulation go from here?
Looking back at the initial regulatory situation in China, Bitcoin has always been regarded as a virtual property, and third-party institutions were banned from providing Bitcoin transaction services at the very beginning. Recently, Zhou Xiaochuan, governor of the People's Bank of China, said that he "does not say what kind of regulatory measures will be taken soon", which may mean that the regulators are still waiting and watching on virtual currencies.
Before the "Announcement" issued by seven ministries and commissions in September 2017, China's supervision of virtual currency has been referring to a 2013 document.
In December 2013, the People's Bank of China and other five ministries and commissions jointly issued the "Notice on Preventing Bitcoin Risks", which reflected the attitude of the regulators towards Bitcoin at that time: they clearly regarded Bitcoin as a virtual commodity and required services such as Bitcoin registration and trading Internet companies effectively fulfill anti-money laundering and other requirements, and at the same time prohibit third-party payment and other institutions from providing services for Bitcoin transactions. This means that Chinese regulators regard legally acquired bitcoins as virtual property.
On September 4, 2017, the "Announcement" jointly issued by seven departments including the People's Bank of China (PBOC) pointed out that token issuance financing refers to financing entities raising bitcoin and ether from investors through the illegal sale and circulation of tokens. The so-called "virtual currency" is essentially an act of illegal public financing without approval. Issuance and financing activities should be stopped immediately."
The latest developments in China's virtual currency regulatory policies come from the morning of March 9, 2018. Zhou Xiaochuan, governor of the People's Bank of China, at the press conference of the First Session of the Thirteenth National People's Congress, said that digital currency and blockchain, which are highly concerned by the outside world, , financial regulation and other issues.
Zhou Xiaochuan pointed out that virtual currencies such as Bitcoin, as retail payment tools, are currently not recognized by the central bank, and the banking system does not accept them or provide related services. Future regulation is first of all very dynamic, depending on the tolerance of the technology, the results of the final test and experiment, and the final evaluation. It remains to be seen. "
It is worth noting that Zhou Xiaochuan reminded investors: "For some new products, you must learn and understand them before you consider using them. If you use them, you must bear your own risks and figure it out yourself. It is not completely controlled by supervision."
How will the global regulatory environment change in the future? The author will launch the "Digital Currency Policy Weekly" to continue to pay attention to this, so stay tuned.
