Regulation of cryptocurrencies: what to learn from foreign experiences?

Previously wary of cryptocurrencies, Morocco was embarking on a regulatory project focused on security, balance and vigilance, as announced by Adil Zbir, head of monitoring of financial market infrastructures and systems. of payment to Bank Al-Maghrib, during the Africa-US Business Summit held in Marrakech from July 19 to 22, 2022.

What is the regulatory system that best suits Moroccan law? What considerations should be taken into account in the context of this draft regulation? What to remember from foreign experiences in the matter? Here is the lighting Me Iliass Segamelawyer at the Casablanca bar and expert in digital law.

Foreign regulations: between crypto hub and vigilance

Although there is no consensus around a single or official definition of cryptocurrency, it can be defined as “a non-governmental digital asset based on a combination of cryptographic algorithms, the existence of which and the transfer is confirmed and recorded on a register distributed on a network of independent computers”.

According to Me Segame, “countries constantly present the best legal framework possible in order to resolve the specific, and often new, legal issues posed by cryptocurrencies whose technological particularities, uses and applications put the use of frameworks and definitions to the test. existing”.

“In order to benefit from the advantages of this technology in a safe and legal manner, certain countries, with the ambition of attracting cryptocurrency and blockchain players and becoming an essential industry hub, have distinguished themselves by putting puts in place a favorable legal framework for the development of the cryptocurrency ecosystem in terms of cryptoasset regulation, political orientation and tax treatment,” he continues.

For example, the repeated Swiss support support the establishment of an attractive legal framework for the use of cryptocurrencies, further encourage the status of Encryption Center from the country.

Thus, in Switzerland, considered a “crypto valley”, “the payment of taxes in cryptocurrencies in certain regions is completely legal”, indicates Me Segame. Parliament passed legislation relating to Distributed Ledger Technology (DLT), known as the DLT Act. This is one of the most notable regulated developments, since “one of the main contributions of this law, which came into force on August 1, 2021, is the establishment of a license for financial market infrastructures for DLT securities which may admit other companies and persons to trading in addition to financial intermediaries. Legal certainty has also been enhanced in insolvency law by regulating judged the segregation of crypto assets in the event of bankruptcy”.

With regard to anti-money laundering regulations, Me Segame indicates that the Financial Markets Supervisory Authority (FINMA) considers that the issuance of cryptocurrencies constitutes “financial intermediation”. Consequently, “it is subject to the applicable anti-money laundering regulations (AMLA). On the other hand, the simple fact of selling cryptocurrencies to another party, or using these cryptocurrencies as a means of payment for the sale or purchase of goods and services, does not constitute financial intermediation”, explains Me Segame.

More vigilante, Singapore adopts a “supportive but cautious approach”. And “regulates all cryptographic activities depending on their purpose rather than technology. It remains a very attractive destination for start-ups and crypto-investments due to its regulations and the favorable tax treatment of capital gains”, explains this expert in digital law.

“The Monetary Authority of Singapore (MAS) classifies cryptocurrency as property and not legal tender. The MAS regulates and licenses digital exchanges and does not appear to be moving towards a ban on cryptocurrency trading activities. »

In the fight against money laundering, Singapore applies cryptocurrency regulations that vary depending on the type of license required. Thus, “if an entity is governed by the Securities and Futures Act (SFA), opinion SFA04-N02 ‘Prevention of money laundering and combating the financing of terrorism – Capital market intermediaries’ could apply. For the Payment Services Act (PSA), notice PSN01 “Prevention of money laundering and combating the financing of terrorism – Holders of a payment services license (specific payment services)” and/or PSN02 Payment Carriers Service license (Digital Payment Token Service) issued by the MAS is applicable”, specifies Me Segame.

Other countries are considered “pioneers of digital exchanges”, like australia which stands out “as a relatively progressive and stable destination for blockchain and crypto-asset operations”.

“Digital exchanges have been around since 2017, making Australia a leader in the industry. The country classifies cryptocurrencies as legal property, not as a currency. Indeed, Australia allows crypto-asset service providers to operate under license, and considers cryptocurrencies to be financial assets under its securities law.

“Since 2018, Digital Device Exchange (DCE) providers are required to register and register with the Australian Transaction Reports and Analysis (AUSTRAC) as a reporting entity under the Australian AML regulatory framework /FCT. Otherwise, these entities provide for a penalty of up to two years in prison or a fine of up to 110,000 Australian dollars or both.

While Australia is considered a leader in the sector, other countries are emerging with new regulations. This is the case of United Arab Emirates where a cryptocurrency-friendly legal framework was recently adopted, “to attract significant investment in the industry and become an essential global hub in the field”.

“In 2020, the global market of Abu Dhabi ADGM (the international financial center of the emirate) has put in place a complete framework to regulate the activities of virtual assets in particular through a guide. The regulatory framework of the Financial Services Regulatory Authority (FSRA) focuses on consumer protection, technology governance, disclosure/transparency and market abuse,” says Segame.

He also discusses the regulations, put in place in Dubai, favorable to virtual asset services provided in the emirate, as well as the creation of the Dubai Virtual Assets Regulatory Authority (VARA), through the adoption of Law No. (4) of 2022.

“This authority is notably responsible at the level of the emirate only, and with the exception of the Dubai International Financial Center (DIFC), for the regulation and supervision of the processes of issuance, offer and relevant disclosure of virtual assets and NFTs. »

“VARA is also the competent authority to grant licenses to entities offering services in relation to virtual assets, and intervenes to monitor the activities of virtual asset exchanges in order to prevent price manipulation and to establish high standards of personal data protection,” he adds.

Which direction for Morocco?

For Me Segame, the comparison between these foreign regulations, with different approaches, makes it possible to free two clear trends:

Licensing or approval regime in which case the platforms and suppliers of cryptoassets, decentralized or not, necessarily submit.

Compliance with local AML/CFT laws : which made the platforms subject to the obligation to comply with local regulations relating to the fight against money laundering and the financing of terrorism.

“For Morocco, it is appropriate, from the outset, to integrate these two considerations within the regulatory project to allow for more confidence, creation and security in the exchanges of crypto-assets on decentralized platforms. It is also strongly recommended to put in place measures and mechanisms to consumer protection to prevent unfair, deceptive or abusive practices. »

“The different ways in which consumers can hold cryptoassets are also a cause for concern, especially when it comes to self-hosted wallets (self-custody wallets) that are distinct from custodial-based services (custody-based services). In this regard, self-hosted wallets are generated by computer protocols and are accessible to the public directly via the Internet,” he continues.

“Therefore, the onus is on the consumer to understand the interface, the security mechanisms, the management and storage of private keys, and the fact that no centralized company is involved and there may be no structure to provide in the event of loss of access to the portfolio constitutes a significant risk. »

Thus, Mr. Segame considers that it is “essential toeducate the Moroccan consumer in order to allow him to make a free and informed choice and to consider the consecration of rules capable of guaranteeing that adequate information is provided in relation to these very specific financial products”.

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