Crypto regulation in the world: weekly digest #125

UAE

Abu Dhabi's Financial Services Regulatory Authority (FSRA) has introduced a comprehensive regulatory framework for Fiat-Referenced Tokens (FRTs), marking a significant development in the regulation of stablecoins within the Abu Dhabi Global Market. This initiative aims to address the growing demand for stablecoins while ensuring financial stability and consumer protection.

FRTs are digital assets backed by high-quality, liquid assets that can be quickly liquidated without significant price impact. They are designed to maintain a stable value, unlike other cryptocurrencies which may exhibit speculative volatility.

The FSRA’s framework seeks to align with international best practices, drawing from regulatory approaches in jurisdictions such as the EU, UK, and Hong Kong. The primary focus is on fiat-backed stablecoins due to their potential for widespread use as payment methods, which poses more immediate risks to monetary stability compared to other types of stablecoins.

Key Features:

• Issuers must back FRTs with high-quality liquid assets, ensuring that the market value of these reserves is always equal to or greater than the value of the tokens in circulation.

• Holders of FRTs will have the right to redeem their tokens at par value within two business days (T+2), with provisions for longer periods during exceptional circumstances.

• The framework explicitly prohibits algorithmic stablecoins, which lack backing by tangible assets and rely on complex algorithms for value stabilization.

The introduction of this framework positions ADGM as a leader in crypto asset regulation, fostering an environment conducive to innovation while prioritizing safety and soundness in financial transactions. By establishing clear guidelines for FRTs, the FSRA aims to enhance transparency and compliance among issuers and market participants.

Earlier this year, in June, the CBUAE officially published the Payment Token Services Regulation, which outlines comprehensive rules for licensing and supervising digital payment services, including stablecoins. This regulation is designed to ensure a secure and efficient digital payment ecosystem in the country. So, this move of FSRTA also aligns its regulatory framework with the rules of the country’s regulator.

USA

Florida, one of the richest American states, is set to establish a Bitcoin reserve by early 2025, marking a significant move in the state's financial strategy. Florida plans to allocate approximately $1.85 billion from its $185.7 billion pension fund, which ranks among the largest in the U.S. This would involve investing just 1% of the fund into Bitcoin. Additionally, the state has a budget surplus projected at $116.5 billion for the fiscal year 2024-2025, from which another 1%, or roughly $1.16 billion, could be directed toward Bitcoin investments.

The initiative enjoys strong backing from Florida's political leadership, including Governor Ron DeSantis, who has been an outspoken advocate for cryptocurrency and has opposed central bank digital currencies. Legislative leaders also show bipartisan support for this venture, indicating a robust political consensus around cryptocurrency adoption in the state.

Florida has already made strides in the crypto space, with existing investments totaling around $800 million in various cryptocurrency assets. This foundation positions Florida as a potential leader in state-level Bitcoin adoption.

The establishment of a Bitcoin reserve could enhance Florida's position in the burgeoning digital currency market and potentially yield significant long-term financial benefits as cryptocurrencies gain traction globally. This move aligns with broader national trends, including discussions about a possible federal Bitcoin reserve under President-elect Donald Trump's administration, which could further influence state-level initiatives like Florida's.

Florida's proactive approach to cryptocurrency investment reflects a growing recognition of digital assets as a legitimate component of state financial strategies.

EU

The development of a crypto tax framework in the European Union is evolving, particularly with France's recent proposals regarding taxation on cryptocurrencies and the Czech Republic's exemption for long-held Bitcoin.

In May 2023, the EU Commission announced a political agreement on new tax transparency rules aimed at improving the monitoring of crypto-assets across member states. This initiative, known as DAC8, mandates that crypto-asset service providers collect and report information on transactions involving their customers. The goal is to enhance tax compliance and reduce tax evasion related to crypto-assets, which are often traded across borders without sufficient oversight.

France has been actively working on its approach to cryptocurrency taxation. Currently, cryptocurrencies like Bitcoin are treated as movable property, subject to a flat tax rate of 30% for occasional traders. However, recent discussions in the French National Assembly have introduced proposals for more nuanced taxation policies. Notably, Pierre Person, a deputy in the assembly, has advocated for a framework that would exempt small transactions (under €3,000) from tax and allow for the claiming of capital losses on crypto investments. Additionally, there are plans to classify unproductive wealth — assets that do not generate income — as taxable under certain conditions, which could impact Bitcoin holders significantly.

In contrast to France's approach, the Czech Republic has adopted a more lenient stance regarding Bitcoin taxation. As of 2025, Bitcoin that has been held for over three years will be exempt from capital gains tax. This policy is part of a broader strategy to foster innovation and investment in the crypto sector while simplifying the tax obligations for long-term holders. The Czech government aims to create an environment conducive to cryptocurrency investment by not taxing gains realized after such a holding period.

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