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What’s up with crypto regulations?


05/07/2021 | Non classé

regulations
What’s up with crypto regulations?

When we think of crypto regulations, there are quite a few things that come to mind. From taxation, regulation of ICO’s (Initial Coin Offerings) and of the statute of cryptocurrencies, bans on use or limitation of use, crypto regulation takes on many forms. Let’s see what they’re all about.

As cryptocurrencies and blockchain technology continue to evolve at a rapid pace, states around the world scramble to find ways of regulating the so-dubbed “Wild West” that is the crypto-world. From Asia to Europe, North & Latin America, many states have already defined their position towards crypto-currencies while some of them are still thinking about how to tackle the crypto-space. For better or for worse, states around the globe have tackled cryptocurrencies their own way, leaving their citizens to figure out ways of best interacting with the crypto-space and blockchain technology.

A primordial soup in the making

What’s up with crypto regulations? PlatoBlockchain Data Intelligence. Vertical Search. Ai.
What’s up with crypto regulations?

At the dawn of cryptocurrency and blockchain, there was Bitcoin. On the 31st of October 2008, a mysterious email from an anonymous Satoshi Nakamoto, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”, started spreading the word about the Bitcoin project, presenting its whitepaper to the world.

At the time of Bitcoin’s emergence into the world, the idea of decentralized, non-government-controlled and low fee transactions seemed like a utopian dream which many started adhering to. At the time, governments were not even batting their eyes and concerning themselves with Bitcoin. Fast forward 7-8 years and a few thousand altcoins, governments started taking action – some to stomp the phenomenon from contesting their hegemony, while others sought to regulate it for the benefit of their citizens.

States like China, Bolivia, Ecuador, Nigeria, outright banned the use of cryptocurrencies, while some only permitted the use of state-controlled digital currencies, leaving their citizens to find alternate ways of interacting with the crypto world and its advantages.

On the other hand, European states like Switzerland and Lithuania and American states like Canada and Mexico, have fully regulated the use of cryptocurrencies.

Case E.U.

What’s up with crypto regulations? PlatoBlockchain Data Intelligence. Vertical Search. Ai.
What’s up with crypto regulations?

The unique structure of the European Union means that its member states are free to develop and impose their own national legislation. However, some overarching regulatory frameworks are always in the works when we think of E.U. legislation.

Although there has been no specific development of a transnational, E.U regulation on blockchain technology and cryptocurrencies, the E.U. has made some steps towards a regulatory framework via the 5th anti-money laundering Directive (5 MLD) in 2020.

A legal definition of cryptocurrencies has been introduced as “a digital representation of value that can be digitally transferred, stored or traded and is accepted… as a medium of exchange”. On top of this, several other regulations have been adopted which point at crypto.

Cryptocurrency exchanges are now considered “obliged entities”. This basically obligates them to perform customer “due diligence” and report any suspicious activity to the authorities. Even more so, the 5 MLD gives Financial Intelligence Units a mandate to obtain addresses and the identities of crypto-owners, in an effort to counteract the anonymity of crypto-usage and its relation to money laundering activities.
5MLD also obligates exchange & wallet service providers to register with fiscal authorities in their states of origin.

The European specifications

The overarching E.U. directives, while being in effect, don’t force any of its member states to regulate cryptocurrencies in a certain way on their territory. Each member state has the freedom to create its own regulation and deal with cryptos as they see fit.

Most of the E.U. member states positioned themselves favorably towards cryptocurrency, registering it as some form of legal tender, assets, etc., allowing it to be taxed like any other type of income, thus winning on the money that pours into state coffers.

Some of the E.U. member states have gone as far as enacting very comprehensive regulatory frameworks that allow not only tax collection but also for the deployment of ICO’s on their territory. In Lithuania, for example, ICOs are very strictly regulated, allowing both ICO investors and token issuers to be assured that the process is equitable on both sides.

Albeit not in the E.U. but still part of the E.E.A. (European Economic Agreement), Switzerland boasts one of the most advanced cryptocurrency regulatory frameworks in the world, along with a thriving crypto community. The city of Zug in Canton Zug has been dubbed “crypto-valley”, with many blockchain startups taking roots there. In Zug, people are allowed to pay their taxes in crypto. What is most impressive, is the fact that the Swiss prime minister declared that he wants to transform Switzerland into “the world’s first crypto-nation.”

In the middle of the playing field, members like Denmark, Finland, Ireland, and France have not adopted any specific regulations for crypto-assets, yet some of them issued warnings informing their citizens about the risks of working with cryptos. The messages of these governments mainly focus on warning their citizens/investors on the high volatility risk of cryptos and security issues surrounding the crypto-space.

On the “nay-sayers side”, countries like Bulgaria, Hungary, Cyprus, Poland, have repeatedly warned their citizens about the risks of cryptocurrencies and urged them to either exercise great caution when dealing with them or to avoid them altogether. One very draconic example of proposed policies is the ban intent that was announced by the Polish prime minister in 2018, invoking a “fear of Ponzi schemes”. It was then stated they will either be banned or highly regulated, to avoid any grim scenarios.

The Americas

What’s up with crypto regulations? PlatoBlockchain Data Intelligence. Vertical Search. Ai.
What’s up with crypto regulations?

Across the Atlantic ocean, things are moving in quite a different fashion. From North to South America, states across the continent are employing quite different policy frameworks. From hard bans to hard or soft regulations, the American continent is a mosaic of contrasting crypto-regulatory frameworks.

Among the most ardent proponents and regulators of cryptocurrencies in the Americas are the Central and South American states. Since most of these states have dealt heavily with poverty, having underserved and underdeveloped communities in many of their regions, the embracement of cryptocurrencies as a way to help “bank” and emancipate the poor and as a way to increase budget income, was a no brainer.

States like Mexico, Chile, Argentina, and Colombia, have gotten knees deep into the cryptocurrency river and have started regulating their use in favor of their citizens and their state coffers. Following the regulations, a series of projects and initiatives were launched to meet the needs of those who started adopting the way of the crypto.

Startups like La PlataForma in Chile and Colombian Valiu, help the unbanked and vulnerable with remittances, easily and safely transfer funds from one party to another. Perhaps one of the most relevant uses for cryptos worldwide is Venezuela, where hyperinflation pushed people to safely keep their funds in cryptos to avoid the economic disaster.

On the fence line, states like Belize, El Salvador, Guatemala have adopted no or mildly negative positions towards cryptocurrencies. Although they don’t expressly forbid cryptocurrencies, they don’t endorse them either, while Guatemala, for example, repeatedly warned its citizens about the dangers of dabbling with cryptos.

On the dark side of the regulatory field, American states such as Bolivia, have decisively banned the use of all types of cryptocurrencies, all but the digital version of their national currency.

In the Northern part of the continent, Canada went full gear into fully regulating cryptos, while the U.S. is still hanging in the grey area with hopes that the Biden administration will now step in and frame good policy around blockchain and cryptocurrencies.

It’s time to learn more

We’ve taken a quick look over how states in Europe and the Americas have regulated the world of cryptos thus far. The nature of blockchain and cryptocurrencies demands a new breed of legislation, one that will not only focus strictly on the currencies but will also help better mold the way blockchain-based business models and projects will be able to shape the future.



Source: https://www.ledger.com/whats-up-with-crypto-regulations

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