LD Capital: A Quick Overview of the Global Regulatory Landscape for Virtual Assets

Written by: Alfred, LD Capital

The ideal state of the crypto world is a decentralized, permissionless system operating under digital rules, which sounds somewhat contradictory to traditional regulation. However, the current development of the crypto industry is rapidly merging with global regulatory bodies. Many crypto natives may not like this, but the frequent emergence of legislation in various countries and the dynamics of regulation have become the absolute focus of industry development.

It is believed that sovereign freedom and mathematical order will still be at the core of the industry in the future. However, for new things to be widely integrated into the existing world order and rapidly promoted and developed globally, the game and integration with regulation is an inevitable path. This article will outline the current progress of the most important trends in 2023 from the perspective of industry observers (Note: Given the common practices of various countries' regulations, this article uses the term "virtual assets" to refer to the broad category of crypto assets and digital assets).

I. Singapore — A Leader in Virtual Asset Regulation

After the bankruptcies of Three Arrows Capital and FTX, regulation in Singapore has become more cautious and stringent, and the pace of development has slowed. However, due to its stable policies and open environment, Singapore remains one of the top choices for global Web3 companies and entrepreneurs.

1. MAS's Three Categories of Virtual Asset Regulatory Framework

The Monetary Authority of Singapore (MAS) is Singapore's central bank and comprehensive financial regulatory authority, responsible for regulating the Web3 industry. MAS adopts a functional and categorical regulatory approach to virtual assets, thereby legalizing regulation.

According to the "Guidelines on Digital Token Offerings" revised and published by MAS in May 2020, virtual assets are categorized into three types based on their functions and characteristics: Security Tokens; Payment Tokens; and Utility Tokens. Among them, eMoney is electronic money, and DPT refers to digital payment tokens, which are cryptocurrencies intended for payment purposes (e.g., BTC, ETH).

Source: Web3 Xiaolu

If classified as security tokens, they are regulated under the Securities and Futures Act (SFA), while payment tokens are regulated under the Payment Services Act (PSA). There are currently no clear regulatory laws for utility tokens. Assets under SFA and PSA regulation need to obtain regulatory approval from MAS and acquire the corresponding licenses to operate compliantly. Additionally, all virtual asset activities, like other financial activities, must comply with anti-money laundering and counter-terrorism financing regulations.

2. Launch of the Final Regulatory Framework for Stablecoins

On August 15, 2023, MAS announced the final version of the regulatory framework for stablecoins, aiming to ensure that stablecoins regulated in Singapore have a high degree of value stability, making it one of the first jurisdictions globally to incorporate stablecoins into its local regulatory system.

According to the definition in the regulatory framework, stablecoins are digital payment tokens (DPT) applicable to single-currency stablecoins issued in Singapore that are pegged to the Singapore dollar or any G10 currency, maintaining a relatively constant value. Issuers of such SCS must meet four key requirements: value stability; capital requirements; redemption at face value; and information disclosure.

When well-regulated to maintain this value stability, stablecoins can serve as a trusted medium of exchange to support innovation, including "on-chain" purchases and sales of digital assets. Only stablecoin issuers that meet all requirements under this framework can apply to MAS for their stablecoins to be recognized and labeled as "MAS-regulated stablecoins." This label will enable users to easily distinguish MAS-regulated stablecoins from other digital payment tokens, including "stablecoins" not subject to MAS's stablecoin regulatory framework. If users choose to trade stablecoins not regulated under the MAS framework, they should make informed decisions regarding the associated risks.

II. Hong Kong — Accelerating the Development of Virtual Assets

After several years of silence, Hong Kong began to accelerate its embrace of the virtual asset industry with the release of the "Hong Kong Virtual Asset Development Policy Declaration" by the Financial Services and the Treasury Bureau on October 31, 2022, and has frequently implemented policies in 2023 to demonstrate its determination. In the 2022/23 annual report released by the Hong Kong Financial Development Council, Hong Kong is positioning itself as a global leader in developing complementary virtual assets and technology.

1. Hong Kong's Unique Dual Licensing System

Hong Kong currently has a "dual licensing" system for operators of virtual asset trading platforms. One license is for "security tokens," used under the Securities and Futures Ordinance regulatory and licensing system, while the other license is for "non-security tokens," applicable under the Anti-Money Laundering Ordinance licensing system. The Hong Kong Securities and Futures Commission previously stated that the terms and characteristics of virtual assets may evolve over time, and the definitions of "security tokens" and "non-security tokens" may also change. Therefore, virtual asset platforms should hold dual licenses to ensure compliance.

