HomeCryptoThe 5 most important regulatory developments for cryptocurrencies in 2022
The 5 most important regulatory developments for cryptocurrencies in 2022
December 25, 2022
2022 will surely be remembered as a year of discontent for cryptocurrencies, a year in which the price of Bitcoin collapsed three times, many large companies went bankrupt and the industry suffered a series of significant layoffs. However, it has been a pivotal year for cryptocurrency regulation around the world. While some regulatory developments are concerning in terms of a more restrictive stance on digital assets, their effect could help the sector mature in the long run.
Looking to the significant regulatory events of 2022 could fuel optimism about the future. The controversial policy to limit proof-of-work (PoW) mining was championed in New York, but a similar one has failed in the European Union. In some jurisdictions, such as Brazil and Russia, cryptocurrencies are undoubtedly gaining momentum.
Of course, there were many other benchmarks to mention, but Cointelegraph tried to pick ones that represent broader regional trends.
The cryptocurrency markets bill
It is right to put the European cryptocurrency markets bill first because it has passed all stages of voting in the European Parliament and is expected to become law in 2024. The comprehensive crypto framework was first proposed by the European Commission in September 2020 and has since worked its way through the various stages of deliberations. Some in the industry, like Binance CEO Changpeng Zhao, expect it to become a regulatory standard copied around the world.
The bill includes a transparent licensing regime, with the European Securities and Markets Authority designated as the responsible body. The provisions include strict criteria for stablecoin operators and increased legal liability for cryptocurrency influencers. Positively, a proposed amendment to the bill that would have effectively banned PoW mining and the incomprehensible 200 million euro ($212 million) limit for daily stablecoin transactions has not made it to the final draft. The bill represents a moderate approach, with an understandable emphasis on investor protection.
Read also: The UK’s plan to regulate cryptocurrencies and the possible end of a favorable regime for crypto licensing in France.
Lummis-Gillibrand v Warren-Marshall
Unlike the European Union, the race towards comprehensive legislation in the United States has just begun this year. The good news is that there are many contenders.
A joint draft by Senators Cynthia Lummis and Kirsten Gillibrand opened the contest in June. The highly anticipated Responsible Financial Innovation Act (RFIA) contains a division of powers between federal regulatory agencies. Under the bill, the Commodity Futures Trading Commission would regulate investment contracts, which the RFIA qualifies under the new term “ancillary activities”. It also defines decentralized autonomous organizations, clarifies taxation on cryptocurrency mining and staking, and initiates a report on the highly controversial topic of retirement investing in digital assets.
There are several banknotes dedicated to stablecoins. The first, sponsored by New Jersey Representative Josh Gottheimer, would see the Federal Deposit Insurance Corporation return stablecoins as fiat deposits. The second, introduced in September, aims to ban algorithmic stablecoins for two years.
The antipode of the Lummis-Gillibrand bill is the Digital Asset Anti-Money Laundering Act, introduced by Senators Elizabeth Warren and Roger Marshall in December. It would ban financial institutions from using digital asset mixers and regulate crypto ATMs. Unhosted wallets, cryptocurrency miners, and validators should report transactions over $10,000. Senator Warren has vowed to write comprehensive cryptocurrency regulation legislation that favors the U.S. Securities and Exchange Commission in the role of regulator.
Read also: The Crypto Consumer Investor Protection Act and the Crypto Exchange Disclosure Act by Representative Ritchie Torres.
Russia backs down on cryptocurrencies
One of the biggest cryptocurrency mining markets, Russia, made this year memorable for all the wrong reasons. By achieving the status of the most sanctioned state in the world, he has joined the club of countries that consider cryptocurrencies a tool to mitigate their exclusion from the global financial system. Prior to the February 24 invasion of Ukraine, the discussion on national regulation of cryptocurrencies was defined by the opposing viewpoints of the central bank and the finance ministry. While the central bank has staunchly opposed attempts to legalize cryptocurrencies, the finance ministry has taken a more moderate approach.
The balance shifted in the spring when the central bank issued the first digital asset license. Senior officials have publicly mocked the option to use Bitcoin (BTC) as a foreign trade currency, and the deputy energy minister has proposed legalizing cryptocurrency mining. Since then, the Russian State Duma has considered at least three bills. One bill would legalize experimental mining and the second would include cryptocurrencies in the national tax code. The third, which banned digital financial assets as payments within the country, had already obtained the president’s signature.
Read also: What we know about Iran’s use of cryptocurrencies for foreign trade.
Moratoriums on cryptocurrency mining in the United States and Canada
Perhaps the most disturbing regulatory developments this year occurred in the US state of New York and the Canadian province of Manitoba. Both regions, famous for their attractive natural conditions for cryptocurrency mining, have decided to impose moratoriums on cryptocurrency mining operations. This option has remained on the table since the beginning of the global discussion on the environmental disadvantages of proof-of-work cryptocurrency mining, with the less energy-intensive proof-of-stake (PoS) consensus mechanism touted as a more sustainable alternative.
In particular, the New York moratorium does not in principle prohibit the mining of PoW, leaving the right to operate on the exclusive condition of using 100% renewable energy sources. Tie the discussion once again into the “clean energy” debate as cryptocurrency miners and proponents prepare their arguments to win public opinion. While only two small regions have initiated moratoriums, the big battle between PoW and PoS advocates is far from over.
Read also: Bitcoin miners rethink business strategies for long-term survival, and Kazakhstan is among the top three Bitcoin mining destinations after the US and China.
Brazil legalizes cryptocurrencies as a payment method
In late November, the Brazilian Chamber of Deputies approved a regulatory framework that legalizes the use of cryptocurrencies as a payment method within the country. While the bill does not make cryptocurrencies legal tender as they did in El Salvador, it is nonetheless significant, as it sets the stage for a comprehensive regulatory regime.
The news may seem small compared to the big regulatory narratives in the US or Europe. However, it represents a continuing trend of crypto-friendly moves in Latin America. While Asian jurisdictions have sent out prohibitive signals in recent years, with Washington and Brussels pledging to adopt their own cautious approaches to digital assets, Latin American countries have shown bold progress towards adoption. Honduras draws tourists to Bitcoin Valley, El Salvador continues to push forward its Bitcoin agenda, Paraguay leads the way in regulating cryptocurrencies, and the Argentine province of Mendoza has begun accepting cryptocurrencies for fees and commissions.
Also guilty: Kenyan legislation establishes taxation of cryptocurrencies, Nigeria launches its central bank digital currency, and the Central African Republic adopts Bitcoin as its legal tender.