Updates on Crypto (VASP) Regulations in 2024

The plans of world governments for 2024 include completing work on crypto regulations that will become the main document within the framework of regulation of the global cryptocurrency market. The creation of such a document has been a major trend for many years. The regulatory framework will also undergo certain changes and modifications aimed at expanding and stabilizing the market. 2024 may be better for Bitcoin (BTC) than 2023. According to the first forecast, Bitcoin could reach a new all-time high. Below we will look at exact regulatory updates and what investors should expect.

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Recent Developments in VASP Regulations and Emerging Trends

Last year, Bitcoin’s rise could be attributed to the expected approval of a spot Bitcoin exchange-traded fund (ETF) and renewed interest in new use cases such as Ordinals based on Bitcoin equivalent tokens (NFTs). While these catalysts have helped improve sentiment in the crypto market, they will likely prove to be minor drivers compared to what is expected in 2024. The most important event for Bitcoin’s new record is its upcoming halving. The halving built into Bitcoin’s code will roughly halve Bitcoin’s inflation rate every four years.

In 2023, the first major package of regulation policy developments covering the activities of players in the crypto market in EU countries came into force; it’s Markets in Crypto-Assets Regulation (MiCA). In terms of global perspectives, a number of separate projects covering various regulatory aspects are also envisaged and developed for 2024. As a fully-covering crypto law, MiCA is one of the most comprehensive sets of regulatory measures in the world. All major players will have to reckon with it. Moreover, many countries outside the EU have already taken this document as the basis for their jurisdictions.

If we describe what is included in the package, then the most appropriate would be the tendency that it is possible to work with cryptocurrency, but not anonymously. Legislators are consciously moving away from regulating decentralized finance and so far are only touching on those segments where they can create transparent rules of the game used in traditional finance. Such regulatory and normative trends become a catalyst and stimulator for investment in cryptocurrencies by the corporate sector, provide transparency to entrepreneurs and provide guarantees to those players who were still afraid to work with crypto-assets.

Over the years, there has also been an increase in cryptocurrency adoption as digital assets become popular and attract more users. Despite these benefits and enormous growth potential, cryptocurrency regulation is strong enough to change the sector’s trajectory, either by providing a legal framework for increased growth or forcing the industry into stagnation. Let’s look at a few recent legislative changes in various jurisdictions.

  1. Some jurisdictions are popular for being crypto-friendly, while others are known for being hostile. China, for example, banned all cryptocurrency activities in 2021, including trading and mining. Interestingly, the ban in China was gradual.
  2. Africa’s largest economy, Nigeria, also implemented an implicit ban on cryptocurrencies in 2021 through a directive from the Central Bank of Nigeria (CBN) ordering financial institutions to cease cryptocurrencies services.
  3. Like Nigeria, several countries, including Bahrain, Algeria and Bolivia, have implemented implicit bans on cryptocurrencies, imposing varying levels of restrictions on the sector. On the other hand, countries like Tunisia, Egypt, and Nepal have banned cryptocurrency completely.
  4. In the United States, crypto regulations and crypto compliance norms typically vary from state to state because the United States does not have a standard regulative system at the federal level. However, state-by-state cryptocurrency laws show that some states maintain supportive regulations that encourage the growth and adoption of digital assets and blockchain technology.

In 2024, regulators around the world are actively developing and updating the regulatory framework for crypto assets. This increase in regulatory activity is in response to a number of incidents in 2023, the most notable of which was the collapse of the centralized exchange FTX. Regulators are primarily focused on developing mechanisms similar to those adopted in traditional capital markets to combat money laundering and terrorist financing.

Key Challenges and Opportunities

Cryptocurrency is becoming a means of payment and a more attractive investment instrument. Of course, industry impact still largely depends on the regulation of this industry. But technologically it is getting closer and more accessible to the average user.

It is likely that 2024 will see a series of approvals for cryptocurrency ETFs sweep across the world. For example, active discussions on this topic are taking place in Singapore, the UAE, Australia and South Korea. So far, all the hype around ETFs is associated with speculation about the arrival of large American investors, since many have an expectation that such funds can attract liquidity from traditional segments to the crypto market.

