Cryptocurrencies Archives | Digital Watch Observatory

Japan recognises crypto as financial products

Japan has passed amendments that move cryptoasset regulation closer to traditional financial-market oversight.

The changes shift core cryptoasset rules from the Payment Services Act to the Financial Instruments and Exchange Act, treating cryptoassets more like investment products than payment instruments.

The reforms create a clearer legal category for cryptoassets under financial-market rules while introducing stronger investor protection and market-integrity requirements.

They include insider-trading rules for crypto transactions, disclosure obligations for certain cryptoasset issuers and tougher penalties for unregistered businesses.

The legislation also lays the groundwork for separate tax treatment of crypto gains, with a future tax regime expected to reduce the rate to around 20% and allow investors to carry losses forward for three years.

Those tax changes are expected to apply from 2028, depending on implementation rules.

The amendments also create a legal basis for domestic spot cryptocurrency exchange-traded funds, although final approval of specific products has not yet been confirmed.

Implementation will depend on future cabinet ordinances, regulatory guidelines and supervisory practice.

The reforms form part of Japan’s wider effort to align digital assets more closely with financial-market regulation while supporting Web3, investment and digital-asset innovation.

Why does it matter?

Japan’s reforms are significant because they move crypto further into the mainstream financial regulatory framework rather than treating it mainly as a payment-related activity. Insider-trading rules, issuer disclosures and stronger supervision could improve investor protection and market integrity. At the same time, tax and ETF changes may make the market more attractive to institutional and retail investors. The approach also reflects a wider global shift: major economies are increasingly trying to integrate digital assets into regulated financial markets rather than leaving them in a separate or lightly supervised category. Japan’s implementation will be watched closely because it combines stricter oversight with measures that could support market growth.

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South Korea expands blockchain strategy with stablecoin plans

South Korea is keeping blockchain and digital assets on its policy agenda for the second half of 2026, alongside much larger investments in AI and semiconductors.

The government’s plans include work on stablecoin legislation, tokenised financial infrastructure and blockchain-based public-sector pilots.

Authorities are expected to move forward with the proposed Digital Asset Basic Act, which would create a broader legal framework for digital asset businesses and Korean won-backed stablecoins.

The government has also considered rules for cross-border stablecoin transactions and amendments that could support the introduction of spot cryptocurrency exchange-traded funds.

Blockchain adoption is also being tested in public finance. South Korea plans to pilot tokenised government bonds linked to the Bank of Korea’s institutional central bank digital currency project in 2027.

The Bank of Korea is also expected to examine interoperability between its institutional CBDC system and other blockchain networks.

At the local level, Gyeonggi Province is preparing a stablecoin pilot to test government payments, settlement and fraud-prevention technologies.

The plans show that blockchain remains part of South Korea’s digital strategy, even as AI, semiconductors and data-centre infrastructure dominate the country’s broader technology investment agenda.

Why does it matter?

South Korea’s roadmap shows that blockchain policy is moving beyond exchange regulation towards stablecoins, tokenised public finance and institutional digital-asset infrastructure. Clearer rules for won-backed stablecoins and crypto ETFs could increase legal certainty and institutional participation. At the same time, the focus on tokenised government bonds and CBDC interoperability suggests South Korea is exploring how blockchain could fit into public financial infrastructure, not only private crypto markets.

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Belarus introduces new compliance rules for crypto banks

Belarus has introduced prudential rules for crypto banks under a new National Bank resolution. Board Resolution No. 167, adopted on 10 July 2026, sets out how crypto banks must comply with prudential requirements after being added to the National Bank’s official crypto-bank register.

The rules implement provisions of Presidential Decree No. 19 on crypto banks and control in the sphere of digital tokens.
The framework defines the minimum banking operations that crypto banks may carry out.

These include opening and maintaining accounts for non-residents, individual entrepreneurs, legal entities, and correspondent banks; foreign-exchange and settlement operations; accepting funds into accounts; and providing cash settlement services.

The list is not closed, and the National Bank may authorise additional operations when a crypto bank is included in the register.
The resolution applies most prudential requirements for banks and non-bank credit and financial institutions to crypto banks, with adjustments depending on the operations they perform.

It sets a minimum regulatory capital requirement of 30 million Belarusian rubles and a leverage ratio of 7%. For crypto banks authorised to place attracted funds on repayment, payment and maturity terms, the thresholds rise to at least 60 million rubles and a leverage ratio of at least 3%.

The rules also define categories of digital tokens, including corporate tokens, tokenised assets, stable cryptocurrencies and other tokens.

Crypto banks will need to account for token-related claims and obligations when calculating prudential ratios, including limits on foreign-exchange risk and additional limits for positions in unreliable tokens.

The resolution also introduces prudential reporting obligations and enters into force on 18 July 2026.

Why does it matter?

Belarus’ new rules show how crypto-related banking is being drawn into prudential supervision, with capital, leverage, reporting and token-risk requirements applied to institutions that handle digital-asset services. The framework could give crypto banks a cleaner legal operating environment, while allowing the National Bank to manage risks linked to liquidity, customer funds, foreign-exchange exposure and unstable tokens.