(1) License No. 12 under the Securities and Futures Ordinance

Hong Kong previously had a relatively complete licensing admission system. If a virtual asset is classified as a security token, it must apply for a relevant securities admission license. Currently, there are three types of licenses that must be applied for to operate virtual asset businesses: License No. 1, License No. 7, and VASP license. Additionally, depending on actual business needs, License No. 4 and License No. 9 may also need to be applied for.

Source: LD Capital

(2) VASP License

The licensing system for Virtual Asset Service Providers (VASP) stems from the newly added provisions of the Anti-Money Laundering and Terrorist Financing (Amendment) Ordinance. In December 2022, the Hong Kong Legislative Council passed and published this bill, making it Hong Kong's first legislation involving the regulation of virtual assets.

According to the "2022 Anti-Money Laundering and Terrorist Financing (Amendment) Ordinance," virtual assets are defined as follows: Virtual assets are encrypted digital values expressed in the form of units of account or stored economic value; they can serve as a medium of exchange for goods or services, settle debts, invest; or be used for voting on matters related to the management, operation, or terms changes of virtual assets; they can be electronically transferred, stored, or traded; the SFC or the Secretary for Financial Services and the Treasury can expand or narrow the scope of virtual assets through publication in the Gazette. The definition of VA under the Anti-Money Laundering Ordinance will cover most virtual currencies in the market, including BTC, ETH, stablecoins, utility tokens, and governance tokens.

Current virtual asset trading platforms that already hold Licenses No. 1 and 7 also need to apply to the SFC for a VASP license but can follow a simplified application process. On August 3, HashKey and OSL applied for the upgrade of Licenses No. 1 and 7 through the simplified process and quickly obtained approval for retail services, expanding their business scope from solely professional investors to retail users.

At the same time, the Anti-Money Laundering Ordinance provides transitional arrangements for "existing virtual asset exchanges," stipulating that the transition period will end on June 1, 2024. Virtual asset trading platforms that already hold Licenses No. 1 and 7 but have not yet obtained a VASP license are advised by the SFC to implement a 12-month transition period. Those not intending to apply for a license should prepare to orderly wind down their business in Hong Kong, with a deadline for closure set for May 31, 2024. In simple terms, starting June 1, 2024, virtual asset exchanges without a VASP license will not be able to operate compliantly.

2. Accelerating the Development of Stablecoins

Regarding stablecoins, the SFC also clearly stated in the "Consultation Summary": The Hong Kong Monetary Authority released the "Consultation Summary on the Discussion Paper on Crypto Assets and Stablecoins" in January 2023, indicating that it will implement regulatory arrangements for stablecoins in 2023/24 and establish a licensing and permission system for activities related to stablecoins. Before stablecoins are regulated, the SFC believes they should not be included for retail trading. On May 18, the Hong Kong Monetary Authority announced the launch of the "Digital Hong Kong Dollar" pilot program, with 16 companies from the finance, payment, and technology sectors selected to participate in the first round of trials in 2023. The pilot project will explore six potential use cases, including comprehensive payments, programmable payments, offline payments, token deposits, Web3 transaction settlements, and token asset settlements. At the Wanxiang Blockchain Week on September 19 this year, Hong Kong Legislative Council member Kenneth Leung stated that the regulatory framework for Hong Kong dollar stablecoins may be launched in June next year.

III. UAE — Establishing the First Tailored Virtual Asset System

The Dubai Virtual Assets Regulatory Authority (VARA) was established in March 2022, making it the world's first government agency specifically set up to regulate the virtual asset industry, responsible for managing and supervising activities related to virtual assets in Dubai (including special development zones and free zones, but excluding the Dubai International Financial Centre). Previously, Binance, Okx, crypto.com, Bybit, and others obtained MVP licenses and established companies in Dubai. On February 7, 2023, according to the Dubai Emirate Virtual Assets Regulatory Law No. (4) of 2022, and upon final approval by the board, VARA issued the 2023 Virtual Assets and Regulatory Activities Regulations, which took effect immediately upon publication, requiring all market participants conducting virtual asset businesses or providing services in the UAE (excluding the two financial free zones ADGM and DIFC) to obtain approval and licensing from the UAE Securities and Commodities Authority (SCA) or VARA.

