Blockchain and Cryptocurrency Laws and Regulations 2024

Regulators are eager to establish safeguards for crypto investors, especially given the failure of major exchanges and industry scams.

Cases of fraud and the chaos of a major cryptocurrency exchange collapse in 2022 ignited calls for greater regulation and consumer protection in the cryptocurrency sector. As cryptocurrency markets have reached new highs in 2024, you might wonder how crypto regulation has evolved and whether it is enough. 

Here’s an overview of blockchain and cryptocurrency laws and regulations in 2024. 

Crypto Regulation in the United States

Crypto regulation in the United States is regularly evolving and primarily developed by a patchwork of regulatory agencies with differing oversight. A few of the agencies involved include:

• Internal Revenue Service (IRS): The IRS treats virtual currencies as property that is subject to capital gains tax. Investors must track and report crypto trades, including when they use crypto to pay for goods or services. purchases. This requirement has been a nightmare for frequent traders who trade on decentralized exchanges (DEXs) or who don’t receive tax reports from crypto brokerages. The 2021 Infrastructure Investment and Jobs Act includes stricter reporting requirements and requires brokers to report capital gains on crypto transactions. The IRS has recently released guidance on reporting for crypto brokers so that centralized exchanges and DEXs must report transactions to the IRS. 
• State banking regulators: Many states get involved in cryptocurrency regulation through state money transfer laws, which means they oversee crypto spot exchanges.  
• U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN): FinCEN pays attention to crypto transfers under an anti-money laundering (AML) scope. It has issued guidance on AML and Know Your Customer (KYC) requirements for crypto businesses.
• U.S. Securities and Exchange Commission (SEC): The SEC has largely taken an approach of enforcing securities laws by going after unregistered initial coin offerings it deems as security offerings.  
• Commodity Futures Trading Commission (CFTC): The CFTC regulates cryptocurrency derivatives like Bitcoin futures contracts. It has declared digital assets to be a commodity that it can oversee.

Congress has made some efforts to introduce bills for cryptocurrency regulation, although the industry still lacks a comprehensive piece of legislation. In 2022, President Biden issued an executive order to examine the development of digital assets, which mainly provides a framework and policy recommendations.

Why Is Crypto Being Regulated?

For many people interested in how to trade in crypto, the motivation is to invest in an asset that offers the freedom to be your own bank and potentially earn better returns. As with any new industry, scammers have participated in defrauding many investors.

In 2022, the cryptocurrency exchange FTX collapsed and filed one of the largest bankruptcies in history, raising concern about a lack of consumer protection. Customer funds were not managed properly, leading to doubts about the crypto industry in general. As a result, the industry faced a downturn, which has likely hastened regulatory action. 

The industry has come a long way from the early days of cryptocurrency mining, and new regulations can offer investors benefits. Many people have been skeptical about which platforms or assets to trade, whether Bitcoin is a good investment and if they should consider crypto at all. Cryptocurrency regulation can provide oversight and try to prevent or reduce illegal activity. 

However, crypto enthusiasts are worried about stifling an asset that is meant to be censorship-resistant. Minimizing the intermediaries that can meddle with crypto transactions can be seen as a way to foster innovation and activity in the market.

Best Regulated Cryptocurrency Platforms

Despite changing cryptocurrency regulations, you can find globally regulated platforms with a solid reputation. Some of the best cryptocurrency exchanges include:

• Kraken: Kraken is considered one of the best brokers for cryptocurrencies as it has been around since 2011. It offers a competitive fee structure, margin trading and a wide selection of coins. You can also upgrade to Kraken Pro to access advanced tools and features. Kraken is regulated by regulatory bodies in the U.S., Canada, Europe, Australia and Abu Dhabi.

• Crypto.com: If you’re looking to trade the top 10 cryptocurrencies, Crypto.com has over 250 available cryptocurrencies, and you can also use Crypto.com’s utility token to pay platform fees and earn benefits. This platform offers perks and rewards if you hold its Visa Card, including cash-back rewards and free subscription trials. Crypto.com offers convenient crypto wallets for platform users. Crypto.com is regulated by agencies across countries like the U.K., Singapore, the U.S., South Korea, Australia, Canada and France.

• Gemini: Whether you’re a complete newbie or have already started to ask questions like what is decentralized finance (Defi) and what is cryptocurrency staking, Gemini could be a reputable platform for you. It is available in all states, and the company has stated a strong commitment to regulatory compliance, holding money transfer licenses and e-money authorizations across the U.K., Italy, Ireland, Greece and the U.S.

Users can enjoy a wealth of features including the Gemini credit card and the Gemini Earn program to earn interest on holdings.

Global Rules and Regulations for Cryptocurrency

As with the U.S., many governments around the world have recognized the need for blockchain and cryptocurrency regulations. These include:

• Canada: Canada was the first country to approve a Bitcoin ETF, and the Canada Securities Administrators (CSA) and The Investment Industry Regulatory Organization of Canada (IIROC) require trading platforms and dealers to be registered with provincial regulators. 
• U.K.: As of October 2022, the British Parliament recognized crypto as a regulated financial instrument with a number of specific reporting requirements that extend existing laws to crypto assets, providers and services. 
• EU: Member states have governance on their own regulations, but in April 2023, legislation was approved that requires certain crypto service providers to obtain an operating license. 
• Japan: Japan has taken a progressive approach to regulating crypto, recognizing it as legal property. Exchanges also must register with the FSA and comply with regulatory obligations. 
• Australia: Australia’s ASIC introduced crypto regulation requirements in 2019 for initial coin offerings and banned exchanges from offering privacy coins. There has also been a licensing framework in the works since plans were announced in 2021, which is due to be approved soon.  
• China: The People’s Bank of China (PBOC) banned crypto enterprises from operating, as they facilitate public financing without government approval, with an outright ban on crypto in September 2021. 
• Singapore: Although considered a crypto safe haven due to no tax on long-term capital gains, Singapore does treat gains from regular crypto transactions as income. Additionally, in 2022, Singapore warned digital payment token providers against advertising to the public. 

Risks of Regulating Digital Assets

Although regulation could provide safeguards for everyday investors, there are downsides. Even though regulations could offer potential investors greater confidence and security, they could constrain the decentralized, anonymous nature of crypto. Ensuring that the core principles of the industry survive requires a delicate balancing act.

Regulation can also stifle innovation and progress. For example, securities tokens have not been able to fully develop because only approved broker-dealers can trade crypto securities tokens, but the SEC has not allowed any currently registered exchanges or broker-dealers to do so. If crypto token issuers can’t find registered exchanges, they won’t register tokens.

Crypto Regulation: The Ongoing Battle

Cryptocurrencies have been rapidly evolving since 2009, and regulation aims to adapt to rising adoption and trading. While this may seem like a significant amount of time in technology terms, governments and global regulators need more time to work out the ways to govern crypto’s uses. 

Although protection from fraud for consumers and businesses is essential and preventative measures need to be implemented to combat illicit activities, there is likely to be an ongoing battle between all interested parties. Investors, platforms, crypto issuers, government agencies and interested parties all have their own priorities, and crypto regulation will likely take a controversial path.