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ECB confirms payment providers for digital euro trial

The European Central Bank has selected 36 payment service providers from across the euro area to take part in a digital euro pilot.

The pilot is due to start in the second half of 2027 and will run for 12 months.

It will test the digital euro’s technical functionality, operational processes and user experience as part of preparatory work for possible future issuance.

The ECB said it received more than 50 applications after opening expressions of interest in March 2026.

Selected participants include banks and non-bank payment service providers, covering a range of business models, sizes and euro area countries.

The pilot will use a beta version of the digital euro that is close to the design foreseen in draft legislation, but it will not have legal tender status.

Some providers will act as distributing PSPs, allowing Eurosystem staff to set up beta digital euro accounts and make payments. Others will act as acquiring PSPs, enabling selected merchants to receive beta digital euro payments.

Testing will take place at the ECB and 19 national central banks across the euro area.

The pilot will include person-to-person and person-to-business payments, both online and offline, as well as in-store and e-commerce transactions.

The ECB said the exercise will help refine the digital euro’s design and user experience before any decision on issuance.

Why does it matter?

The pilot is a significant step in testing how a digital euro could work in practice, especially through banks, payment providers and merchants. It will help the ECB assess technical performance, operational readiness and user experience before any launch decision. The exercise also matters for Europe’s payments sovereignty, as the digital euro is being developed as a public digital payment option alongside private payment services.

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China seeks stronger rules for virtual currency money laundering

China has proposed a series of legal and procedural reforms to improve the investigation and prosecution of virtual currency-related money laundering cases. Prosecutors argue that current legislation creates difficulties in determining criminal liability, collecting digital evidence and recovering illicit assets, leaving gaps in the country’s enforcement framework.

The proposals recommend issuing dedicated judicial guidance, expanding training in blockchain analysis, and requiring investigators to examine both the underlying criminal offence and any related laundering activity. Greater use of blockchain transaction reports and earlier prosecutorial involvement in complex investigations are also intended to improve case handling.

Prosecutors have also suggested updating evidence rules to recognise verifiable blockchain transaction records and qualified blockchain analytics reports, subject to judicial review. Courts could rely more heavily on corroborating circumstantial evidence in cases involving mixers, privacy-focused cryptocurrencies or anonymous wallets where direct tracing is difficult.

The recommendations also call for a national framework to manage seized virtual assets through standardised custody, valuation and disposal procedures, alongside stronger international cooperation on cross-border investigations and asset recovery.

Why does it matter?

The move signals that China is refining its legal approach to virtual currency crime by focusing on investigative procedures and evidentiary standards rather than introducing an outright policy shift. Clearer rules for handling blockchain evidence and seized digital assets could strengthen enforcement while providing greater consistency in complex financial crime cases.

The recommendations also reflect a broader global trend towards equipping law enforcement with specialised tools to investigate illicit cryptocurrency activity. If adopted, the reforms could influence how other jurisdictions develop legal frameworks for digital asset investigations, cross-border cooperation and asset recovery.

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EDPB adopts GDPR guidance for AI, blockchain and anonymisation

The European Data Protection Board (EDPB) has adopted new guidelines on anonymisation, web scraping for generative AI, and the use of blockchain technologies under the General Data Protection Regulation (GDPR). The measures aim to provide organisations with greater regulatory clarity while protecting individuals’ personal data rights.

The anonymisation guidelines set out criteria for determining when data can be considered anonymous, focusing on whether individuals can be isolated, linked to other datasets or reidentified through inference. The framework is intended to help organisations assess when data can be used without identifying individuals.

The web scraping guidance outlines the GDPR obligations associated with collecting online data to train generative AI models. The EDPB emphasises transparency, purpose limitation, data accuracy and data minimisation, while noting that processing sensitive personal data requires additional legal safeguards.

The Board also adopted its blockchain guidelines following public consultation, explaining how different blockchain architectures may affect GDPR compliance. The recommendations are intended to help organisations deploy blockchain technologies while addressing privacy challenges associated with decentralised data processing.

Why does it matter?

The EDPB’s guidance provides greater legal certainty for organisations developing AI and blockchain applications in Europe. As generative AI increasingly relies on large-scale data collection and blockchain adoption continues to expand, clearer GDPR expectations could shape how organisations collect, process and protect personal data.

The guidance also illustrates how European regulators are adapting long-standing data protection rules to emerging technologies without creating separate privacy frameworks for each new innovation.

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European Parliament calls for wider crypto regulation review

The European Parliament has adopted a policy position calling for a review of how emerging digital-asset activities should be regulated after the rollout of MiCA.

The report asks the European Commission to assess whether decentralised finance, staking, crypto lending and borrowing, NFTs and tokenised assets need clearer regulatory treatment.

The position does not amend MiCA or create immediate new obligations for crypto firms.

Instead, it signals Parliament’s view that the EU should examine activities that remain partly outside the current crypto-asset framework.

Lawmakers also warned that inconsistent national approaches could fragment the EU digital-asset market and weaken the single-market benefits of MiCA.

The report comes after MiCA’s transition period ended on 1 July 2026, requiring in-scope crypto-asset service providers to obtain authorisation to continue operating in the EU.