VARA has identified seven different virtual asset (VA) activities, covering consulting services, brokerage services, custody services, exchange services, lending services, management and investment services, and transfer settlement services. The licensing process is divided into four stages: temporary licensing, preparation and operation of a minimum viable product (MVP) license, and the so-called full market product (FMP) license. Before the phased (4) FMP license is approved, MVP license holders are not allowed to provide services to the general retail public (they are allowed to provide relevant virtual asset services to eligible retail and institutional investors in Dubai). Currently, three companies have officially obtained VASP licenses for related activities, with Binance, OKX, and Bybit at different stages of MVP.

Source: VARA Public Register

The Dubai government has taken the boldest and most proactive approach to the development of virtual assets, not only promoting the establishment of independent regulatory agencies and policies but also vigorously developing artificial intelligence and the metaverse, rapidly becoming an influential international player in the virtual asset field.

IV. Europe — The EU Launches the Most Comprehensive Unified Virtual Asset Regulatory Framework

1. European Union

On May 31, 2023, the European Union officially signed a landmark regulation — the Markets in Crypto-Assets Regulation (MiCA), which was published in the Official Journal of the European Union (OJEU) on June 9. This marks the emergence of the world's first and most comprehensive unified regulatory framework for virtual assets, providing a common regulatory system for the 27 EU member states and creating a unified market covering 450 million people.

The regulation spans a total of 150 pages, offering a complete regulatory framework (which is also quite complex) for companies and individuals to refer to specific provisions in corresponding sections, mainly including the scope and definitions of regulation, classification of crypto assets and related regulations, regulatory provisions for crypto asset service providers, and regulatory authorities. According to this regulation, any company offering crypto assets to the public must publish a fair and clear white paper, warn of risks without misleading potential buyers, register with regulatory authorities, and maintain appropriate bank-like reserves for stablecoins.

Source: LD Capital

MiCA defines crypto assets as: a digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology. In terms of classification, MiCA categorizes assets into electronic money tokens, asset-referenced tokens, and crypto assets that do not fall into either category, where electronic money refers to crypto assets that maintain stable value by referencing the value of an official currency, mainly covered in Chapter 4 of the regulation; asset-referenced tokens refer to crypto assets that are not electronic money tokens, aiming to maintain stable value by referencing another value, right, or combination, including one or more official currencies, mainly covered in Chapter 3 of the regulation; utility tokens are crypto assets used solely to provide access to goods or services offered by the issuer, mainly covered in Chapter 5 of the regulation. According to the existing regulation, MiCA does not provide a clear regulatory approach for security tokens and NFTs, and more practical use cases are needed to clarify the specific classification of existing tokens in the current crypto market.

Source: Mayer Brown Law Firm

MiCA will undergo an 18-month transition period and will officially come into effect on December 30, 2024. By mid-2025, the committee will report whether further legislation is needed to meet the demands of NFTs and decentralized finance.

2. United Kingdom

Following the introduction of the EU's MiCA regulation, the UK is also accelerating its legislation on virtual assets. On June 19, 2023, the House of Lords approved the Financial Services and Markets Bill (FSMB), and on June 29, the bill received royal assent from King Charles, marking a procedural step after legislative agreement, bringing cryptocurrency under the legal regulatory scope of the FSMB, which also includes measures to supervise cryptocurrency promotions.

UK Financial Services Minister Andrew Griffith stated in a statement that after leaving the EU, the UK can control its financial services rulebook, allowing regulation of cryptocurrency assets to support their safe adoption in the UK. On July 28, the UK and Singapore agreed to jointly develop and implement global regulatory standards for cryptocurrencies and digital assets.

V. United States — A Key Player in the Development of the Virtual Asset World

The U.S. Securities and Exchange Commission (SEC) has been aggressive in recent years, making the U.S. the most stringent regulator globally. However, traditional finance and crypto companies in the U.S. are also working hard to promote industry development and regulatory integration. Since 2022, U.S. lawmakers have submitted over 50 digital asset bills to Congress. Currently, U.S. regulation is both a key obstacle to development and an important accelerator for future growth, as it concerns the most important source of liquidity in the crypto world — the flow of U.S. dollars.

1. SEC and CFTC

(1) SEC and the Howey Test

The SEC is an independent agency of the U.S. federal government established under the Securities Exchange Act of 1934, responsible for overseeing and regulating securities in the U.S. The SEC exercises powers granted by Congress to ensure that public companies do not engage in financial fraud, provide misleading information, insider trading, or other violations of securities laws, or face civil lawsuits.

