In the 45 countries we studied, cryptocurrencies are legal in 20 countries, partially banned in 17 countries, and fully banned in 8 countries. In the 10 G20 countries that account for over 50% of global GDP, cryptocurrencies are fully legal, and all G20 countries are considering regulating cryptocurrencies.

Authored by: Ananya Kumar, Greg Brownstein, Alisha Chhangani

Translated by: TaxDAO

Since its inception in 2008, cryptocurrencies have become increasingly popular and have become an important part of the global financial system. Cryptocurrencies have greatly changed today's financial structure and are changing the next generation of currency and payment methods. However, these changes also come with great concerns about the potential negative impact of cryptocurrencies on the market, investors, users, and the environment. Governments around the world are seeking to establish regulations to prevent these harms while encouraging the innovative capabilities of cryptocurrencies.

We studied 45 countries, including G20 member countries and countries with the highest cryptocurrency adoption rates. This new study classifies and explains how the largest economies in the world and economies with frequent cryptocurrency activities regulate cryptocurrencies.

45 Countries

We analyzed how 45 countries regulate crypto assets within their jurisdictions. In each country, regulated participants can be cryptocurrency issuers, cryptocurrency exchanges, traditional financial institutions, service providers, or miners.

Legal Status

Each country is designated as one of the following regulatory states: legal (allowing all activities), partially banned (not allowing one or more activities), and fully banned (restricting all activities).

Regulatory Categories

Countries regulate actors in the cryptocurrency field using tax policies, requirements to combat money laundering and terrorist financing, consumer protection rules, and licensing and disclosure obligations.

Key Findings

• In the 45 countries we studied, cryptocurrencies are legal in 20 countries, partially banned in 17 countries, and fully banned in 8 countries. In the 10 G20 countries that account for over 50% of global GDP, cryptocurrencies are fully legal. All G20 countries are considering regulating cryptocurrencies.
• Regulatory changes for crypto assets are happening rapidly. In the countries under review, nearly 75% of countries are making significant adjustments to their regulatory frameworks, usually through new tailored legislation targeting the cryptocurrency market.
• Stablecoins, typically backed by fiat currency, are the next frontier of cryptocurrency regulation. The EU, US, UK, and Thailand are considering regulating stablecoins. In Mexico, financial institutions cannot issue stablecoins.
• Emerging market economies lag behind developed economies in regulatory development. In the developed economies studied, 64% of countries have established regulations related to taxation, anti-money laundering/counter-terrorist financing, consumer protection, and licensing. In emerging market countries, only 11% of countries have established relevant regulations.
• Experimentation is widespread. Countries use regulatory sandboxes for testing and collaborate with the private sector. Japan has established an association of cryptocurrency exchanges and issuers in an attempt to encourage self-regulation. Canada, Italy, Mexico, and Saudi Arabia have also developed regulatory sandboxes.
• Consumer protection rules are relatively lagging. In the countries under review, only one-third of countries have established rules to protect consumers. These rules include advertising regulations, network security requirements for service providers, investor authentication, and more. These rules can successfully prevent fraud.
• The relationship between cryptocurrency adoption rates and regulatory restrictions is generally weak in the countries under review. Among the top ten countries in cryptocurrency adoption rates, six countries have implemented partial or full bans.
• Cryptocurrency exchanges have faced increased scrutiny since the collapse of FTX. Global regulatory agencies are looking to promote responsible industry standards to prevent the negative impact of regulatory arbitrage.
• In the 45 countries analyzed, over 90% of countries have active central bank digital currency (CBDC) projects in addition to cryptocurrency regulations. This indicates that countries are exploring CBDCs while adjusting and updating cryptocurrency regulations.

Role of Global Governance Institutions

In addition to promoting global cooperation in cryptocurrency asset regulation, standard-setting bodies play an important role in creating governance and industry standards.

Financial Stability Board (FSB)

The Financial Stability Board's members mainly include G20 countries, the International Monetary Fund, and international institutions such as the Bank for International Settlements and the International Organization of Securities Commissions.

The Financial Stability Board focuses on the financial stability aspects of crypto assets and promotes international cooperation between financial authorities and standard-setting bodies to ensure uniform regulatory standards. It has issued regulatory proposals for cryptocurrencies and stablecoins.

Financial Action Task Force (FATF)

The Financial Action Task Force has 38 member countries and a wide range of regional and international institutions. Its broader network includes 200 jurisdictions that have agreed to implement anti-money laundering/counter-terrorist financing standards.

In 2019, FATF provided a global framework for anti-money laundering for all virtual asset service providers, listing 15 recommendations for improving anti-money laundering/counter-terrorist financing regulations. These recommendations were updated in 2021. FATF also reviews the implementation of its recommendations annually. The latest review found that most jurisdictions still need to adopt, implement, and enforce the recommendations. Recommendation 15, known as the "travel rule," requires value service providers to share beneficiary and originator information for all transactions. In practice, this rule is controversial, and only a few jurisdictions have implemented it.

Basel Committee on Banking Supervision (BCBS)

The Basel Committee on Banking Supervision has 45 members, consisting of central banks and banking supervisory authorities from 28 jurisdictions.

The Basel Committee is the setter of global banking prudential regulatory standards. It has provided recommendations for prudently managing banks' exposure to crypto assets. This provides guidance for capital requirements, liquidity requirements, leverage ratios, and supervisory functions. It is part of the Bank for International Settlements.

International Organization of Securities Commissions (IOSCO)

The International Organization of Securities Commissions has 131 member countries' securities and derivatives commissions, 34 regional and international institutions, and 72 non-national entities such as self-regulatory associations, stock exchanges, and financial market infrastructures.

The International Organization of Securities Commissions is the setter of global securities market regulatory standards. It published cryptocurrency exchange regulation guidelines in 2020. In 2022, it agreed to establish a board-level Financial Technology Task Force, currently chaired by the Monetary Authority of Singapore (MAS). The task force focuses on market integrity and investor protection issues and has two broad workstreams, namely cryptocurrency and digital assets, and decentralized finance.

• Committee on Payments and Market Infrastructures (CPMI)
• The members of the Committee on Payments and Market Infrastructures are central banks from 28 countries.

The Committee on Payments and Market Infrastructures is the setter of global standards for payment, clearing, and settlement arrangements and serves as a platform for international cooperation among central banks. Its work on crypto assets includes cross-border payment workflows and cooperation with the International Organization of Securities Commissions on stablecoin market infrastructures.

Egmont Group

The Egmont Group's members are 166 financial intelligence units from around the world.

The Egmont Group is a coordinating body among 166 financial intelligence units. It is a major platform for the sharing of financial intelligence, supporting domestic and international anti-money laundering/counter-terrorist financing measures. The Egmont Group's Information Exchange Working Group aims to promote bilateral and multilateral information sharing, enhance members' information technology capabilities, and is currently tasked with conducting a project on the risks of emerging financial technologies, virtual currencies, and anti-money laundering/counter-terrorist financing standards.

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