Cryptocurrencies Archives | Digital Watch Observatory

Unlicensed crypto exchanges to be barred from EU under MiCA rules

Crypto-asset service providers operating under national transitional regimes must obtain MiCA authorisation or stop serving the EU clients when the Markets in Crypto-Assets Regulation transitional period ends on 1 July 2026.

The European Securities and Markets Authority has said the transitional period will expire across the EU on that date. Under MiCA, crypto-asset service providers that were operating legally before 30 December 2024 could continue providing services until 1 July 2026, or until they were granted or refused authorisation, whichever came first.

ESMA has urged firms and national supervisors to ensure an orderly transition, with a focus on timely authorisation, client protection, and market integrity. Providers that do not obtain MiCA authorisation will need to stop unauthorised activities, wind down services, or transfer clients where appropriate.

Applications still under review do not, by themselves, give firms the right to continue operating after the deadline. Firms that continue offering crypto-asset services without authorisation risk enforcement action under national law.

The end of the transition marks a major shift from fragmented national registration regimes towards a single EU-wide licensing framework for crypto-asset service providers. MiCA authorisation allows firms to passport services across the EU, while also subjecting them to common requirements on governance, consumer protection, market integrity, prudential safeguards, and supervision.

Some member states shortened or did not fully apply the transitional regime, meaning certain national markets have already moved more quickly towards MiCA-only authorisation. From 1 July, however, the transitional period ends across the EU.

Why does it matter?

The deadline marks the point at which MiCA becomes the effective gateway to the EU crypto market. Firms that previously operated under national regimes will need full authorisation or lose access to the EU clients. In the short term, that could lead to service disruptions, client migrations, or consolidation among crypto providers. In the longer term, it strengthens the EU’s shift towards a single regulatory framework for digital asset platforms.

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US SEC outlines roadmap for market growth, digital assets and investor protection

The US Securities and Exchange Commission (SEC) has released a draft strategic plan outlining its priorities for the coming years, with a focus on investor protection, market efficiency and capital formation.

The agency is seeking public feedback on the proposal, which also highlights the growing importance of digital assets and emerging technologies within the financial system.

Under the plan, the SEC aims to modernise its regulatory framework by supporting innovation while maintaining market integrity. Among its objectives is the development of a clearer and more consistent regulatory approach to digital assets and distributed ledger technologies, with the aim of providing businesses and investors with greater certainty.

The regulator also intends to strengthen engagement with market participants and review existing rules to improve compliance and effectiveness. The draft plan states that enforcement should focus on fraud, market manipulation and violations of existing laws, rather than relying on expansive interpretations of regulatory authority.

Technology modernisation is also a key component of the strategy, including plans to upgrade legacy systems and expand the use of technologies such as AI and blockchain. According to the SEC, these improvements could enhance oversight capabilities, reduce operational costs, and improve efficiency across the agency.

Why does it matter?

The SEC plays a central role in regulating the world’s largest capital market, making its approach to digital assets and emerging technologies influential beyond the United States. Greater regulatory clarity could affect how businesses develop blockchain-based services, how investors engage with digital assets and how other jurisdictions shape their own regulatory frameworks.

The proposal also signals a broader shift towards integrating AI and advanced technologies into financial supervision, reflecting growing efforts by regulators to adapt to increasingly digital and technology-driven markets.

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Georgia launches crackdown on unlawful crypto mining

The Georgian government has announced new measures to combat illegal cryptocurrency mining in Mestia, citing concerns over pressure on the country’s electricity network.

Vice Prime Minister Mamuka Mdinaradze said unauthorised mining activity in the municipality has placed sustained pressure on local power supplies, worsened supply quality, overloaded the grid and transmission lines, and contributed to outages affecting residents, businesses, and tourism.

According to Mdinaradze, electricity consumption in Mestia reached 133 million kilowatt-hours in 2025, while a municipality of comparable size would normally not exceed 10 million kilowatt-hours. Authorities estimate the resulting damage to the electricity system and financial losses at at least 20 to 25 million lari.

To address the issue, the government will begin installing electricity meters in Mestia. Officials said the purpose of the process is to identify illegal and hidden electricity consumption while preserving free electricity access for ordinary users up to a maximum quantity required for their needs.

Consumption above that limit will be subject to a tariff. Metering will be carried out locally and across villages and settlements to help identify the sources of excessive electricity use.

Law enforcement agencies have been tasked with supporting and overseeing the rollout. Officials said large-scale illegal electricity consumption will be investigated and prosecuted, and warned that attempts to obstruct the process or continue unlawful activity will face legal consequences.

