Crypto regulation in the world: weekly digest #123

USA

Gary Gensler, the current Chair of the U.S. SEC, has announced his resignation effective January 20, 2025, coinciding with the inauguration of President-elect Donald Trump. Gensler has led the SEC since April 2021 and will step down nearly a year before the end of his five-year term, which was set to expire in June 2026.

Gensler's departure aligns with a common practice where regulatory agency heads resign when a new administration takes office, particularly if they belong to a different political party. Trump had previously indicated intentions to remove Gensler on his first day in office due to Gensler's aggressive regulatory stance on cryptocurrencies, which has faced significant backlash from the crypto industry. In a statement, Gensler expressed gratitude for the opportunity to serve and highlighted the SEC's mission to protect investors and ensure market integrity.

During his tenure, Gensler was known for implementing stringent regulations on the cryptocurrency sector, leading to numerous enforcement actions against major firms like Binance and Coinbase for various violations, including fraud and unregistered securities sales. His leadership was marked by a focus on increasing transparency and accountability within financial markets, but it also drew criticism for being overly aggressive especially towards cryptocurrency industry.

With Gensler's resignation, President-elect Trump will have the opportunity to nominate a successor who may shift the SEC's regulatory approach, especially concerning cryptocurrencies. This transition could lead to a more lenient regulatory environment for digital assets, which has already seen significant changes following Trump's election victory. Speculation about potential candidates for Gensler's replacement includes former SEC commissioners and crypto-friendly figures.

Meanwhile Donald Trump is reportedly planning to establish a new position within the White House dedicated to cryptocurrency policy. Trump's transition team is actively discussing the creation of this crypto-focused role, which would be the first of its kind in the White House. The position aims to coordinate cryptocurrency policies across various federal agencies, including the SEC and CFTC.

China

A recent ruling by a Shanghai court has clarified the legal status of cryptocurrencies in China, affirming that individual ownership of cryptocurrencies is legal under Chinese law. Judge of the Shanghai Songjiang People's Court stated that cryptocurrencies possess attributes of property and can be classified as virtual commodities. Nevertheless, while individuals can legally hold cryptocurrencies, commercial activities related to them, such as trading and initial coin offerings (ICOs), still remain prohibited due to concerns about financial stability and potential illegal activities.

Also, earlier this year China's highest court has officially classified the use of cryptocurrencies as a method of money laundering. In a joint statement issued by the Supreme People's Court and the Supreme People's Procuratorate, it was emphasized that transactions involving virtual assets can be utilized to transfer or convert criminal proceeds, which constitutes a violation of China's anti-money laundering laws.

China's regulatory landscape has been historically stringent regarding cryptocurrencies. The government has imposed various bans on trading and mining activities since 2017, citing risks to financial stability. However, this ruling marks a nuanced shift, recognizing personal rights while maintaining a crackdown on speculative trading.

South Korea

South Korea's financial regulatory environment regarding cryptocurrency has recently tightened, with significant restrictions placed on exchange-traded funds linked to digital assets.

The Financial Supervisory Service has officially prohibited the launch of Bitcoin spot and futures ETFs. The FSS cited a 2017 directive aimed at protecting investors from the risks associated with virtual assets as the basis for these restrictions.

Many domestic asset management firms had plans to introduce ETFs focused on cryptocurrency-related businesses but have been forced to pause these initiatives due to the FSS's stance. Critics, including legal experts, argue that the FSS's actions are overly cautious and lack a solid legal foundation.

As South Korea maintains its restrictive policies, other countries, particularly in the West, are moving towards greater acceptance of cryptocurrency-linked financial products. The U.S., for example, has seen significant developments with Bitcoin ETFs and options trading gaining traction. This divergence raises concerns about South Korea's competitiveness in the evolving digital asset market.

Overall, while South Korea's current stance reflects a cautious approach to cryptocurrency regulation, ongoing discussions within its financial authorities may lead to changes that could align it more closely with global trends in digital asset investment.

News from other countries:

• Russia is establishing a regulatory framework for cryptocurrency mining, which includes the creation of a special registry. Starting November 1, 2024, all companies and individual entrepreneurs engaged in cryptocurrency mining must register in a special registry managed by the Ministry of Communications.

• FTX is set to initiate the distribution of nearly $16 billion in funds owed to its customers and creditors, following the approval of its Chapter 11 reorganization plan. Distributions are expected to commence in early 2025, with specific payouts anticipated within 60 days after the effective date of the plan, likely in January 2025

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