The decentralized landscape of cryptocurrencies has always clashed with the centralized ethos governing financial regulations globally. As governments, financial institutions, and regulatory bodies scramble to understand and ultimately control the emerging technologies, a new legal landscape has been developing that is poised to shape the future of the crypto industry. The outcome of these ongoing political and legal struggles has significant implications on businesses, investors, and consumers.
Over the past year, significant shifts have taken place in the regulatory scenery both at a national and international level. Countries that once championed the cause of cryptocurrencies are now imposing stringent regulations. This, in turn, has led to a significant restructuring within the cryptocurrency ecosystem – with nations that have favorable regulatory climates, seeing an influx of businesses.
###United States: Uncertainty Prevails###
In the United States, regulatory uncertainties continue to cloud the crypto space. The Internal Revenue Service (IRS) has classified Bitcoin as property, the Commodity Futures Trading Commission (CFTC) considers it a commodity, whereas the Securities and Exchange Commission (SEC) defines most Initial Coin Offerings (ICOs) as securities. This fragmented and sometimes conflicting approach has led to inertia and confusion.
Recently, the Office of the Comptroller of the Currency (OCC) has granted conditional approval to create Anchorage Digital Bank – the first federally chartered digital asset bank in the U.S. While this is a significant step forward, overall, the regulatory climate in the U.S. remains tumultuous.
###European Union: Towards A Unified Regulatory Framework###
The European Union recently introduced a comprehensive framework for crypto-assets through the Markets in Crypto-assets (MiCA) regulation. The regulation sets out establishment rules for issuers of crypto-assets, service providers, and guidelines for regulatory scrutiny. This move is expected to create a ‘passporting’ system for crypto businesses across the European Union, allowing companies to operate anywhere within the EU once registered.
###China: Crackdown Continues###
China’s position on cryptocurrency has been clear— it’s not a fan. In May 2021, China reiterated its ban on financial institutions providing services related to cryptocurrency transactions. Furthermore, the government has cracked down on crypto mining, citing environmental concerns.
###India: Flip-flopping on a Ban###
India’s position on cryptocurrencies has been inconsistent. In 2020, the Supreme Court of India overturned a central bank directive that had effectively banned cryptos. However, in 2021, there are reports of a new bill being drafted that may impose a complete ban on cryptocurrencies, except for a few exceptions.
###Australia: Balancing Act###
Australia has managed to strike a balance where they neither completely embrace nor reject cryptocurrencies. Financial transactions with cryptocurrencies are considered barter arrangements and are taxed accordingly. Australia also has strict Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) rules for cryptocurrency exchanges.
###Switzerland: A Crypto-friendly Nation###
Switzerland has carved out a niche for itself as a leader in the digital finance space. The government has a defined legal framework for digital currencies and fintech companies. The town of Zug, also known as the ‘Crypto Valley,’ is home to numerous blockchain startups.
As the new legal landscape of global crypto regulation continues to evolve and develop, businesses, governments, and investors must stay on top of these changes to navigate these uncharted waters. While there is potential for significant growth and development in the global cryptocurrency industry, the various and shifting regulatory climates also pose a potential challenge to the nascent technology.
SOURCES:
1. https://www.bloombergquint.com/global-economics/bitcoin-has-to-become-better-regulated-to-trade-on-major-exchange
2. https://www.investing.com/news/cryptocurrency-news/germanys-finance-minister-calls-for-more-action-from-international-community-on-cryptos-2576172
3. https://www.reuters.com/technology/china-gives-personal-finance-apps-one-month-ban-new-customer-business-2022-02-07/
4. https://timesofindia.indiatimes.com/business/india-business/government-clarifies-on-proposed-cryptocurrency-bill-in-india-what-we-know-so-far/articleshow/92402842.cms
5. https://www.canstar.com.au/tax/cryptocurrencies/
6. https://www.gov.uk/government/consultations/regulating-cryptoassets-and-stablecoins-a-consultation-and-call-for-evidence
