Cryptocurrency is not new and has been around for a while. To make matters more significant, 2020 will be a landmark year in terms of its widespread adoption. 2021 witnessed a big push because countries worldwide have begun to accept bitcoin in some way. In a bid to regulate cryptocurrency exchanges, several nations have also started developing national rules.
Disappointedly, International cryptocurrency rules did not yet get implemented. However, given the rapidly changing crypto scene, it appears likely that we will see it soon. Today, we will learn about Cryptocurrency and the various regulations enacted by different countries and regions around the globe.
Although the European Union has not made any specific legislation, it has been working on regulations that promote the prevention of money laundering. A proposal called MiCA (markets in crypto-assets) is known as the draft of cryptocurrency regulation. This regulation encourages the development and advancement of cryptocurrencies within a framework of legal security that protects users in their transactions.
In this way, companies or people who provide cryptocurrency services will have an obligation to comply with different requirements, such as having a tax domicile in one of the Member States and defining consumer protection rules in case of loss or scams using their exchange platforms. Although other countries have already approved this type of proposal, Europe’s is different because it is a general EU legislation that must be applied and complemented by each country. So this opens the possibility of having a general regulation of cryptocurrencies in a large area of territory, giving each country the chance to experiment and legislate according to specific needs.
The French Ministry of Finance promotes the creation of new measures so that companies that make life around Bitcoin and other cryptocurrencies can effectively control their transactions. For this, they propose to prohibit anonymous cryptocurrency accounts by applying digital identification tools on exchange platforms.
The first regulation in Spain in Royal Decree-Law 7/2021 will be better expanded when the European Regulation is approved. This decree specifies who these laws will affect and where they must become registered in the Banco de España registry. It can guarantee that Exchange companies, wallets, and other digital services become registered to pay taxes and provide their services in Spain.
Recently, in the United Kingdom, lawmakers demanded greater surveillance and regulation of cryptocurrencies in the territory. It is an initiative of the U.K. Treasury Committee initiative where the concerned government sector explicitly explored the benefits and risks inherent in using crypto assets. The committee then concluded that cryptocurrencies do not have an intrinsic value and are vulnerable to manipulation, so their regulation in the country will start from stable coins. The Bank of England and the Treasury Department evaluate adding this type of Cryptocurrency to their daily transactions.
To include cryptocurrencies in their everyday transactions, the bank drafts rules that regulate financial technologies. However, the lack of a legal framework has not prevented reducing the use of Cryptocurrency in the country. But instead, they have managed to show the present risks, and users are more cautious. Currently, British citizens are waiting for the official regulation of cryptocurrencies in their country, but they do not stop exchanging financial assets through the network.
A few months ago, the Salvadoran Parliament legalized the circulation of Bitcoins as currency. It means that every economic agent that carries out commercial transactions in the country must accept Bitcoins as a form of payment. With this, the government is committed to creating the structural and legal security that users need to exchange, buy and sell Cryptocurrency in the country. This step is a milestone as no country in the world has declared any crypto asset as legal tender. Japan has only managed to configure it as a payment method but not as a legal currency capable of being accepted in public entities despite being an advanced country that favors the field of cryptocurrencies.
In Mexico, the situation is different; thanks to the impulse of El Salvador, the acceptance of crypto assets seems at least to be in the discussion. Representatives of the Ministry of Finance and Public Credit, the National Banking and Securities Commission, and Banco de México have communicated their digital assets and risks. Therefore, they maintain that no financial institution based in the country is authorized to transact with cryptocurrencies. The still mistrust is due to the increase in the use of cryptocurrencies by drug cartels in Central America, which is why money laundering has also increased.
Recently, the Securities and Exchange Commission president, Gary Gensler, stated that his institution has the tools to regulate cryptocurrencies. His idea also goes towards the protection of platform users who trade securities and loan products. Cryptocurrency pools and wallets work in the United States only on platforms with a fiscal address in the country. And it is expected that in the future, some tokens will have attributes that are more in line with the Securities so that their legalization and the legal framework where they got developed could have more security within public policies.