Parliament also takes a more supportive view of tokenisation and euro-denominated stablecoins, arguing that regulated digital assets could contribute to the competitiveness of the EU financial markets.

Any expansion of crypto regulation would require further Commission work and separate legislative steps.

Why does it matter?

The report points to the next phase of the EU crypto regulation after MiCA. DeFi, staking, crypto lending, NFTs and tokenised financial assets are increasingly important parts of the digital-asset market, but they do not all fit neatly inside MiCA’s current scope. A review could bring more legal certainty and consumer protection, but it could also raise compliance costs and shape Europe’s competitiveness in digital finance. The key issue is whether the EU can expand oversight without fragmenting innovation or creating divergent national rules.

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ESMA launches first crypto custody review under MiCA

The European Securities and Markets Authority has launched a Common Supervisory Action on the digital operational resilience of crypto-asset service providers, with a specific focus on custody services.

The exercise will assess the maturity of authorised CASPs’ digital operational resilience frameworks in relation to custody activities.

National competent authorities will conduct a risk-based review of a sample of authorised crypto-asset service providers.

The exercise will run from the second half of 2026 to the first half of 2027.

ESMA said the review will focus on risks linked to distributed ledger technology, including governance arrangements, key and storage management, transaction controls, incident detection and response, smart contract risks and dependencies on third-party providers.

The initiative reflects ESMA’s risk-based supervisory priorities, which identify both digital operational resilience and crypto-asset service providers as key risk areas.

The findings collected by national regulators will be consolidated into a final report and submitted to ESMA’s Board of Supervisors upon the exercise’s conclusion in the second half of 2027.

The action marks a shift from rule implementation towards coordinated supervision of crypto firms operating under the EU’s MiCA framework.

Why does it matter?

Crypto custody is a critical part of the digital-asset market because failures in private key management, storage, transaction controls or incident response can directly affect users’ assets. ESMA’s coordinated review shows that MiCA supervision is moving from authorisation towards testing how firms manage operational and technology risks in practice. It could also help align national supervisory approaches and reduce uneven standards across the EU crypto market.

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SEC advances Project Crypto to clarify digital asset rules

The US Securities and Exchange Commission is advancing its Project Crypto initiative as part of a broader effort to provide clearer rules for digital assets.

SEC Chair Paul Atkins has framed the initiative as a shift away from uncertainty over how federal securities laws apply to crypto assets and related transactions.

The agenda includes work on a token taxonomy anchored in the Howey investment-contract analysis, while recognising that not every crypto asset is itself a security.

In March 2026, the SEC issued an interpretation, joined by the Commodity Futures Trading Commission, clarifying the treatment of digital commodities, digital collectables, digital tools, stablecoins and digital securities.

The interpretation also addressed how non-security crypto assets may become subject to an investment contract and later cease to be subject to one.

It clarified the application of federal securities laws to airdrops, protocol mining, protocol staking and wrapping of non-security crypto assets.

Atkins has also directed SEC staff to develop proposals that could allow broker-dealers and alternative trading systems to offer crypto asset securities, non-security crypto assets, traditional securities, staking and lending services under a more efficient licensing structure.

The SEC says it will continue working with the CFTC, banking regulators and Congress as lawmakers consider a broader crypto market-structure framework.

Why does it matter?

Project Crypto signals a major shift in the SEC’s approach to digital assets, from enforcement-driven uncertainty towards taxonomy, interpretation and possible rulemaking. Clearer distinctions between securities, non-security crypto assets and tokenised securities could make it easier for firms to understand which rules apply. However, many elements remain dependent on future SEC action and congressional market-structure legislation, so the initiative should be treated as an evolving regulatory agenda rather than a completed framework.

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France enforces new EU crypto rules under MiCA

France has entered a new phase of crypto regulation as the transitional period between its national Pacte law framework and the EU’s Markets in Crypto-Assets (MiCA) Regulation has ended. Since 2 July 2026, crypto-asset service providers operating in France must comply with MiCA requirements and obtain authorisation to offer services across the European Union.

The Autorité des Marchés Financiers (AMF) has supported firms throughout the transition while reviewing MiCA authorisation applications. France has authorised 31 crypto-asset service providers, making it the EU’s second-largest jurisdiction for approved firms.

MiCA introduces stricter requirements on investor protection, security, market integrity and the custody of crypto-assets. The AMF will continue supervising authorised providers and assessing new applications.

The regulator will also work with the European Securities and Markets Authority (ESMA) and other national authorities to oversee the orderly withdrawal of firms that failed to obtain MiCA authorisation. It has urged investors to use only authorised crypto-asset service providers operating under the new European framework.

Why does it matter?

France’s transition marks another step in MiCA‘s move from legislation to implementation. As national transitional regimes end, crypto firms across the EU must comply with a single regulatory framework, replacing fragmented national approaches with common licensing and supervisory standards.

The new regime is also intended to strengthen consumer confidence by introducing harmonised rules on investor protection, market integrity and operational resilience. Its long-term success will depend on whether it can provide effective oversight while allowing compliant firms to innovate and compete across the EU’s single market.

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