How 5 Asian Countries Regulate Cryptocurrency
Apr 8, 2019
The Financial Stability Board has detailed how its member countries regulate crypto assets, who the regulators are, and the scope of their oversight. Most countries have more than one government body monitoring and regulating different aspects of crypto activities. Among the board’s Asian member countries, India is the only one with no legal mandate to directly regulate crypto assets.
Three regulators — the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Ministry of Finance — regularly attend the Financial Stability Board (FSB) meetings and G20 summits. The FSB is an international body that monitors and makes recommendations about the global financial system. It has listed only the RBI, the country’s central bank, as the regulator of the Indian crypto space, clarifying in a report published Friday:
RBI does not have a legal mandate to directly regulate crypto-assets. RBI’s current mandate permits it to assess financial institutions’ exposure to crypto-assets and supervise their operations.
Within its mandate, the central bank has prohibited financial institutions from dealing in “or providing services for facilitating any person or entity in dealing with or settling” cryptocurrencies, the FSB detailed. The three aforementioned regulators are part of the panel headed by Subhash Chandra Garg, Secretary of the Department of Economic Affairs, tasked with drafting the country’s crypto regulation. According to the government, this panel is in its final stages of deliberations. India’s crypto regulation was expected to be presented to the country’s supreme court on March 29 but the court adjourned without addressing the matter until July.
At the opposite end of the crypto regulatory spectrum, Japan legalizedcryptocurrency as a means of payment back in April 2017 under the amended Payment Services Act.
The main regulator is the Financial Services Agency (FSA) which supervises and conducts oversight of crypto exchange service providers. Crypto exchanges are required to register with the agency. There are currently 19 registered exchanges with over 140 companies interested in entering the market, the regulator has shared with news.Bitcoin.com. The FSA also cooperates with a self-regulatory organization for added oversight. Additionally, the agency engages in international policy discussions on crypto assets and is currently discussing policies on initial coin offerings (ICOs).
Besides the FSA, two other government bodies are involved in the regulation of the Japanese crypto industry: the central bank and the Ministry of Finance.
The Bank of Japan established a fintech center within its Payment and Settlement Systems Department in 2016. The center conducts research on new technologies including cryptocurrency and how they could change existing financial services and structures. The Ministry of Finance is responsible for supervising and legislating crypto assets’ trade under the Foreign Exchange and Foreign Trade Act including the planning and execution of crypto-related taxation.
There are three regulators for crypto activities in South Korea, with the main regulator being the Financial Services Commission (FSC). The Financial Stability Board describes:
The FSC promotes information exchanges and cooperation with international organisations, especially in regard to virtual currency, and is responsible for analysing trends and establishing policies on the digital currency market and for integrating and coordinating policies and major plans of anti-money laundering system related to virtual currency.
Meanwhile, the Financial Supervisory Service (FSS) is responsible for the oversight, market integrity, general anti-fraud and consumer protection of crypto-related activities.
The FSS and the FSC worked together to produce the country’s cryptocurrency measures at the end of 2017 and additional guidelines in January last year. However, they have yet to introduce any follow-up measures. Meanwhile, ICOs are banned from being launched domestically. At least six bills have been submitted to the National Assembly but none have advanced, the FSC previously told news.Bitcoin.com.
The two regulators implemented the real-name system in January last year with the aim to convert all anonymous crypto accounts into real-name-verified ones. In addition, the Korea Financial Intelligence Unit issued reporting guidelines for banks to prevent money laundering via crypto transactions. The country is also working on the taxation of crypto assets.
The last regulator listed for South Korea by the FSB is the central bank. The Bank of Korea monitors and researches the development of crypto assets and their impacts on the economy and financial stability, including the implications of using cryptocurrencies as payment instruments.
Despite the country’s early history in the space, the only crypto regulator listed for Singapore is the central bank, the Monetary Authority of Singapore (MAS), which performs many regulatory functions.
Firstly, it monitors “the prudential exposures of banks, insurance companies and asset managers to crypto-assets.” It also “regulates activities and institutions conducting activities involving cryptoassets if these are capital markets products” under the Securities and Futures Act, the FSB described. Moreover, besides monitoring “the financial stability risks posed by crypto-assets,” the central bank has “extended its surveillance and market intelligence gathering to include crypto-assets.”
The MAS additionally regulates crypto businesses as part of its regulation of payment systems, stored value facilities, remittance businesses and money-changers. The FSB explained that the upcoming Payment Services Act will expand the “MAS’ regulatory reach to cover additional payment activities, including digital payment token services.” It will also set out “regulations for AML/CFT to mitigate risks posed by entities … which conduct crypto-related activities.”
Another member of the FSB, China became a hotbed of crypto activity in bitcoin’s early life but then began heavy oversight of the crypto industry, banning crypto exchanges outright in 2017. In addition to the People’s Bank of China (PBOC), the country’s central bank, five other government bodies regulate crypto-related activities in China.
The Cyberspace Administration of China monitors online crypto-related activities and rectifies any problems found. The Ministry of Industry and Information Technology prohibits and shuts down illegal crypto-related websites, the FSB noted. Another regulator is the Ministry of Public Security which prohibits crypto activities that are “suspected of illegal criminal activities including illegal fund-raising, fraud and pyramid-schemes.”
Meanwhile, China’s Banking and Insurance Regulatory Commission “is closely following the development of crypto-assets in China and its potential risk to the banking and insurance system,” the board emphasized. Lastly, the country’s Securities Regulatory Commission, which combats the illegal issuance of securities, “is now strengthening research on the issues of crypto-assets related securities.”
Written by: Kevin Helms