Why does it matter?

The case shows how cryptocurrency mining can become an energy governance issue when high electricity consumption strains local infrastructure. Georgia’s response focuses less on crypto regulation itself and more on identifying unlawful electricity use, protecting grid stability, and balancing subsidised or free household electricity with enforcement against commercial-scale mining activity.

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Japan finalises rules for cryptoasset service intermediaries

Japan’s Financial Services Agency has finalised regulatory amendments linked to the 2025 revision of the Payment Services Act, creating a new intermediary category for electronic payment instruments and cryptoasset services.

The amendments, which enter into force on 1 June 2026, establish rules for the newly created electronic payment instrument and cryptoasset service intermediary business. The framework sets out registration application requirements, information that must be clearly explained or provided to users, prohibited conduct, user protection measures, and record-keeping obligations.

The new category allows intermediaries to provide certain electronic payment instruments and cryptoasset-related services without operating as full electronic payment instrument service providers or cryptoasset exchange service providers. The structure is intended to support intermediary activity while maintaining user protection and oversight requirements.

The wider amendment package also develops rules for electronic payment instruments and cryptoassets, including the scope of assets that may be subject to domestic holding orders for electronic payment instrument service providers and cryptoasset exchange service providers.

The FSA also finalised related provisions on funds transfer services, banks, insurance companies and their subsidiaries, and other required amendments. Public consultation on the relevant cabinet orders, cabinet office orders, notices and guidelines drew 259 comments from 62 individuals and organisations.

The amendments form part of Japan’s ongoing effort to refine its digital finance framework as cryptoassets, stablecoin-related services, payment intermediaries, and traditional financial institutions become increasingly interconnected.

Why does it matter?

Japan’s new intermediary category shows how regulators are creating more tailored frameworks for different roles in digital asset services. Rather than treating every participant as a full exchange or electronic payment instrument service provider, the framework gives intermediaries a defined route into the market while preserving registration, conduct, disclosure, and user protection requirements.

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Brazil raises compliance bar for virtual asset companies

Brazil’s Central Bank has introduced a new requirement for virtual asset service providers seeking authorisation to operate in the country.

From 1 June 2026, companies applying to operate as sociedades prestadoras de serviços de ativos virtuais, or SPSAVs, must submit a reasonable assurance report issued by an independent auditor registered with Brazil’s securities regulator, the Comissão de Valores Mobiliários.

The audit requirement is intended to assess whether applicants have adequate compliance and control structures in place. Reviews will focus on anti-money laundering and counter-terrorist financing measures, including governance arrangements, client verification procedures, internal risk controls, and mechanisms to prevent misuse of virtual asset services.

The measure builds on Brazil’s broader virtual asset regulatory framework, established under Law No. 14,478 of 2022 and further developed through Central Bank resolutions issued in 2025. Those rules created a dedicated category for virtual asset service providers and placed their authorisation and supervision under the Central Bank.

The Central Bank said the new audit requirement is designed to strengthen security and efficiency in Brazil’s financial system while supporting the development of the country’s virtual asset market. The measure is also intended to align supervision with stronger standards for governance, transparency, internal controls, and financial crime prevention.

The additional requirement is expected to increase compliance costs for applicants, but it also signals that Brazil is moving towards more structured and bank-like oversight of crypto service providers.

Why does it matter?

Brazil’s move shows how crypto regulation is shifting from basic registration towards deeper supervisory checks. By requiring independent assurance over compliance controls before authorisation, the Central Bank is placing greater emphasis on AML/CFT, governance, client protection, and operational integrity. For virtual asset firms, market access will increasingly depend not only on business activity but also on whether internal controls can withstand external review.

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ECB cautions that stablecoins could affect monetary sovereignty

Stablecoins could enable faster payments, lower transaction costs, and more efficient settlement, but may also create risks for financial stability, monetary policy, and monetary sovereignty, according to European Central Bank Executive Board member Isabel Schnabel.

Speaking at the Bank of Korea International Conference on Central Banks and the Future of Money, Schnabel compared the rise of stablecoins with the earlier emergence of money market funds. Both offer alternatives to traditional bank deposits and operate outside the banking system, but stablecoins also function as payment and settlement tools.

Schnabel said stablecoins could contribute to a new wave of bank disintermediation if households and firms replace bank deposits with stablecoin holdings. That could make banks more reliant on wholesale funding and leave their liabilities more concentrated, rate-sensitive, and volatile.

