2019 can be seen as a decisive year for the evolution of cryptocurrency. While we’ve frequently talked about “mass adoption”, it’s become clear that such a milestone will not happen without regulations. And that’s not because crypto usage won’t take off until we have rules – on the contrary. Because its use is becoming more widespread, countries are doing their best to catch up and create frameworks and regulations for trading, taxation and the simple day-to-day use.
Governments around the world have been publishing rules, from defining crypto as an asset – and is therefore taxable -, creating crypto trading licenses, allowing crypto ATMs, to altogether banning mining or crypto use. Indeed, the global regulatory framework can be seen as fragmented, as some countries advance faster than others, displaying different focus and preoccupations.
Let’s have a look at some of the countries that made headlines across the globe, highlighting the changes made and the progress achieved. The list is non-exhaustive and aims at shedding some light at the start of a new year.
Eight countries and their regulatory framework for cryptocurrencies (and blockchain)
Tax-deductible crypto transactions and a strong desire to compete with Libra, France is quickly becoming a leading crypto country in Europe.
There’s been quite some crypto movement in France this year. With the announcement of Libra, the French government positioned itself firmly against Facebook’s project, calling it a threat to monetary sovereignty. At the beginning of December, the governor of the Bank of France announced the bank’s intention to launch a pilot project of a central bank digital currency in the first quarter of 2020. According to the French publication Les Echos, the CBDC will be tested by financial institutions.
This initiative is seen as a way to strengthen the efficiency and productivity of the financial system and by consequence, promote trust in the digital currency. Besides, the governor highlights that the project can be used as a way to ensure the country’s sovereignty in the face of private initiatives, such as Libra.
The French Minister of Economy, Bruno Le Maire, announced on September 12th that crypto-to-crypto trades wouldn’t be subject to tax. However, crypto-to-fiat sales remain taxable.
France is one of the countries with the most establishments accepting Bitcoin payments, with a total of 25,000 sales point.
Blockchain is the word of the day in China, with cryptocurrency being regarded as only possible through state means.
China’s relationship with cryptocurrency has rendered many news headlines throughout the year. It seems most fit to recall the famous phrase “When life gives you lemons, make lemonade”. As the world wakes up to the potential of cryptocurrencies, China saw no other way but to ban them, and ICOs. But they’ve decided to start their own CBDC project and at the same time invest – quite heavily – in the blockchain technology.
China’s dislike of cryptocurrencies has led to bans across different platforms. Most recently, Weibo, a social media platform, banned major crypto platforms such as Binance and Tron. In October, Alipay, the digital payment branch of the e-commerce giant Alibaba, banned all crypto transactions. During the summer, WeChat blocked crypto media accounts under the pretext that they violated the platform’s terms.
Meanwhile, they’ve been accelerating blockchain adoption across the country, coupling it with different technologies such as big data and machine learning. We’ve been covering China’s introduction of the blockchain technology in many domains, from agriculture to pharmaceuticals.
China’s president, Xi Jinping, reportedly spoke about the technology’s potential:
“We must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain and industrial innovation.”
United States of America
Different opinions regarding crypto compose a fragmented regulatory framework at the state and federal level.
The regulatory scene is still quite fragmented at the American state level, with the federal government failing to adopt a universal framework. Even though the U.S can be seen as a leader in many aspects, they haven’t earned the lead among the most active governments regulating blockchain and cryptocurrency.
U.S regulatory agencies have different opinions about crypto. In 2013, Bitcoin was classified as “an example of a decentralized virtual currency” by the U.S Treasury Department’s Financial Crimes Enforcement Network (FinCEN). One year later, the Internal Revenue Service (IRS) announced that cryptocurrencies were “property for the U.S federal tax purposes”. However, not all is clear in the crypto tax territory. The IRS forbad tax exemptions on crypto-to-crypto exchanges in 2018.
The U.S Commodity Futures Trading Commission (CFTC) considers digital currencies as commodities since 2015, and the Securities and Exchange Commission (SEC) outlined regulatory compliance issues for crypto custodians this year. They require registration of any virtual currency traded in the country to be classified as a “security”, and that of any trading platform.
The SEC made headlines this year, a closer look at their crypto guidelines is definitely worth it. As for the states that are leading the race in the country, Wyoming, Colorado, Ohio, California and Texas are among the top 5.
