Current Global Encryption Regulation Status: Comparative Analysis of Various Countries' Attitudes and Styles

At the beginning of Bitcoin's inception, it was only circulated within a small circle of geeks, but with the hot development of blockchain technology, the scale of the cryptocurrency market has been continuously expanding. Currently, the number of global cryptocurrency holders has surpassed 200 million, with over 19 million holders in China, truly realizing the transformation from niche to mainstream. In just a few years, the crypto market has developed to a point that no government can ignore, and regulatory issues have become a necessary topic to address. However, to date, there is still no consensus on cryptocurrency globally, and the attitudes of various countries remain unclear.

This article will detail the evolution of the regulatory styles of five countries and regions that are highly concerned in the encryption field, as well as their current regulatory attitudes towards encryption.

USA: Control Risks, Encourage Innovation

The United States has always been the most watched country in the global encryption field, but it is not at the forefront in terms of regulation. Compared to countries like Japan and Singapore, the cryptocurrency regulatory policies in the United States are more ambiguous and difficult to predict.

Before 2017, cryptocurrencies were still in a phase of free growth, and the regulatory policies in the United States were limited to controlling overall risks, with no signs of strict prohibition or accelerated legislation.

In 2017, cryptocurrencies experienced an ICO boom, and regulatory policies in various countries began to tighten. The U.S. Securities and Exchange Commission ( SEC ) issued its first announcement regarding cryptocurrencies, clarifying that ICO activities fall under the jurisdiction of federal securities laws. Although this was the official stance for the first time, the attitude remained to strengthen regulation rather than ban it.

In January 2019, multiple cryptocurrency exchanges reopened the IEO( Initial Exchange Offering) platform, but were soon targeted by regulators. Subsequently, a certain exchange was banned from operating in the United States. Since then, the U.S. has begun a crackdown on cryptocurrencies, regulating them as securities rather than as assets or currencies, which means that cryptocurrencies will face numerous restrictions under the Securities Act.

With the continuous increase of encryption enthusiasts and ongoing calls and lobbying from encryption institutions, the United States' attitude towards cryptocurrency changed in 2021. In February 2021, Gary Gensler became the chairman of the U.S. Securities and Exchange Commission (SEC). He had previously taught a "Blockchain and Money" course at MIT and was relatively friendly towards cryptocurrencies and blockchain, which accelerated the shift in the U.S. attitude. Soon after, the U.S. allowed a certain cryptocurrency exchange to be listed on NASDAQ, marking the first cryptocurrency exchange to go public in the U.S. Since then, the U.S. has begun actively researching regulations related to cryptocurrency.

By 2022, a series of cryptocurrency project collapses made the United States one of the countries with the most severe losses, leading to increased regulatory scrutiny over encryption. In September 2022, the United States released its first draft of a regulatory framework for the cryptocurrency industry, but no laws have been passed to date. Recently, U.S. regulators have initiated lawsuits against several well-known figures in the encryption industry, and the regulatory pressure is intensifying.

Currently, the regulation in the United States is carried out jointly by the federal government and the states. At the federal level, the regulation is overseen by the Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ), with the SEC holding most of the regulatory power. However, the two agencies have not yet reached an agreement on regulatory responsibilities and standards. At the state level, the attitudes and regulatory efforts towards encryption vary from state to state. Reports suggest that the U.S. government is considering establishing a unified regulatory framework to eliminate regulatory differences between states.

Regarding regulatory legislation, the two parties in the United States hold differing opinions, and some local politicians do not view encryption regulation as an urgent matter, or even show complete indifference to cryptocurrencies. Encryption regulatory legislation is entangled in party disputes, making it difficult to reach a consensus in the short term.

The President of the United States has signed an executive order emphasizing that federal agencies take a unified approach to regulating encryption, collectively addressing risks. At the same time, it expresses support for innovation in encryption, hoping that the United States can be a global leader in technology in the encryption field.

