Five countries where crypto regulation changed the most this year
Regulating the crypto world is at the top of the to-do list for central banks and financial-market regulators around the globe. Who has made the biggest changes this year?
The crypto market is, by far, the fastest-growing in the financial universe. But the intense volatility of the Bitcoins, Ethereums and Litecoins of this world, plus a fairly substantial regulatory vacuum mean digital assets aren’t quite yet treated on a par with traditional stocks, bonds and fiat currencies. Central banks are warming to the idea that, not only is greater regulation and legislation part of bringing cryptocurrencies into the fold, issuing their own digital currencies is key to helping this market evolve and truly reach the mainstream.
Here are the five countries where regulation of crypto assets has changed the most this year, ranked by CoinTelegraph.
China - The world’s second-biggest economy has an uneasy relationship with the crypto world. Back in 2017, Xinhua, the state news agency, called for cryptocurrencies and exchanges to be handled with “an iron fist”. Two years on, using Bitcoin and the like is still illegal in China and the government has cracked down fiercely on local crypto exchanges and warned investors about the risks in investing in digital assets, in spite of President Xi Jinping voicing support for blockchain technology. The central bank, the People’s Bank of China (PBoC), said in November it would create a series of regulations that would apply across the entire fintech sector, effectively meaning it will regulate blockchain. What happens in China has a huge impact on the Bitcoin market. When Xi Jinping announced his support for blockchain, the price raced up to $10,000, only to crash back down to around $6,500 when the central bank announced it would target crypto-exchanges.
France - The euro zone’s second-largest economy is leading the way among central bankers in the push to go digital. In early December, French daily Les Echos reported that the governor of the Bank of France, François Villeroy de Galhau, announced the bank will start testing a digital euro project by the end of Q1 2020. He told a regulatory conference earlier this month that the bank should be at the forefront of the development of central bank-backed digital currencies. France is already taking a slightly more lenient approach regarding taxation of digital trades than other countries. Finance minister Bruno Le Maire told Bloomberg in September that crypto-to-crypto trades would remain tax-free, although once any gains were used to purchase non-digital goods or services, tax would then apply.
Germany - A proposed change to EU law on anti-money laundering would allow banks in the bloc to own, trade and store cryptocurrencies. The German government quickly passed draft legislation of its own that would allow banks to sell Bitcoin and other cryptocurrencies, as well as to store them on behalf of their customers, by the end of next year. Previously, German banks would have relied on third-party custodians in order to handle cryptocurrencies for their clients. From 2020, banks will need a licence to offer crypto-related services, but will essentially be able to offer digital assets, alongside traditional assets such as stocks or bonds.
United States - Digital currencies aren’t treated as legal tender in the US, even though some retailers will accept payment in the likes of Bitcoin or Ethereum. However, they are regulated just like fiat currency. At the moment, the US Securities and Exchange Commission, the industry regulator, doesn’t regulate the crypto markets, which is one of the reasons why institutional investors have baulked at entering this space. Right now, individual states issue regulation. This map from Investopedia.com shows most states are, as yet, undecided on how to regulate cryptos. California, New York, Arizona and Wyoming are among the leaders in the introduction of crypto legislation.
Iran - Surprisingly, given the tight restrictions around the country’s financial system, Iran has made serious inroads into legalising and regulating crypto-relate activities. In July this year, the state-linked Mehr News Agency announced the government of president Hassan Rouhani had made crypto mining legal, equating it to industrial activity. Miners need a licence from the Ministry of Industry, Mine and Trade. As with any other industry, crypto-mining will be taxed, although miners will get support from the government, such as cut-price power. The country has been crippled by tough US sanctions that have choked off revenues from the oil industry, Iran’s biggest money-earner. Mehr said at the time that many believed cryptocurrencies could serve to mitigate the effects of US economic sanctions. That said, using digital money in domestic transactions is still not allowed.
FURTHER READING: Cryptocurrency regulation in the UK: is Bitcoin legal?