Regulations Crypto Apps Have To Comply With

Cryptocurrency is still in its infancy, but as the new technology has evolved quickly, governments have started to pay attention. In particular, many countries are discussing regulatory frameworks for the asset.

Some countries, like Canada, already have reasonable frameworks in place. Other countries, including China, have very restrictive policies, having even outlawed the mining of cryptocurrency, and countries including the US and the UK are still progressing their own regulations.

When it comes to complying with regulations, app developers need to comply with the regulations of countries where their apps will be available.

Cryptocurrency Services

Crypto exchange apps have become essential for those looking to invest in or buy crypto apps. But those aren't the only crypto-related applications that are making waves. For instance, a Litecoin gambling site might offer casino games and fast deposits and withdrawals to players around the world. Play-to-earn apps let users earn cryptocurrency for the time and effort they spend on crypto games. There are also defi apps, lending platforms, and more.

Generally, sites and apps that accept money from users need to follow certain procedures, but because cryptocurrency is so new, governments and financial agencies have found their existing regulations are not fit for purpose. As such, requirements change regularly, and they depend on where the app will launch.

Canada

Canada has one of the most advanced cryptocurrency regulatory frameworks in the world. They accepted and launched ETFs before any other country, and exchanges need to register with provincial regulators to offer their services to Canadian citizens.

Crypto businesses are classified as money service businesses, which means complying with the Financial Transactions and Reports Analysis Centre of Canada. Failure to comply with regulations can lead to fines and other punitive actions, as is true in most jurisdictions.

US

The US has seen considerable legal conflict over the status and regulation of cryptocurrencies. The Securities and Exchange Commission has taken legal action against numerous cryptocurrency companies, including the likes of Ripple and Coinbase.

However, courts largely determined that crypto is only considered a security when sold to institutions and not to individuals on exchanges. The courts also rejected the SEC's ongoing bid to prevent the launch of ETFs and, as a result, Bitcoin ETFs were launched in January 2024, followed by Ether products in May. Everything is set to change again in the coming months, following the inauguration of Trump as President and the replacement of Gary Gensler as the chairman of the SEC.

UK

The UK implemented the Financial Services and Markets Act in 2023 and this classified crypto assets as financial instruments. As a result, most crypto apps have to comply with regulations that necessitate the gathering of Know Your Customer (KYC) details as well as extensive anti-money laundering regulations and those designed to prevent the financing of terrorism.

The rules are quite strict, but the fact they are clearly set out means at least developers know what requirements they have to meet. There has been no indication from the new Labour government, which took control in 2024, that the regulations will change.

EU

The EU has frameworks in place to deal with some cryptocurrency companies, services, and apps. Specifically, the Markets in Crypto-Assets Regulation Act is designed to enhance consumer protection and establish levels of conduct that crypto companies must meet.

Certain types of crypto service providers must seek and obtain a license before they are allowed to conduct business. Like the UK's regulations, these attempt to prevent money laundering and terrorism funding while protecting consumers from bad actors.

China

At one time, China was considered the Bitcoin mining capital of the world. In May 2021, the country banned Bitcoin mining. Following on from this, in September 2021, cryptocurrencies were banned completely.

It is not possible to legally launch cryptocurrency apps in China at the current time. The country's main bank, the People's Bank of China, also prevents related companies from operating.

Japan

Japan has been quite forward-thinking when it comes to consumer protection. Exchanges must register with the Financial Services Agency and meet the group's obligations. This includes collecting data from customers, and the Japanese government is looking to introduce further legislation that will require the collection of more data from crypto traders and investors.

It is also investigating how to improve taxation rules on cryptocurrency, with trading gains currently treated as miscellaneous income.

Australia

Due to their classification as property, cryptocurrencies in Australia are subject to capital gains tax, rather than income tax. Furthermore, exchanges that register with the Australian Transaction Reports and Analysis Centre, and meet the group's obligations, are free to trade in the country.

Exchanges have been banned from offering privacy coins and there are strict regulations regarding Initial Coin Offerings (ICOs) in the country. The government is currently working on an extensive cryptocurrency framework that may place additional requirements on crypto app companies.

Singapore

Singapore is another country where cryptocurrency is treated as property and is therefore subject to capital gains tax. This is considered beneficial to developers because Singapore does not tax long-term capital gains. It does have some regulations in place, especially concerning the issuance and offering of stablecoins.

Stablecoins are pegged to the value of currency or other assets, and if a stablecoin is approved by the Monetary Authority of Singapore, it can be labeled as an MAS-regulated stablecoin. Despite the lack of long-term capital gains tax, Singapore does tax cryptocurrency companies and companies that regularly trade in cryptocurrencies, treating the profit as gains.

South Korea

South Korea has made the move to ban all privacy coins from exchanges, which, along with other cryptocurrency service providers, must register with the Korea Financial Intelligence Unit.

The country also introduced the Act on the Protection of Virtual Asset Users in 2023, which requires service providers, including crypto apps in the country, to comply with various regulations and best practices.

What Should Crypto App Developers Do?

Any crypto company needs to ensure it meets legal requirements and regulations in countries where it will offer its services. This typically means meeting the same regulations as banking apps and other financial services. However, every country has different legislation, with some countries having adopted extensive legal frameworks and others presumably still waiting to see what other countries do before enacting their own frameworks.

For the most part, apps that are used as exchanges or where cryptocurrency is exchanged for cash or other cryptocurrencies will likely need to register with local financial authorities. These authorities will have their own requirements, and if apps don't meet the requirement, developers could face having their app shut down, at best, or potentially even be hit with substantial fines.

A lot of countries require the collection of customer details and financial apps, which can include crypto companies, following anti-money laundering regulations, and checking tax and other financial liabilities. It is also worth noting that regulations are subject to change and this is especially likely in countries where new parties and new leaders are elected, such as in the US.

Conclusion

Cryptocurrency is a new technology and continues to evolve. As it does, and as we find new ways of interacting with and using cryptocurrencies, regulations, and legislations in different countries also change. Crypto app developers, like other crypto businesses, need to ensure they comply with local laws, and the laws in any countries their apps will be available.