With the development of crypto assets with financial attributes, the SEC analyzes whether a particular crypto asset qualifies as a security through the analytical framework released on April 3, 2019, titled "Are Virtual Assets Securities?" The key method for this determination is the "Howey Test": Is there an investment of money? Is there a common enterprise between the issuer and the investor? Is there a reasonable expectation of profits from the efforts of others? Both the SEC and federal courts have emphasized that the Howey Test is flexible (and somewhat subjective), and if a crypto asset is defined as a security under the Howey Test, it will be subject to regulation.

Source: Web3 Xiaolu

(2) SEC Regulation's Challenges for the Crypto World

Current SEC Chair Gary Gensler has repeatedly stated in public that, aside from decentralized cryptocurrencies like Bitcoin, the vast majority of crypto tokens meet the investment contract test and should be considered "securities," thus requiring registration of their investment contract offers and sales with the SEC or meeting exemption requirements. Given that most crypto tokens are subject to securities laws, most crypto intermediaries must also comply with these laws.

Defining tokens as securities would mean that crypto asset issuers or trading platforms would incur high costs and expenses to adapt to the already comprehensive and stringent regulatory standards in the U.S., and they would continue to be subject to regular reviews and lawful enforcement by regulatory authorities. Most importantly, regulating based on existing laws (without adaptive revisions) would fundamentally change the operational methods of the existing crypto asset industry, hindering current operations and future innovative explorations.

(3) CFTC's Embrace of Crypto but Still Strict

The Commodity Futures Trading Commission (CFTC) is an independent agency established by the U.S. government in 1974, authorized by Congress to manage and enforce the Commodity Exchange Act (CEA) and its regulations. It primarily oversees the U.S. commodity futures, options, and financial futures and options markets.

Currently, CFTC Chair Rostin Behnam stated in an interview that there are significant differences between the CFTC's and SEC's approaches to cryptocurrency regulation. He believes that many crypto assets currently fall under the category of commodities rather than securities, such as BTC and ETH, and criticized the SEC's approach to cryptocurrency regulation: "I strongly oppose enforcement regulation. I have done everything I can to remain transparent." He also stated that financial innovation aligns with national interests and compared crypto innovation to other "milestone moments in market structure," such as the shift from over-the-counter trading to electronic trading two decades ago.

However, recently, the CFTC has demonstrated its strict regulation by enforcing actions against three DeFi projects involving derivatives, penalizing U.S.-based blockchain companies Opyn, Inc., ZeroEx, Inc., and Deridex, Inc., which ultimately settled and accepted penalties. In the past, people may have perceived the CFTC as a mild and friendly agency due to the SEC's enforcement and the CFTC's proactive stance, but now it is recognized that the CFTC's regulation can be even stricter in certain areas.

2. Bitcoin Spot ETF

(1) ETF and Bitcoin Spot ETF

An ETF is an open-end investment fund, formally known as an exchange-traded fund. The ETF investment portfolio is held by a company that issues fund shares (partial ownership), serving as an index investment product that can track a broad index as well as sub-sectors or industry sectors. ETFs are composed of investment portfolios based on the compilation methods of various indices, allowing for trading of a series of underlying asset combinations through ETF trading, thereby achieving risk diversification. Common examples include ETFs for financial stocks, energy stocks, or commodities.

Bitcoin spot ETFs primarily invest in spot assets related to Bitcoin, following Bitcoin's price, allowing investors to buy and sell fund shares on conventional exchanges, enabling them to gain exposure to Bitcoin price fluctuations without actually holding the cryptocurrency.

(2) Why Bitcoin Spot ETFs Are So Important

ETFs will simplify the investment process for investors and lower the barriers to entry, encouraging more investors to use ETFs to invest in Bitcoin. Additionally, the approval of Bitcoin spot ETFs will provide new legitimate investment products in traditional financial markets, leveraging the strong sales power and return expectations of fund giants to bring trillions of dollars into the market. As the largest cryptocurrency, the approval of Bitcoin spot ETFs will drive the emergence of more compliant products and capital inflows in the crypto asset space, thereby promoting the overall development of the industry.

(3) Current Progress of ETFs

Several major U.S. fund giants have submitted applications for Bitcoin spot ETFs, including BlackRock, Fidelity, ARK, Bitwise, WisdomTree, and Valkyrie. The SEC needs to respond to the application documents before four deadlines (including rejection, approval, or delay). The SEC did not approve any applications during the first deadline, and many applications will reach the second deadline for related decisions in mid-October.

