How do different countries regulate cryptocurrency?
For the first decade of its life, cryptocurrency has been in the state of tranquility, free of regulatory restrictions.
But since the sudden growth of Bitcoin in 2017, the governments have been paying close attention to the industry.
Switzerland, Japan, Lithuania, Malta, and Mexico are in the vanguard of the countries that had established compulsory licensing for exchange of cryptocurrencies.
In these countries, the principles on which the regulation of the industry is based are taken from banking. First of all, it is KYC (know-your-customer) and AML (Anti-money laundering).
There have been nascent centers of cryptocurrency-related legislation, whose approaches to the regulation are quite distinct from each other: western countries seek to profit from stablecoins and taxation, while Asian countries (particularly China, Japan, and South Korea) aim at the development of the blockchain technology and the creation of a cryptocurrency economy on its basis.
The story of Facebook’s Libra, which has been started to fight against even before its creation, proved that western law-enforcement practices would most likely go down the tough road of control and restrictions.
The case with another cryptocurrency project, Pavel Durov’s Gram, provided SEC with a chance to test an instrument of control without which it would be left defenseless in the face of the forthcoming cryptocurrency invasion. The instrument is to classify the type of tokens as securities.
Along with this, the USA is trying to develop tax laws. Thus, hard-forks have already become subjects of taxation. The way to regulate the advertising industry has yet to be determined.
Obviously, the regulators will face an unprecedented task: they will have to find a balance between the traditional financial institutions and technological innovations since the neglect of the latter questions the compatibility of any modern country’s economy.
Asia, at least for now, is showing a weighted cryptocurrency policy moving towards peaceful coexistence, which could eventually lead to a merger of the industry and a general economic development.
India, for example, has seen three stages for the last 1,5 years. The country ignored cryptocurrencies, criticized them, and has finally tended to establish constructive cooperation.
In October, China enacted the law on cryptography, which establishes no other than the governmental support for cryptography-related business.
Japan pays attention to cryptocurrency trading, restricting margin trading to decrease risks and increase the protection of consumers and providing virtual currencies with a status of cryptoassets.
Europe, in turn, seeks to ensure the transparency of cryptocurrency transactions. The fifth anti-money laundering directive (5AMLD) by the European Commission should contribute to the goal.
But the business community has already raised concerns: the financial load caused by the regulation could lead to the elimination of small and medium companies and the creation of a corporate monopoly.
What is the full picture by the beginning of the third decade?
Apparently, we will see the continuation of the ongoing process of bringing the cryptocurrency industry to the legal framework and improving mechanisms of control over crypto-financial flows.
An optimistic outlook involves the development of the global cryptocurrency ecosystem, in which a cryptocurrency is no longer a foreign body but rather an inherent organic element of the world economy. At least, today, there are hot spots of such development.
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Published at Tue, 03 Dec 2019 11:16:50 +0000
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