Typically, halving pushes the entire crypto market towards growth, as demand for the coin remains or even grows, and the influx of new liquidity slows down. It is important to note that due to the reduction in mining rewards, unprofitable miners will leave, giving way to those who have cheaper power. Many analysts note that halving expectations are already reflected in the price of Bitcoin. However, history shows that in the coming months after the halving, the price of the asset will still rise.

Interest in Bitcoin is also growing due to the fact that it is evolving as a technology. If earlier the first cryptocurrency was a technologically modest solution and lost competition to young blockchain networks, now it is developing, and solutions are appearing that change digital ecosystems.

Authorities around the world will likely focus more attention on the crypto sector in 2024. Industry-watching regulators who have seen an increase in the volume of crypto projects, digital assets and use cases over the past year are likely to try harder to create laws to accommodate them.

Regulatory Trends in Getting Crypto Licenses in 2024

VASP license is a permit for companies that provide virtual asset services. Such a document allows services related to the processing of crypto transactions to operate legally. That is, a VASP license is needed by crypto-exchanges, wallets, crypto-exchangers and any business that has introduced cryptocurrency circulation as a means of payment.

Each individual country develops its own rules and regulations for the developing crypto sector. In 2023, the EU approved the Regulation of Markets in Crypto-assets (MiCA) bill, which will regulate the crypto market in the EU according to uniform standards. In general terms, the MiCA rules are mainly concerned with transparency and protection of all market participants.

There is no single system for obtaining a crypto-license for all jurisdictions. Globally the process looks like this:

  • firm registration;
  • obtaining a license;
  • opening a corporate account for a specific activity.

It is worth understanding that in each individual country each stage will take a different amount of time and money.

Crypto-exchanges must comply with strict regulations, which may include regular reporting, adherence to certain operating standards and external audits, which can significantly increase the workload. A licensed crypto exchange must also have a robust technology infrastructure to ensure the security and integrity of customer data and funds. This includes state-of-the-art cybersecurity measures, which can be an expensive investment to implement and maintain.

The steps to obtain crypto license are listed below.

  1. Regulatory jurisdictions. Identify crypto license jurisdiction whose regulatory environment meets the goals of your cryptocurrency business. Your future jurisdiction should offer legal clarity, favorable tax conditions, political stability, and supportive policies for cryptocurrency transactions.
  2. Preparing for the licensing process. Do thorough research to fully understand crypto license requirements. Prepare all necessary documentation such as a detailed business plan, confirmation of compliance requirements fulfillment, financial projections and prevention of illegal monetary means circulation and anti-terrorism financing policies that meet regulatory requirements.
  3. Creation of an enterprise. Create a legal entity in your chosen jurisdiction. This means creating a company structure that complies with local corporate laws, including the appointment of directors and shareholders and the establishment of the necessary internal policies.
  4. Application process. Gather all the necessary information and documentation to submit a complete crypto license application. Build a strong security infrastructure to protect your business and customers from cyber threats. Encryption protocols must be state-of-the-art, ensuring that all client data and transaction information is protected from unauthorized access.

As the crypto segment matures, it becomes apparent that existing financial regulations do not reflect the specific mechanisms used by decentralized technologies. Since local laws generally do not cover the scope of cryptocurrency transactions, some countries choose to ban all financial activities related to cryptocurrencies altogether.

Therefore, many regulators are discussing the creation of a separate, comprehensive legal framework to address the risks and opportunities of cryptocurrencies. One of the most advanced developments in this area is the EU cryptocurrency regulation MiCA. The Bahamas has also demonstrated significant progress in regulating cryptocurrencies by introducing the Digital Assets and Registered Exchanges (DARE) Bill for public review.

Our specialists are ready to provide you with comprehensive advisory and practical assistance in obtaining a crypto license, as well as offer ready-made solutions. Contact us right now.

Article’s author is Denys Chernyshov – founder and CEO of the globally-famous organization Eternity Law International.