Virtual digital assets: Lessons from global trends in regulation
G20 summit. The G20 presidency note by India underlines some concerns and calls for a common global road map for minimum policy standards for VDAs. Therefore, it is important to understand how other countries have addressed VDAs.
In the US, in light of the actions taken by the SEC against Ripple and FTX, it is clear that the SEC treats VDAs as a security if they pass the test laid down in SEC vs Howey. While VDAs are not banned in the US, the government perceives them as risky for consumers and insists on ramping up enforcement where needed. As per Gary Gensler, chairman of the SEC, US is likely to adopt regulations which are protective by nature and might restrict interests in VDAs.
The European Union in 2023 adopted the regulation on Markets in Crypto Assets (MiCA), prescribing the registration requirements for VASPs in EU. Only VASPs located in the EU can obtain registration under MiCA from European Securities & Markets Authority. In 2022, the Dubai constituted the Dubai Virtual Asset Regulation Authority (VARA).
VARA issued regulations in 2023 prescribing the requirement of a business license for seven virtual asset related activities. Entities interested in pursuing any of the seven activities need to demonstrate their fitness for obtaining a business license. As recently as July 2023, the world’s largest international crypto exchange, Binance, received an operational MVP license from VARA to operate a crypto exchange.
Because of its regulatory approach, Dubai is pegged to become a global hub for innovation in VDAs. After the collapse of Mt. Gox in 2014, Japan became a proactive regulator of VDAs, including from a money laundering standpoint.
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