Source: Bloomberg, Planet Daily

Former SEC Chair Jay Clayton and Wintermute co-founder Evgeny Gaevoy, among other financial leaders in the U.S., have stated that approving a Bitcoin spot ETF is inevitable; it's just a matter of time. Although there have been many voices recently suggesting good news for Bitcoin ETFs in October, the author believes that formal approval is likely to come next year.

3. Others

(1) Stablecoins

This year, Republican members of the U.S. House Financial Services Committee proposed a new stablecoin regulatory draft aimed at transferring jurisdiction over stablecoins from the SEC to federal and state banking and credit union regulatory agencies, but it did not pass in the Democrat-majority Senate. In August, global payment giant PayPal announced the launch of a dollar stablecoin, PYUSD, for transfers and payments, issued by Paxos Trust Co. and backed by U.S. dollars, short-term government bonds, and cash equivalents. Meanwhile, on August 16, Circle's Chief Strategy Officer Dante Disparte called for the U.S. to expedite stablecoin legislation in an interview.

(2) RWA

RWA is one of the fastest-growing areas in the U.S., with RWA related to U.S. Treasury bonds becoming an important asset in the crypto world. In a working paper on tokenization published by the Federal Reserve on September 8, it stated that tokenization is a new and rapidly growing financial innovation in the crypto market, analyzing it from the perspectives of scale, advantages, and risks, indicating the Federal Reserve's increasing attention to asset tokenization. On September 7, leaders in the crypto world announced the establishment of the Tokenization Alliance (TAC), with founding members including Aave Companies, Centrifuge, Circle, Coinbase, Base, Credix, Goldfinch, and RWA.xyz. These companies are committed to bringing the next trillion-dollar asset on-chain through the tokenization of real-world assets, education, and advocacy.

(3) DeFi and NFT

Recently, DeFi and NFTs have been the focus of enforcement by U.S. regulatory agencies. As mentioned earlier, the CFTC took enforcement actions against three DeFi protocols, and the three companies ultimately pleaded guilty and settled. In August and September of this year, the SEC took regulatory enforcement actions against a Los Angeles-based entertainment company, Impact Theory, LLC, and Stoner Cats 2 LLC for offering unregistered securities, with Impact Theory, LLC reaching a settlement with the SEC by launching an investor compensation policy.

The U.S. has long had the most comprehensive financial system and high regulatory standards. However, the criticism faced by the U.S. this year is that, compared to the formal introduction of new legislation in other countries and regions, U.S. regulatory agencies currently incorporate virtual assets into existing systems for enforcement without formally introducing new rules suitable for industry development, which hinders the growth and innovation of the crypto industry in the U.S. Nevertheless, the U.S. still has highly innovative companies and large traditional interest groups involved in Web3, which will continue to drive regulatory changes. Perhaps external regulatory developments and next year's U.S. elections will be key turning points.

VI. Japan and South Korea — Important Participants in the Virtual Asset World

1. Japan

Japan was one of the early countries to engage in cryptocurrency, but in 2014, it experienced one of the industry's most severe setbacks — the global major Bitcoin exchange Mt. Gox was hacked and collapsed. This incident caused retail investors to lose up to 850,000 Bitcoins, and the debt repayment triggered by this event has not yet been resolved after nine years. Recently, on September 21, the trustee responsible for the Mt. Gox bankruptcy case decided to postpone payments to creditors for another year, moving the originally scheduled payment date from October 31, 2023, to the new date of October 31, 2024. Since the Mt. Gox incident, Japan has begun to implement stricter regulations on the cryptocurrency industry and has adopted clearer and more straightforward control policies than other countries like the U.S. In 2017, Japan amended the Payment Services Act to include cryptocurrency exchanges under regulatory oversight, implementing a licensing system regulated by the Financial Services Agency (FSA).

With the rapid development of the crypto industry in recent years, Japan has also accelerated a series of proactive policies since 2022. On June 1, 2022, Japanese Prime Minister Fumio Kishida stated in the House of Representatives that "the arrival of the Web3 era may lead to economic growth in Japan, and it is strongly believed that Japan must resolutely promote this environment from a political perspective." Shortly thereafter, Japan established the Web3 Policy Office under the Ministry of Economy, Trade and Industry and several policy institutions such as the LDP Web3 Project Team to vigorously promote the development of Web3 in Japan.

