But in the case of Bitcoin, the actual market manipulation took outside the U.S. jurisdiction. Carol Alexander, Professor of Finance at the University of Sussex Business School, said Seychelles-based crypto derivatives exchange BitMEX allowed its bots to drive the bitcoin price down from above $8, to below $4, “As the S&P crashed in March , gold had its worst week in eight. May 30, · The laws that govern such tokenized securities are the German Securities Trading Act, the European Markets in Financial Instruments Regulation, and the European Market Abuse Regulation. Russia: Not Regulated: In the Russian Federation, there is . Market abuse is a concept that encompasses unlawful behaviour in the financial markets and, for the purposes of this Regulation, it should be understood to consist of insider dealing, unlawful disclosure of inside information and market manipulation.
Market abuse regulation bitcoinWhy Regulation Could Help Bitcoin
The country serves as the home base of the first STO in Europe. Further legal clarity is needed, however. Such activities require direct CNBV approval. That said, research shows that local regulators already see security tokens in a much more favorable light. Tokens which qualify as securities are subject to security laws. They also have to observe regulations concerning insider trading and they have to register with an exchange. There is some regulatory ambiguity about where utility tokens stand in this picture.
The classification of the token is of the essence. Decisions in this regard are made on a case-by-case basis. Security token issuers need to draft a prospectus and to submit it to BaFIN for approval. There are three draft laws currently on the table, addressing the issue of STOs directly or indirectly.
Lawmakers have not really shown much interest in moving any of them forward though. The Thai National Legislative Assembly paved the way for this regulatory stage through a February decision.
Still, nothing has transpired yet. There is a lot of concern about financial crime. Security token issuers have to draft a prospectus and submit it for MAS approval unless granted an exemption. Token issuers with such exemptions cannot advertise their offer.
From a legal perspective, regulators find it easier to corral tokenized securities under existing securities laws. This class of tokens does naturally lend itself well to such a regulatory approach. While this exercise may seem simple in theory, it is anything but. The case-by-case analysis approach is, however, a fail-safe solution. Bitcoin Market Journal brings you hot investment tips from the best minds in bitcoin, altcoins, and ICOs. Straight to your inbox.
The relevant law in this regard is Art. Most security tokens do, indeed, fall into this asset category. Join our Newsletter and Join the New Rich. Sign Up. You should, too. European Union. Allowed and heavily regulated. In the US, security tokens are subject to existing laws governing securities in general. Chinese authorities have been consistent regarding the legal status of STOs.
Australia was one of the first countries to set up a functional regulatory framework for STOs. Not Regulated.
In India, there are no laws regulating digital security tokens and STOs. Bitcoin was founded on the principles of decentralization, meaning that the cryptocurrency was not regulated by the central authority in the way that a traditional or fiat currency would be.
As Bitcoin, and the blockchain technology behind it, remains quite new and in the early stages of its evolution, authorities are still trying to get to grips with what exactly the technology is before attempting to come up with a plan about how to deal with it, especially in relation to taxation and money laundering issues. Currently, there is no uniform international approach to Bitcoin and its legality will depend on where in the world that you reside.
However, as authorities gain more experience and knowledge about Bitcoin, and the cryptocurrency industry in general, it is likely that at least a certain minimum levels of regulation will come into place in the vast majority of countries. In addition, the huge gains being made by the cryptocurrency this year has meant that authorities are feeling that urgency about regulating the sector, with over 30 global regulators having announced various approaches to cryptocurrency regulation in recent months.
Not long after its inception, Bitcoin had gained the attention of regulators as a result of its popularity amongst vendors and customers on the Dark Web, an area of the internet that was rife with illegal trade in items ranging from weaponry to illegal drugs. For example, the infamous Silk Road marketplace only accepted Bitcoin on its site in order to ensure anonymity for its customers. In addition, the semi-anonymous and decentralized nature of Bitcoin meant that authorities feared that it would be used for money laundering.
For example as early as April the FBI indicated that the lack of regulation could mean that Bitcoin could be used for illegal activities by criminals, especially when offshore exchanges were available.
Other issues arising include the fact that as Bitcoin has risen in value, its usefulness when it comes to making transactions has fallen and it is being used more and more to store value, leading to the possibility of a bubble. It is suggested that the vast majority of Bitcoin transactions over the last months have been for speculation purposes, with the volatility of the asset and the demands and resulting expense that the sudden surge of interest has placed on the currency making it increasingly unsuitable for everyday transactions.
Although a small number of countries have restricted or banned Bitcoin, most countries allow Bitcoin to be used, while a patchwork of regulations having been put in place in different. The decentralized nature of Bitcoin makes it very difficult to enforce restrictions on Bitcoin, even in those countries that have banned it.
Below, we have a look at the approach of a number of different jurisdictions. The US does not yet have a uniform approach to the regulation of Bitcoin at a Federal or State level. For example, the CFTC recently accepted a proposal by the Chicago Mercantile Exchange to allow Bitcoin and other cryptocurrency to be cleared in the same manner as other products, which could have a major effect on the value of Bitcoin.
At a State level there have been various approaches taken by individual States, particularly in relation to the regulation of exchanges or other money transmitters. Some States, such as New York, have made attempts to make specific licensing regimes that are applicable to cryptocurrency exchanges whereas other states, such as Texas, continue to apply existing financial laws and regulations to the use of cryptocurrencies.
In fact, the New York Bitlicence is currently being challenged by the Bitcoin Foundation, who are increasingly active in lobbying against large scale regulation of the industry. Indeed, the EU already had a framework to govern the use of electronic money before the invention of Bitcoin, which was adaptable to fit cryptocurrencies such as Bitcoin.
The European Banking Authority EBA has advised European banks not to trade in any cryptocurrencies until a regulatory regime was put in place. In , the European Parliament agreed to set up a taskforce to monitor cryptocurrencies with a view to combating money laundering and terrorism.
The European Commission has further proposed that cryptocurrency exchanges and digital wallets would be subject to regulation in order to prevent tax evasion. The current rapporteur of the first Blockchain Resolution of the European Parliament has suggested that the benefits of a framework of rules in respect of the blockchain industry would allow for companies and customers operating in the sphere to act on a level playing field.
She stated that without certainty about regulation, it is unlikely that the required scalability of the technology will be able to occur. She further proposed that ICOs, for example, should be defined within their own structure, rather than any attempt be made to make it fit into the current regulatory structures of securities or commodities.
Although legal for individuals in China, there has been a clampdown on the trading of Bitcoin in , with multiple exchanges having to delay or pause Bitcoin withdrawal services.
This clampdown arrived in tandem with an increase in the Chinese media noting the dangers of cryptocurrency as a tool for criminal activities, which suggests that this has been a de facto regulation of Bitcoin.
The other area in which authorities are increasingly looking at how regulation will be implemented in respect of Bitcoin is in the area of tax. Due to the semi-anonymity of Bitcoin, it can potentially be used to hide assets and assist in reducing taxation.
There is no uniform international approach on how profits made from trading in Bitcoin or other cryptocurrencies should be taxed.