The cryptocurrency market is highly dynamic; the regulatory situation and the asset legal status change every month or so. But how is the regulation of cryptocurrencies changing in different parts of the world, and how will it affect the market ecosystem? In this post, we will talk about controversial issues and legislative decisions that demonstrate the attitude of different states toward cryptocurrencies.
Initially, bitcoin emerged as an opposition to centralized payment systems that are subject to regulation and control by central banks, legislatures, and courts. At that time, the cryptocurrency did not need to be accepted by states, and the latter did not notice it for a long time. But with the massive spread of cryptocurrencies, the situation has changed gradually. What is the status of cryptocurrencies now?
World Practice of Regulation of Cryptocurrencies
Global trends and vectors of cryptocurrency regulation in certain regions were outlined 7-8 years ago. And neither then nor now, do governments and banks around the world have a single approach to this issue. The main regulatory practice is now grouped into three main regions and differs significantly:
- North America – The US and Canada are trying to integrate cryptocurrencies into the existing legal framework, which causes many problems for both regulators and industry players. Although, cryptocurrency is quite popular in this part of the world, and the largest markets and exchanges operate here;
- Asia – The region is trying to use blockchain and cryptocurrencies to improve the existing financial system. But countries have a different understanding of this process. For example, Japan recognized bitcoin as a means of payment, whereas China followed the path of monopolization of the blockchain by the state;
- European Union – The legal framework for cryptocurrencies in Europe is rather vague and manifests itself differently in each country. Strict rules are established only in relation to procedures.
Recent Industry Regulation Changes
Despite such different approaches in different parts of the world, we can identify two major trends that are typical for most regulators faced with the need to fit cryptocurrencies into the legal framework:
- Change in perception – The industry has started to be noticed and is no longer perceived as a geek hobby;
- Prevention of possible risks – Cryptocurrencies are feared for user anonymity and lack of control. Therefore, local governments and regulatory bodies try to prevent them from becoming a weapon of crime.
That is why in the past few years, we have seen a tightening of market ecosystem regulation. Luckily, it has nothing to do with trading gold coins from the U.S. Mint. Even in the EU, where they have not yet decided what to count as cryptocurrencies, the AMLD5 rules apply to exchanges.
Recent Controversial Issues & Legislative Decisions
Yet most countries are trying to articulate their “attitude toward” cryptocurrencies and blockchain more clearly, although this is not a quick process. Here are some of the controversial issues and legislative decisions that you could have recently witnessed:
- Charges against Ripple – The SEC case against Ripple has led to the de facto freezing of the company’s operations in the United States and the loss of many partners. The SEC believes XRP is a security and could not have been released to the market through an ICO. So far, the case is in court and could set a dangerous precedent for other coins in the United States;
- Bill of the Central Bank of India – The Reserve Bank of India has proposed to ban the use of private cryptocurrencies and create a legal framework for the digital rupee. It looks like India is following the path of China;
- Anchorage endorsement – OSS licensed Anchorage to launch the first US cryptocurrency bank with national status;
- The new law on DLT assets in Switzerland – The country has fully legalized the trade of digital assets operating in distributed ledgers. This means that goods and services can be legally tokenized;
- Development of BSN in China – Based on the national BSN blockchain, China plans to build an international payment system using digital currencies from central banks and public cryptocurrencies around the world.
These are just some of the recent decisions that are currently being discussed by the community. Over the past few years, we have witnessed some other grandiose events. Among them are the joint EU and US pressure on Libra developers, the first tests of the digital yuan, and unsuccessful attempts to save Venezuela from hyperinflation with the help of El Petro.
All of the above controversial decisions so far speak only of one thing – countries are trying to regulate crypto assets, but they do not yet know how to do that in the best way. And this is just the beginning. While regulators are trying to deal with classic cryptocurrencies like BTC, the industry is already preparing new challenges – DeFi, tokenization of traditional assets, voting systems on the blockchain, etc.
Obviously, cryptocurrencies continue to change the world, and regulators have to react. Therefore, until the final formation or prohibition of cryptocurrencies occurs, such high-profile cases will appear again and again. We are at the stage of forming complex concepts of regulation of cryptocurrencies and blockchain, and now their general outlines are only vaguely looming.