The regulation of the encryption sector in the United States is not at the forefront of the world. The U.S. pursues manageable risks and promotes the development of the encryption sector through moderate innovation. It can be said that the U.S. prefers to lead the world in encryption technology rather than regulation. The ambiguity of regulatory policies adds uncertainty for encryption companies, but it also leaves some room for innovation in encryption technology. This is precisely what the U.S. government emphasizes as "addressing risks and supporting innovation."

Japan: Stable and Sustained, Lack of Attractiveness

Japan has long been deeply active in the encryption field, and any significant changes in this area are closely related to Japan. Since the early development of cryptocurrency, the Japanese government has actively created a sound and regulated environment for the industry, and has now specifically introduced laws and regulations to legalize Bitcoin and bring it under regulation.

In 2014, countries around the world began to express their positions on cryptocurrencies, with some imposing strict bans while others cautiously observed. Japan, however, experienced one of the most serious setbacks in the industry in 2014 -- the collapse of the largest Bitcoin exchange at the time. This was a significant disaster in the history of cryptocurrencies, as the exchange handled over 80% of Bitcoin transactions at that time and was the largest cryptocurrency exchange in the world. This event directly triggered investors' concerns about cryptocurrency regulation, creating an urgent need for a stable and secure investment environment. Since then, Japan has implemented stricter regulations on the cryptocurrency industry and adopted clearer and more defined control policies than countries like the United States.

In 2016, the Japanese National Diet began actively legislating on encryption currencies, adding a chapter on "virtual currencies" in the "Fund Settlement Act" to define virtual currencies and set related regulatory details. The aim is to protect investors' rights and prevent virtual currencies from being used for money laundering and other illegal purposes.

In 2017, Japan revised the Payment Services Act to bring cryptocurrency exchanges under regulatory oversight by the Financial Services Agency (FSA)(. This not only brought Bitcoin under regulation, recognizing cryptocurrency as a legitimate means of payment, but also made Japan the first country to legalize Bitcoin. In December of the same year, the Japanese National Tax Agency began taxing income from the cryptocurrency sector, with rates higher than those in Singapore.

In 2018, a local exchange suffered a large-scale hacking attack, marking a turning point in Japan's encryption policy. Since then, Japanese encryption exchanges have strengthened self-regulation, and regulatory agencies have also conducted intensive supervision. Japan's attitude towards encryption has always been strict regulation, treating it as an emerging field and actively promoting relevant legislation.

In June 2022, Japan passed an amendment to the "Fund Settlement Act," officially legislating on stablecoins and becoming the world's first country to create a legal framework for stablecoins. This move aims to protect digital currency users by pegging stablecoins to the yen or other fiat currencies, ensuring stable value.

Japan's完善监管环境 has allowed many encryption companies to develop steadily and sustainably, and protected many investors from losses during the recent collapse of encryption projects.

Overall, Japan's cryptocurrency regulation is clear and strict, focusing on guiding the industry rather than prohibiting its development. Most importantly, it has been dedicated to protecting retail investors and continuously filling legislative gaps.

Japan's attitude towards encryption has always been to implement systematic legislation and regulation. The clear regulatory stance makes the expectations of encryption companies in the Japanese market clearer.

South Korea: Tightening Up, Legalization is Expected

As the fourth largest economy in Asia, South Korea is one of the most active countries in the cryptocurrency market, with 20% of young people being cryptocurrency traders. Despite the high penetration rate of encryption, South Korea has not yet incorporated it into law like Japan.

Since 2017, various forms of token issuance have been banned in South Korea. At the same time, the government has also established regulations against illegal activities involving virtual currencies. In addition, to protect encryption investors, real-name registration is required, and accounts are prohibited for minors under the age of 20 and non-Korean residents. South Korea's encryption regulatory policy is relatively one-size-fits-all, only regulating significant violations, with a lack of relevant detailed rules. Many regulatory rules are not legislations at the parliamentary level, but rather regulations issued by government agencies or departments, and regulatory legislation has not yet emerged.

In February 2021, South Korea finally showed signs of cryptocurrency legislation. Financial regulatory authorities began to work on legislation for virtual currencies, marking the first time that regulators considered enacting laws on encryption.