Financial stability risks remain a key concern. Stablecoins can be vulnerable to runs if confidence in their reserve assets weakens, while large-scale redemptions could trigger fire sales or spillovers into sovereign debt and broader fixed-income markets. Schnabel noted that the largest US dollar-pegged stablecoins are now approaching the size of the largest US money market funds.

Stablecoins may also affect monetary policy transmission. Their wider adoption could change bank funding conditions, influence demand for short-term government securities, and create uncertainty over how policy rate changes pass through to financial conditions and the real economy.

Schnabel also warned that stablecoins could further strengthen the US dollar’s international role. Most stablecoins in circulation are dollar-denominated, and wider use could deepen dollar-based payment and settlement networks, particularly in jurisdictions with weaker monetary credibility.

The ECB sees regulation, digital payment infrastructure, and central bank digital currency as part of the response. Schnabel said the Eurosystem’s strategy includes a digital euro for retail payments and tokenised central bank money for wholesale settlement, preserving central bank money as the anchor of trust while supporting private innovation.

Why does it matter?

The speech frames stablecoins as a question of monetary architecture, not only crypto-market innovation. If stablecoins become widely used for payments and settlement, they could shift deposits away from banks, affect monetary policy transmission, create new run risks, and reinforce dollar-based financial networks. For central banks, the policy challenge is to support innovation while ensuring that public money remains the trusted settlement anchor of the financial system.

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ECB warns digital money must evolve to preserve financial stability

The European Central Bank has said central bank money must evolve to remain relevant in an increasingly digital financial system.

Speaking in Frankfurt, Piero Cipollone, Member of the ECB’s Executive Board, said digitalisation is reshaping retail payments, wholesale financial markets, and cross-border payment infrastructure across the euro area. He warned that if central bank money does not adapt to technological change, it risks losing relevance in key parts of the economy, weakening public money’s role as an anchor of stability and increasing fragmentation in the financial system.

Retail payments are becoming more digital and platform-based, while wholesale financial markets are being shaped by tokenisation and distributed ledger technology. Cipollone said digitalisation could help reduce costs and speed up cross-border payments if it is used in a way that avoids further fragmentation.

The ECB’s policy response is built around three areas: preparing for a possible digital euro for retail payments, enabling DLT-based transactions to settle in central bank money, and interlinking fast payment systems to improve global cross-border transactions.

Cipollone said the digital euro would be designed as a digital form of cash for day-to-day retail payments, not as an investment product. He said it would complement physical cash and private payment solutions while ensuring that people retain access to a public digital payment option across the euro area.

For wholesale markets, the ECB said tokenisation could make capital markets more efficient, but only if tokenised settlement assets are available. The Eurosystem plans to allow DLT-based transactions to settle in central bank money from September 2026 through its Pontes project, while its Appia work will develop a longer-term vision for Europe’s tokenised financial ecosystem.

Cross-border payments remain a concern because they are still too slow, costly, and opaque. The ECB said interlinking fast payment systems could help reduce these frictions while protecting the monetary sovereignty of participating jurisdictions.

Why does it matter?

The speech frames digital money as a financial stability and sovereignty issue, not only a payments innovation story. As payments, markets, and cross-border settlement become more digital and tokenised, the ECB wants central bank money to remain the risk-free settlement asset, anchoring trust in the financial system. The message is also a response to the risk that private platforms, stablecoins, and fragmented infrastructures could weaken the uniformity of public money if central banks fail to adapt.

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Financial institutions adopt stricter monitoring than crypto exchanges

A Chainalysis analysis of crypto compliance monitoring shows that transaction surveillance standards across financial institutions and crypto firms have tightened significantly since 2020.

The report says nearly half of organisations onboarded in 2026 now operate at alerting standards that would have placed them among the top 10% for alerting strictness in 2020. Chainalysis said newer entrants are launching with more aggressive Know Your Transaction monitoring configurations, reflecting the maturation of digital asset compliance frameworks.

According to the analysis, traditional financial institutions generally apply stricter detection thresholds than crypto exchanges. Financial institutions set lower dollar-detection floors for both illicit and non-illicit categories, meaning they are alerted for smaller sums and apply a more conservative monitoring approach.

The gap is particularly visible in indirect exposure to non-illicit flows. Chainalysis said crypto exchanges set average alerting minimums of USD 950, compared with USD 150 for traditional financial institutions. For illicit funds, both groups apply tighter thresholds, with exchanges setting alerts from USD 100 and financial institutions from USD 55.