To avoid sanctions, Iran is investing in cryptocurrency and blockchain. Last year, they authorized the mining of cryptos and announced the Crypto-Rial.
No Western-imposed sanctions will stop Iran from adopting cryptocurrency and blockchain. On the contrary, they seem enticed to do so to circumvent long-standing economic blockades. Iran has been turning to decentralized technology, and that was made clear through a series of actions taken in 2019.
As reported by The Blockchain Land, the Iranian Chamber of Commerce, Industries, Mines and Agriculture authorized the mining of cryptocurrencies in July 2019. Seen as an “industrial activity” subject to taxation, licenses have already been issued, and demand is rising. Those that want to create a mining farm will receive support from the government.
Subsidized electricity rates are said to be offered to the miner, to encourage the trend. However, reports differ, with some outlets claiming the price will be not be subsidized after all. Nonetheless, electricity rates are low in the country, and the new law is bound to attract mining companies from countries such as China and Ukraine.
Earlier this year, Iran also announced that they were working on the “Crypto-Rial”, a sovereign cryptocurrency backed by state-owned gold reserves. It’s important to note that despite the seemingly progressive stance, crypto as a method of payment is still banned in the country.
A new bill, introduced in November to enable banks to support the sale and custody of crypto, was met with enthusiasm.
The country has held back on releasing any regulations regarding cryptocurrencies. Currently, German banks and other financial institutions aren’t allowed to facilitate the sale of cryptocurrencies to their clients.
However, a new bill was introduced in November enables banks to support the sale and custody of cryptocurrencies by 2020. Even though the initial draft required that the banks would need to make recourse to external crypto custodians, the latest version removed that clause. This means that banks would streamline crypto operations.
The bill needs to be approved – by consensus – by the country’s 16 states. Though it is still at the initial stage, this new law has been met with enthusiasm from the domestic industry, who are hoping that the country will become a crypto-heaven.
Aiming to become a global fintech leader, crypto-assets were classified as property. The country also recognized the potential of smart contracts in revolutionizing industries.
The UK has also made strides in cryptocurrency and blockchain adoption. The country has been in the bid to become a fintech leader, but there has been quite some uncertainty surrounding crypto and digital assets. In November, they published a landmark legal statement that classified crypto assets like property.
This announcement is said to have cleared the path for businesses to use digital assets on a blockchain and smart legal contracts since its mainstream utilisation depends on a solid regulatory foundation.
The statement was issued by a legal panel headed by the Chancellor of the High Court, Sir Geoffrey Vos. They also discussed blockchain smart contracts and how it creates a “more secure and more efficient ways of implementing — and automating the performance of — contracts between parties”. Reportedly, the panel emphasized the potential of crypto-asset systems to “revolutionise agreements such as mortgages, medical research and property ownership, with smart contacts in the background.”
United Arab Emirates
Often overlooked, the UAE has been developing a blockchain ecosystem over the years. Most recently, they released crypto-asset regulations that provided clarity for businesses in the region.
The Middle East region is known to have a supportive stance when it comes to the blockchain and crypto industry. Apart from some highly restrictive countries such as Iraq and Kuwait, we’ve seen how Dubai is implementing blockchain in its smart city initiatives, and how the United Arab Emirates has developed a blockchain ecosystem.
In October 2019, the UAE’s Security and Commodities Authority (SCA) released crypto-assets regulations, thus providing much-needed clarity for the region. The resolution was seen as a positive sign to the world, as a way of showing the region is open to exploring the industry by providing solid guidelines for businesses to enter the market.
New Zealand became the first country to allow salaries to be paid in crypto.
Also worth mentioning is New Zealand. In September, they became the first country to allow companies to pay salary in cryptocurrency. This is applicable as long as the digital coin is pegged to at least one fiat currency. They also require it to be directly convertible into a standard form of payment.
As for a comprehensive regulatory framework, New Zealand doesn’t have specific legislation related to cryptocurrencies. The Financial Markets Authority states that activities relating to crypto could be considered financial services, which are thus subject to other requirements under the law.
What are the trends for crypto regulations for the future?
We’re likely to see, in the next couple of year, more countries proposing and implementing their crypto regulations. If the trend continues, we will also see the first nation to emit a digital currency.
However, crypto regulations might not follow the adoption of blockchain technology. Trends also point to an increasing interest in blockchain, as governments and private companies invest in new technologies across different industries, aiming for growth, development and innovation.r