Crypto derivatives and security tokens regulation in 2023

Thu 16th Mar, 2023

FTX's collapse and the May crash of stablecoin TerraUSD served as a reminder of the necessity for thorough regulation of the crypto markets. This regulatory mechanism needs a strong legal base, the cornerstone of which is a workable framework to distinguish assets that are securities from those that are not. So what can we expect from the SEC and CFTC in 2023? Let's find out.

Legal definition and taxation of cryptocurrency

The notion of "cryptocurrency", which is also known as "virtual currency," "tokens", "digital assets", etc., lacks a standardized legal definition. Hence, it is unclear how to regulate new services, pay taxes, or simply how to protect yourself from fraud.

Nevertheless, cryptocurrencies are regarded as digital asset by the IRS in the US, where it is taxed similarly to stocks and bonds. If you own crypto, there is no immediate gain or loss, hence there is no tax. Only when you sell the asset and receive money in the form of cash or another token in exchange for it do you have to pay tax: By selling it, you "realize" the gains and a taxable event occurs.

Overview of cryptocurrency regulations in 2023 The United States

New regulations are required to combat both domestic and international illegal activity. To promote investor protection and a well-organized legal framework, the Justice Department continues to cooperate with the SEC and CFTC on upcoming provisions. The new regulations classify bitcoin exchanges as brokers and necessitate that they should comply with the AML/CFT rules while offering their services.

The EU

The European Union is actively adopting new crypto laws. Let's consider several of them.

  1. In 2020, the EuroCommission released a new proposal known as the MICA. It outlined proposed regulatory measures, including the establishment of a new licensing scheme for companies that issue digital assets, guidelines for commercial conduct, and new consumer safeguards.
  2. In addition, there was released a set of legal recommendations in 2021 that would affect virtual asset service providers (VASP) all over the bloc.
  3. The proposals would demand the gathering of data on the senders and receivers of bitcoin transfers and would expand the scope of fund regulations to include all VASPs in the EU.


With the PSA in place, Singapore's crypto businesses comply with the latest FATF provisions. New rules with stricter AML/CFT requirements for cryptoservice firms and better technological policies may be among the upcoming acts.

A revived interest in Singapore's cryptocurrency industry on a global scale is reflected in recent regulatory measures. Many well-known Chinese service providers, including Huobi, ByBit and OKCoin, as well as their clients, moved to Singapore in 2021 as a result of China's crackdown on crypto.

The UK

The UK's crypto legislation is probably going to follow the EU in the short term, but they might start to deviate from it in the future. The UK's desire to consult on bringing some tokens under the purview of "financial promotions regulation" and to continue considering a "broader regulatory approach" to crypto assets were both stressed in HM Treasury recommendations released in 2021. To bring crypto ads "into line with mainstream financial advertising," the government announced proposals for legislation to combat "misleading crypto asset promotions" in January 2022.

The bottom line

In 2023, the regulatory environment for digital currency is anticipated to remain unclear. The SEC and CFTC will undoubtedly test the limits of their current authorities through new enforcement efforts, while crypto projects continue to push the bounds of decentralization and community governance. 2023 will be the year of regulation vs decentralization since neither body is prepared to release new comprehensive regulations. But there is one undeniable aspect: now is the best time to set up a business dealing in cryptocurrencies, while the full-fledged regulation is doing the last step ahead to be fully adopted. Since regulating cryptocoins and licensing of cryptocurrency operations is just a matter of time, starting or buying a crypto project will be a wise solution.

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