The report also highlights a persistent gap between direct and indirect exposure monitoring. Direct exposure refers to funds arriving immediately from a known illicit source, while indirect exposure covers funds that pass through intermediary addresses before arriving at the final destination. Chainalysis said direct monitoring has become more standardised, but indirect exposure thresholds often remain 10 to 20 times higher than direct thresholds in categories such as ransomware, fraud shops, scams, darknet markets, and sanctioned jurisdictions.

Regional differences also remain. Chainalysis said direct exposure monitoring is broadly uniform across regions, while indirect exposure thresholds vary more significantly. EMEA organisations generally apply the strictest and most concentrated thresholds, while APAC organisations show more lenient and varied configurations.

Chainalysis said the findings show a compliance sector in transition, with stronger direct exposure monitoring but continuing inconsistency in how organisations treat indirect risk.

Why does it matter?

The findings point to a maturing crypto compliance environment, especially as traditional financial institutions expand into digital assets. However, the persistent gap in indirect exposure shows that illicit actors may still find room to exploit inconsistent monitoring practices. As funds move through intermediary wallets and cross-regional networks, calibration of indirect risk controls is becoming a key issue for regulatory defensibility, counterparty due diligence, and institutional trust in digital asset markets.

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Argentina bill tightens crypto gambling rules

Argentina’s national government has sent Congress a bill aimed at regulating online gambling, preventing gambling addiction, and blocking financial and technical support for unauthorised betting platforms.

The bill, titled the Law on the Prevention of Gambling Addiction and Regulation of Online Gambling, would coordinate action between several state bodies, including the Central Bank of Argentina, the National Securities Commission, the National Communications Agency, and NIC Argentina.

The proposal would prohibit financial institutions, payment service providers, and virtual asset service providers from offering services to unauthorised gambling operators. It would also allow NIC Argentina to suspend, disable, or remove domains reported by competent authorities in relation to illegal gambling.

The bill also restricts the promotion, sponsorship, and dissemination of illegal gambling platforms across television, radio, public spaces, social networks, and digital environments. Media companies, agencies, and content creators would be required to verify that promoted operators have official authorisation. Measures to protect minors are also included.

Authorised platforms without effective technological systems to identify age and exclude minors would be prohibited from operating financially. The Central Bank would also be required to block money transfers from accounts linked to minors to gambling operators.

The proposal would amend the Criminal Code to introduce prison terms of three to six years for those operating unauthorised betting systems. It would also create a new offence, punishable by two to four years in prison, for those who provide essential financial, technological, advertising, or digital services to unauthorised operators.

The bill follows growing scrutiny of online betting and prediction markets in Argentina and abroad, including earlier action against Polymarket for alleged unlicensed gambling.

Why does it matter?

The proposal shows how governments are targeting the infrastructure that enables illegal online gambling, including payment systems, domain names, advertising channels, and crypto-related services. By including virtual asset service providers, Argentina is treating crypto payment rails as part of the regulated gambling ecosystem when they are used to support unauthorised betting platforms. That could raise compliance expectations for crypto firms, payment providers, media companies, and online platforms.

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Belarus expands crypto role in financial system with new asset recognition

Belarus has expanded the role of digital assets in its financial system by recognising cryptocurrencies, including Bitcoin, as underlying assets in non-deliverable over-the-counter financial instruments.

The decision, issued by the Council of Ministers and the National Bank of the Republic of Belarus, marks another step in the country’s effort to integrate digital tokens into regulated financial market activity.

The updated framework allows cryptocurrencies, alongside futures, interest rates, stock indices, and other reference assets, to be used in cash-settled contracts rather than through delivery of the underlying asset. Such instruments allow investors to gain exposure to price movements without directly holding the asset itself.

Authorities are positioning the change as a way to expand investment opportunities and deepen the use of digital assets within the wider economy. Belarus has already developed a broader regulatory framework for digital tokens, including rules covering crypto-related banking services, mining, trading, and token operations.

The move reflects a wider trend of bringing crypto exposure into conventional financial structures, rather than treating digital assets as entirely separate from regulated markets. However, the change is narrower than full integration of cryptocurrencies into the financial system, as it applies specifically to their use as reference assets in cash-settled OTC instruments.

Why does it matter?

Belarus’ decision shows how crypto assets are being incorporated into more traditional financial products through regulated exposure rather than direct ownership. The change could broaden access to crypto-linked instruments while keeping settlement within conventional financial channels. It also illustrates a broader regulatory trend in which digital assets are increasingly treated as reference assets for financial contracts, rather than solely as standalone tokens traded on crypto platforms.

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