DSG Crypto Regulatory Roundup: December 2024
International Bodies
South Korea’s Democratic Party agrees to delay crypto tax by 2 years: On December 1, South Korea’s Democratic Party (KDP) agreed to delay the implementation of the country’s crypto capital gains tax until 2027, reversing its earlier opposition to the delay. The tax, originally set to take effect in 2023, was postponed multiple times, with the latest delay coming after the ruling People’s Power Party (PPP) proposed a three-year extension. Initially, the KDP had pushed to implement the tax in 2025 but now supports the further delay, citing concerns about investor impact and political strategy. Once enacted, the tax will impose a 20% levy on crypto gains. More here.
Crypto Firms Face Mandatory Licensing Under Australia’s Draft Guidelines: On December 4, the Australian Securities and Investments Commission (ASIC) proposed new guidelines requiring most crypto firms in Australia to obtain financial licenses. Under the proposal, digital assets would be classified as financial products, requiring firms to hold an Australian Financial Services License (AFSL) and, in some cases, an Australian Market License. This has raised concerns, especially among smaller firms, about the high compliance costs, which could drive startups offshore. Liam Hennessy of Clyde & Co and Joni Pirovich, a crypto lawyer, warned that launching in Australia could become as expensive as operating abroad. Charlie Karaboga, CEO of Block Earner, expressed concerns over the significant capital requirements for smaller firms. Swyftx CEO Jason Titman highlighted the uniqueness of Australia’s approach. The guidelines also expand the definition of financial products to include stablecoins, staking services, and exchange tokens, while memecoins, Bitcoin, and Ether may be exempt. Feedback on the guidelines is open until February 28, 2025, with final rules expected in mid-2025. ASIC Commissioner Alan Kirkland emphasized the goal of fostering responsible innovation and consumer protection. More here.
El Salvador Plans Bitcoin Policy Changes to Secure $1.3B IMF Loan: According to reports on December 9, El Salvador is set to finalize a $1.3 billion loan agreement with the International Monetary Fund (IMF) in exchange for changes to its Bitcoin Law, specifically removing the mandate that businesses accept Bitcoin as legal tender. The deal, expected to be concluded within weeks, would also unlock an additional $2 billion in loans from the World Bank and the Inter-American Development Bank. The IMF has long opposed El Salvador’s Bitcoin adoption, citing risks to financial stability and urging the government to address the policy’s shortcomings since it was enacted in 2021. More here.
EU MP Calls for Bitcoin Reserve, Rejects Digital Euro: On December 17, European Parliament member Sarah Knafo urged the EU to establish a strategic Bitcoin reserve while rejecting the proposed digital euro (CBDC) under development by the European Central Bank (ECB). Knafo criticized the ECB’s approach, calling for a shift from regulatory overreach towards embracing Bitcoin’s decentralized nature. Knafo emphasized that Europe’s focus on crypto regulation and taxation is stifling innovation, while other countries, like El Salvador and the U.S., have embraced Bitcoin more positively. She warned against the ECB’s plans for the digital euro, describing it as a tool for potential totalitarian control, where a bureaucrat could ban transactions or restrict access to the banking system. The ECB has been studying the digital euro since 2020 and plans to decide by October 2025 whether to move forward with its launch. Concerns about privacy risks and the potential impact on private payment systems have fueled the ongoing debate. More here.
Turkey Introduces Stricter Crypto AML Regulations: On December 25, 2024, Turkey introduced stricter Anti-Money Laundering (AML) regulations for cryptocurrency, set to take effect on February 25, 2025. Under the new rules, transactions over 15,000 Turkish lira (around $425) will require users to provide identification to crypto service providers. Providers must also gather information for transfers involving unregistered wallet addresses and may halt “risky” transactions if sufficient data cannot be obtained. Turkey is also reportedly considering a 0.03 percent tax on crypto transactions. The new regulations build on a recent wave of crypto license applications after the July implementation of the “Law on Amendments to the Capital Markets Law.” More here.
China Introduces Stricter Crypto Trade Oversight With New Forex Rules: On December 31, China’s State Administration of Foreign Exchange (SAFE) implemented new rules requiring banks to monitor and report risky forex trades involving crypto assets. The regulations mandate that banks track the identities, sources of funds, and trading frequencies of individuals and institutions involved in cross-border crypto activities, including illegal financial transactions and underground banking. These rules are designed to further restrictions on Chinese residents’ ability to purchase digital assets and tighten control over cross-border crypto transactions. China has enforced a strict anti-crypto stance since banning crypto transactions in 2019, but holds approximately $18 billion in Bitcoin, primarily acquired through asset seizures linked to illicit activities. More here.
United States
GAO Reports on 401(k) Plans, Crypto Asset Investments: On December 4, the Government Accountability Office (GAO) released a report titled “401(k) Plans: Industry Data Show Low Participant Use of Crypto Assets Although DOL’s Data Limitations Persist.” The GAO reviewed data from firms that serve 401(k) plans, filings by 401(k) plans, and relevant federal statutes, regulations, and guidance. The report also involved 28 interviews with government officials, researchers, plan fiduciaries, participants, service providers, and crypto asset companies. Additionally, the GAO conducted a simulation analysis to estimate the potential impact of crypto assets on retirement savings. Specifically, the report examines: (i) the presence of crypto asset investment options in 401(k) plans, (ii) the potential effects of crypto assets on participant savings, (iii) how fiduciaries fulfill ERISA responsibilities when offering crypto assets, and (iv) the extent of federal oversight of crypto asset investments in 401(k) plans. More here.
FSOC Warns Stablecoins Remain A ‘Potential Risk’ to Financial Stability: On December 6, the Financial Services Oversight Council (FSOC) released its 2024 annual report with a warning that stablecoins remain a potential risk to financial stability, highlighting their vulnerability to runs due to inadequate risk management standards. The FSOC pointed to the heavy concentration of the market, with Tether (USDT) controlling around 66 percent of the $205.48 billion market, and emphasized that the lack of regulatory oversight increases risks of fraud and market disruption. The council urged Congress to pass comprehensive legislation to regulate stablecoin issuers and address concerns about payment system risks, market integrity, and consumer protections. More here.
US Judge Criticizes FDIC for Redacting Crypto “Pause Letters”: In a December 12 order, District Court Judge Ana Reyes criticized the Federal Deposit Insurance Corporation (FDIC) for its handling of redactions in crypto “pause letters” sent to banks, as part of a Freedom of Information Act (FOIA) lawsuit backed by Coinbase. The judge expressed concerns about the FDIC’s “lack of good-faith effort” in making nuanced redactions. Reyes instructed the FDIC to make more “thoughtful redactions” and re-file the letters by January 3, 2025, emphasizing that the agency could not simply “blanket redact everything that is not an article or preposition.” More here.
Blockchain Association Sues IRS Over Crypto Broker Rules: On December 28, the Blockchain Association and the Texas Blockchain Council filed a lawsuit against the International Revenue Service (IRS), challenging new rules requiring brokers to report digital asset transactions. The rules, set to take effect in 2027, expand reporting obligations to include decentralized exchanges (DEXs) and platforms facilitating digital asset sales through smart contracts, which could classify them as brokers. The lawsuit argues that the regulations exceed the IRS’ statutory authority, violate the Administrative Procedure Act, and infringe on privacy rights, particularly for decentralized finance (DeFi) users. Legal experts have raised concerns that the rules could push DeFi innovation offshore. More here.