In April 2023, the ruling party's Web 3.0 project team released a white paper proposing recommendations to promote the development of Japan's crypto industry. In June 2023, Japan's "Revised Fund Settlement Act" was passed in the House of Lords, making it one of the first countries in the world to issue stablecoin legislation. The Ethereum Developer Conference "EDCON 2024" will also be held in Japan.

2. South Korea

South Korea is one of the countries most enthusiastic about trading cryptocurrencies. In 2017, this country, with a population of over 50 million, accounted for 20% of all Bitcoin trading volume and became the largest market for Ethereum. In the following years, the South Korean government implemented a series of policies to combat speculative behavior in cryptocurrency trading, such as trader admission and exchange regulatory registration. However, currently, the enthusiasm for crypto trading remains high. If a token gains popularity among South Korean traders and is listed on South Korean exchanges, it often results in the token's price on South Korean exchanges being significantly higher than on other global exchanges, a phenomenon known as "kimchi premium."

In the hot atmosphere of crypto, South Korea's regulation has also accelerated development in recent years, similar to other countries and regions. In June this year, the South Korean National Assembly passed the "Virtual Asset User Protection Act," which introduces a regulatory system for virtual assets, expected to help protect users in the virtual asset market and establish a sound, standardized, and transparent market order. The South Korean Financial Services Commission is preparing for a second phase of legislation for virtual assets. This act will take effect one year after the government issues the relevant procedures, expected to be in July 2024.

Recently, the South Korean blockchain industry has also been actively laying out infrastructure. On September 12, three major securities companies — Shinhan Investment Corp., KB Securities, and NH Investment & Securities — will form the "Token Securities (ST) Security Token Alliance" and begin to jointly build infrastructure. On September 21, Busan City in South Korea passed the "Plan for Establishing the Busan Digital Asset Exchange and Future Schedule," with the exchange planned to be established in November and officially start operations in the first half of 2024. Additionally, Busan City proposed to build itself into a "blockchain city" centered around the Busan digital asset trading platform and set up a 100 billion won (approximately 7.5 million USD) blockchain innovation fund.

VII. G20 — Advocates for a Global Virtual Asset Regulatory Framework

The current characteristic of virtual asset regulation is the lack of uniform standards and specific regulations among countries and regions, which creates high difficulties and costs for the operation and development of projects and companies, and provides opportunities for regulatory arbitrage for speculators. The G20, as an economic cooperation forum organization accounting for 85% of global GDP, 80% of trade volume, and two-thirds of the world's population, is currently actively advocating for a unified global virtual asset regulatory framework.

On September 9, 2023, G20 member country leaders expressed their agreement with the previous recommendations from the Financial Stability Board (FSB) and the International Monetary Fund (IMF) regarding the regulation and supervision of crypto asset activities and markets, and will discuss advancing the proposed roadmap from the FSB and IMF at the October meeting. At the G20 summit in New Delhi on September 11, member country leaders reached a consensus on the rapid implementation of a cross-border framework for crypto assets. This framework will promote global information exchange on crypto assets starting in 2027, with countries automatically exchanging information on crypto transactions across different jurisdictions annually, including transactions conducted on unregulated cryptocurrency exchanges and wallet providers. (The G20 consists of twenty parties, including China, Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.)

The G20's promotion of virtual assets is positive, but the group's characteristics involve a blend of various political ideologies and complex interests, currently situated in a period of de-globalization amid great power competition. Therefore, the progress of substantial policies that the G20 can promote may be slow.

VIII. Conclusion

1. The current regulatory application costs for crypto companies remain high. Although various countries and regions have introduced legislation, their definitions, classifications, and regulatory methods for virtual assets differ, requiring crypto companies and individual investors to adapt to different rules in different regions to ensure compliance.

2. Virtual assets possess innovation and uniqueness, making them more suitable for establishing new regulations for oversight. The lifecycle of virtual assets spans multiple stages, such as mining, staking, issuance, trading, transfer, payment, lending, and derivatives, and the asset categories are complex. For example, a token may simultaneously have payment, security, and utility attributes. If regulation categorizes virtual assets under existing unamended regulatory frameworks, it will be challenging to adapt to current industry developments. New regulations and regulatory methods should be adopted based on the widely recognized characteristics of virtual assets. Balancing regulation and development will test the wisdom of government and industry negotiations.

3. A regulatory path of gradual integration and change is an inevitable journey. In 2024, more regulatory bills for virtual assets will officially begin to take effect, and the process of adapting to regulation will be lengthy and challenging. However, the current market seeks to inject new liquidity and large-scale applications, and the path of integrating regulation while changing existing systems has become essential.