Regulatory and compliance issues have always been one of the most controversial topics in the cryptocurrency space, and it has been the front and center problem in the context of issues like Libra, bitcoin ETF, and ICO. Some believe that regulatory challenges were the biggest hurdle for crypto investment to go mainstream, others argue that crypto-related products must be well regulated before entering the mainstream investment market. So, is there a middle ground on this? Meanwhile, we’ve seen the US and Asia have some very different approaches when it comes to crypto regulations, what’s the latest trend in crypto compliance world? And how it could impact the future of the crypto industry?

Very Different Landscapes

The institutional and retail interest in cryptocurrency investing has been growing rapidly in the past years. Despite the high volatility and price fluctuations, global investors have been looking for a proper and legitimate way to tap into this emerging asset class, and that high demand for crypto interest is something too huge to ignore for all the financial regulatory bodies in any jurisdictions. Geographically, Asia, the US, and Europe all have very different approaches when it comes to regulations on cryptocurrency, so let’s have a brief review of their approaches.


As the fastest growing crypto region, Asia has the widest regulation spectrum than any other region in the world. Japan has created one of the most crypto-friendly environments and widely considered bitcoin as legal tender. The country passed a law in mid-2017 recognizing cryptocurrencies as legal property. In late 2018, Japan also approved self-regulation for the crypto industry. In contrast, China has completely banned all bitcoin transactions in 2013, and later in 2017, the country outlawed all the ICOs. However, Hong Kong and Singapore have adopted a relatively open position, both regions introduced new licensing laws with a prerequisite to obtaining regulatory approval before trading is allowed. In terms of ICO, both jurisdictions classify it as a security and will be regulated under related laws.

United States

Regulators in the US seems to have been taking a relatively active approach when it comes to overseeing the crypto industry. However, despite some high-profile cases such as the bitcoin ETF applications, the SEC and the CFTC remain rather slower than their Asian counterparts in terms of developing a complete crypto regulation framework, and mostly they have been product dependent.


Europe has been lacking a clear stance on crypto regulations due to the diversified jurisdictions. However, this is going to change soon. In June 2018, the European Commission has introduced ​the 5th Anti-Money Laundering Directive, which requires all the EU countries to limit the anonymity related to virtual currencies and wallet providers. Measures to improve the cooperation and information exchange between AML supervisors and the ECB are also included. EU countries are required to adopt the Directive by 10 January 2020. Meanwhile in the UK, currently there are no specific cryptocurrency laws and crypto investments are mostly unregulated. Recently the FCA published its final guidance on crypto assets and restated its position that crypto assets have no intrinsic value.

Balancing Out

We may see regulators could step up its efforts in overseeing the crypto industry by requiring licenses to conduct crypto-related activities. In the past decade, the crypto industry has been largely operated in an unregulated environment, and the involvement of regulators only happened in the past few years. However, like it or not, that fact that this absence of regulation has partly contributed to the exponential growth that the crypto industry has experienced in the past years.

As the industry evolves and cryptocurrency investment has been getting closer to the mainstream, the call of having a proper and complete crypto regulatory framework has been gaining momentum. Licensing seems an inevitable part of it and could be one of the ways to benefit both investors and industry players.

For example, acquiring licenses will able to force exchange operators to adopt investment banking KYC and AML standards, giving them a clear guideline on what they can and can’t do, and able to avoid grey areas. Investors will also be benefited from a more transparent exchange and with greater confidence when it comes to trading crypto assets.

Same as other players in the crypto industry ranging from investment service providers to brokerages. As an emerging sector, we’ve seen cases of industry participants’ practices fall short of investors’ expectations and failed to protect their interests. This comes at a time that traditional financial markets have adopted cryptocurrencies with increasing frequency, which also poses a challenge for regulators as they have been trying to manage this ever-changing new asset. In many cases, regulators also haven’t able to catch up with the fast-growing industry.

What about ICO/IEOs?

While the nature of initial coin offering or initial exchange offering remains highly debatable, ICO and IEO white papers could be something that investors have been taking too lightly, and perhaps an area lacks regulatory presence.

Currently, there are no formal rules for writing white papers, despite the project descriptions and future development plans, the white paper generally doesn’t require third party opinions. Unlike IPO prospects, financial information must be audited by professional accountants, and many of the terms must be certified by a team of lawyers.

Although seeking third-party opinions for an ICO/IEO project could significantly increase the compliance cost, but at the same time, it could increase the level of transparency and confidence for investors. Over the long run, the white paper could be an area that regulators could look at.


Looking ahead, the crypto industry may have to embrace more regulatory guidelines and rules globally, as institutional and retail investors have been increasing expose in cryptocurrency investment. Areas like AML, KYC, antifraud, transaction reporting and cybersecurity are likely in focus. While industry players may have to step up their efforts to adopt some new changes, an improved regulatory environment could also enhance the transparency of the crypto industry as a whole and strengthen investors’ confidence.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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