Latin America: Brazil
In the case of Latin America, Brazil does not consider cryptocurrencies within its regulatory framework, although citizens must declare them in taxes. The possession of crypto assets must become reported as other assets in the Assets and Rights File of the income tax declaration. It means that they are financial assets. So it contributes as a good, and the government must collect capital tax on it.
On the other hand, the lack of specific regulations cannot prevent institutions such as the Real Estate Securities Commission from approving Ether (ETH) -quoted funds. Also, for some years in Brazil, applications have been created that allow the exchange of Tether (USDT). So the progressive use of this type of crypto will indeed incentivize a bill to regulate them. The federal deputy Expedito Neto recently submitted a request in the Chamber of Deputies to regulate cryptocurrencies based on Bill 2303/2015. So discussions are expected to begin in the coming months.
In the case of Venezuela, there is a relatively advanced legal framework for cryptocurrencies and associated services. By law, different regulations were put in place, such as SUNACRIP as the control entity of cryptocurrencies in the country and RISEC as a digital registration system. In addition, the government also established the regulations of the so-called Digital Mining Pool. All miners who carry out their activities in the country must be registered to use blockchain technology to favor their interests. These regulations cover all cryptocurrencies such as Bitcoin, Dash, Etherium, Petros, and others. However, rules with other crypto assets have not yet gotten proposed.
The regulation of cryptocurrencies in the Asian continent is very diverse. It is due to, in the case of China, the National Internet Finance Association clarifies that services that involve cryptocurrencies cannot get offered. It means that no bank or payment channel can offer cryptocurrency transactions in the country.
In the case of Korea, the Financial Services Commission takes another step towards monitoring digital businesses. The regulations ensure that the economic sector can guarantee the implementation of measures against money laundering. Together with the Ministry of Finance, the Fair Trade Commission, and the National Tax Services, each commercial industry will be in charge of supervising these measures and ensuring the registration of exchange companies, wallets, or others in the Korea Financial Intelligence Unit. It entails a series of requirements in which they must verify that the bottom of the platforms has real metallic support within a Korean bank.
The demand for cryptocurrencies in countries such as Nigeria has never been higher on the African continent. Despite this, the need for Cryptocurrency does not stem from a government shift toward cryptocurrencies. In recent months, the country’s central bank, the CBN, issued a statement prohibiting commercial banks from providing services to cryptocurrency exchanges.
Even the country’s SEC upheld the suspension of cryptocurrency regulatory plans. It indicated that it was working with the CBN to create an optimal regulatory regime for the sector in the country. It has increased the popularity of bitcoin adoption. The CBN and the Securities and Exchange Commission of the African country have now announced plans to make all crypto assets default assets. Regionally,
South African regulators have proposed stringent license requirements and supervisory requirements that do not recognize cryptocurrencies as legal tender.
Will cryptocurrencies continue to have a more widespread use despite the regulations?
A year ago, there were less than 600 cryptocurrencies valued at 12 billion dollars. They are decentralized digital reading currencies that use specific encryption and registration techniques called the blockchain. Tokens can be traded between two people without external approval because of their unique I.D.s and access rights. Blockchain protocols capture more wealth and value than earlier protocols (e.g., HTTP of a web page). Blockchain protocols are “thick” due to data connection and cryptographic “access” tokens.
These tokens serve as a means of joining a network or employed in investing. Like social networks, these tokens allow users to pick their level of involvement. They also allow for more equitable wealth distribution. It will not be surprising to see Blockchain applications gain value as the industry evolves. It is because the data link layer must permanently preserve value.
Cryptocurrencies are now much more viable after four years of infrastructure building. Major financial institutions are exploring the blockchain, and Ethereum, the blockchain-based Smart contract platform, is extending corporate support as its tokens have risen in value.