These all happened before the collapse of a certain well-known encryption project. In June 2022, after the project's collapse, it further accelerated the legislative process for cryptocurrencies in South Korea.

On June 1, 2022, the South Korean government announced the establishment of the "Digital Asset Committee." Its main objective is to propose policy recommendations, including the standards for new encryption currencies listed on exchanges, the timeline for ICOs, and to implement investor protection measures before the promulgation of the basic law on digital assets )DABA(. In addition, the Financial Supervisory Service of South Korea also plans to establish the "Virtual Asset Risk Committee," which is a follow-up regulatory measure triggered by the aforementioned events.

Since 2022, perhaps influenced by the collapse of numerous encryption projects, South Korea has begun to adopt more intensive encryption regulatory measures.

In the past, the South Korean government did not consider cryptocurrency as legal tender, but with the inauguration of the new president, South Korea's attitude towards encryption is also changing. The new president is referred to as the "crypto-friendly president" and to gain support from young voters, he has promised to lift regulations on the cryptocurrency industry and stated that he would "take legal measures to confiscate profits from cryptocurrency obtained through illegal means and return them to the victims." Local South Korean media have also reported that as the new president promises to ease cryptocurrency regulation, the market is moving towards significant legalization.

Singapore: Predictable, but not loose

Among countries around the world, if there is any country that has always maintained a friendly and open attitude towards encryption, it must be Singapore. Like Japan, cryptocurrencies are also recognized as legal in Singapore.

In 2014, the Monetary Authority of Singapore )MAS( issued a statement on the money laundering and terrorism financing risks of virtual currencies, becoming one of the first countries in the world to regulate virtual currencies.

Between 2016 and 2017, cryptocurrency ICOs were exceptionally active, and scams were rampant, leading many countries to implement strict regulations. At that time, the Monetary Authority of Singapore's stance on cryptocurrencies was to warn of risks, but it did not recognize them as legal.

In 2019, the Singapore Parliament passed the Payment Services Act, marking the first legislative regulation. Singapore has always been known for its "friendly and open" approach, and with taxes lower than Japan, it attracted numerous encryption companies over the next two years, becoming a hotbed for encryption. In January 2021, the Payment Services Act was further revised and improved, continuously expanding the scope of regulated cryptocurrency services. Although it is also legislation, Singapore's regulatory environment is much more lenient than Japan's.

In 2022, Singaporean authorities continued to improve the regulatory environment, aiming to maintain stability in the financial market while being open. They also began to pay attention to retail investors, taking steps towards relevant legislation to further restrict retail investment. The Singaporean government has also continuously guided retail investors to recognize investment risks and does not encourage their participation in encryption investments.

In 2023, Singapore continues to maintain its encryption-friendly image, offering tax incentives for individuals holding digital assets.

In summary, while trading in Singapore is free, it has also been affected by the recent collapse of encryption projects. Previously, Singapore's regulatory focus on the encryption industry was on the risks of money laundering and terrorist financing, but after the collapse, policies began to tighten to protect investors.

A well-known scholar from Singapore stated that Singapore has always maintained a friendly but not loose attitude towards the operation of encryption assets, consistently opposing fraud, speculation, money laundering, and irresponsible promotion. Singapore's policies have always been stable and consistent, flexibly adapting to market conditions. Similar to Japan, Singapore's system has always been stable and predictable, but to control financial risks, it is also gradually tightening regulatory policies.

Hong Kong: Striving to Catch Up, Actively Legislating

Hong Kong, which originally held a skeptical attitude towards cryptocurrency, has changed after the new SAR government took office. After several years of observation, Hong Kong seems to have found a regulatory path suitable for itself from the experiences of other countries.

Prior to 2018, Hong Kong was extremely cautious towards encryption and the regulation was in an exploratory phase. It was not until November 2018 that Hong Kong first included virtual assets under regulation. Since then, Hong Kong has regarded encryption as "securities" under the existing legal framework, but does not regulate non-security type encryption.

This regulatory situation continued until 2021, when Hong Kong strengthened its approach regarding the