Crypto regulation in the world: weekly digest #136
Armenia
Armenian government has taken significant steps towards regulating its cryptocurrency sector by introducing its first comprehensive crypto law. This development marks a crucial milestone in the country's efforts to establish a clear legal framework for crypto assets as Armenia is one of the several countries in Europe and Central Asia that still has not developed it.
The proposed law aims to create a predictable environment for the crypto-asset sector, defining rights and responsibilities for operators and ensuring customer protection mechanisms are in place. It introduces well-defined legal parameters for crypto assets and their underlying technologies, fostering innovation in distributed ledger technologies.
The Central Bank of Armenia will have enhanced oversight powers to monitor sector activities, address financial stability concerns, combat money laundering and terrorist financing, and collaborate with international regulatory bodies.
The legislation aligns with international standards, reflecting Armenia's efforts to harmonize its regulatory approach with global practices, particularly following the European Union's comprehensive legislative framework.
Prior to this law, reforms in the Civil Code recognized cryptoassets as a distinct type of property, laying groundwork for further regulation. However, critics fear that the new regulations might stifle innovation and harm the country's crypto industry, emphasizing the need for a balanced approach that supports both regulation and innovation.
USA
The U.S. SEC recently issued a Staff statement that most meme coins are not considered securities under U.S. federal law. This determination is based on the fact that meme coins typically do not produce a yield or offer rights to future profits or assets, and they are more akin to collectibles than traditional financial instruments. The SEC's decision means that transactions involving meme coins do not need to be registered with the Commission, and neither buyers nor sellers are protected by federal securities laws.
Meme coins are crypto assets inspired by internet memes or trends, often purchased for entertainment and social interaction, with their value driven by market demand and speculation. The SEC applied the Howey test, which requires an investment in an enterprise with a reasonable expectation of profits derived from others' efforts. Meme coins do not meet this criteria because they do not involve pooled investments or managerial efforts that could lead to profits.
By not classifying meme coins as securities, the SEC reduces the regulatory burden on their issuance and trading. This could encourage more retail investors to participate in the market without concerns about compliance complexities. Businesses may feel more confident accepting meme coins as payment, potentially increasing their utility and value. For instance, companies like Tesla and AMC are planning to accept Dogecoin, and this trend might grow.
However, meme coins are still largely driven by social media trends, community sentiment, and speculative trading rather than intrinsic value or utility. This means their prices will likely remain highly volatile and unpredictable.
South Korea
South Korea has officially launched a specialized crypto crime prosecution unit, known as the Joint Investigation Unit (JIU) for Virtual Asset Crimes. This unit is operated by the Seoul Southern District Prosecutors' Office and is a collaborative effort with the Financial Services Commission and the Financial Supervisory Service. The JIU was initially formed as a temporary task force in July 2023 to address a surge in crypto-related fraud cases but has been upgraded to a permanent investigation unit due to the ongoing rise in crypto crimes.
The unit consists of 34 to 35 full-time employees, including prosecutors and financial regulators. It is led by Chief Prosecutor Park Geon-wook and two deputy chief prosecutors and focuses on investigating and prosecuting crypto-related crimes such as coin fraud, market manipulation, and other illicit activities.
Since its inception, the unit has indicted 74 individuals and arrested 25 suspects involved in crypto fraud and market manipulation. The establishment of the JIU was part of broader efforts to enhance investor protection and stabilize the crypto market in South Korea. We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!
