Crypto Regulation: Past, Present, And Future
Bitcoin started attracting the attention of enthusiasts and cyberpunks in the early stages of its inception. As a young digital currency, Bitcoin was not really a threat to the mainstream financial system and regulators. It was only later when more and more people started hearing about and transacting with Bitcoin, that the decentralized network and its native cryptocurrency started to pose a threat to global regulators, federal reserves, and banks. As soon as Bitcoin was labeled as a “threat”, governments and regulators across the globe have been at war with the decentralized community and all of the cryptocurrencies they use. In today’s article, we will analyze crypto regulation, and crypto bans, take a look at countries where cryptocurrency is legal and illegal, and try to examine how regulators will try to regulate cryptocurrencies in the future.
Why Was Bitcoin Created?
The creator of Bitcoin, Satoshi, explicitly stated that the reason for creating this digital cash system was to remove the third-party intermediaries that are traditionally required to conduct digital monetary transfers. Third parties incur significant costs for conducting these services; these costs are then passed on to end users and can restrict transactions below a certain size.
Why Some Countries Are Banning Crypto
Cryptocurrency is decentralized, which means it does not require a third-party intermediary or institution, such as a bank, to intervene in the transaction process between parties in the network. This, coupled with the high level of transparency that cryptocurrency networks boast, poses a number of threats to banks and governments worldwide. Let’s take a look at some of the top threats.
Little Monetary Control
Due to cryptocurrency’s decentralization, they are not controlled or maintained by anyone. No single party can have a controlling influence on the network. This is a problem for governments of communist countries that have a tight grip on everything that their citizens do. Not only do communist countries have a problem with cryptos, but many other non-communistic countries across the globe are also not too keen on adopting these digital assets. Cryptocurrency empowers anyone across the globe financially in a way never before possible by turning them into their own banks. With this low level of control over citizens, global governments are not able to stronghold citizens, through financial means, into conforming to political agendas and unfair government policies.
Lack of Monitoring
Cryptocurrencies implement advanced cryptography methods and practices to ensure user privacy for anyone transacting with them. Because of this, it is difficult to monitor who wallet addresses on the network belong to and how much money a person has off of the network. This affects the income streams of global revenue services since they are unable to accurately track the amount of tax that each citizen has to pay.
High Levels of Transparency
The main reason for the invention of Bitcoin was to prevent financial crises, such as the 2008 financial crisis, from happening again. Most of the big banks in the world are not completely transparent with how they use their clients’ money or how legitimate some of the financial products offered to clients are - the main reason the 2008 financial crisis and following global recession happened.
Since users transacting with cryptocurrencies can do so anonymously, many banks, regulators, and governments fear that criminals will utilize cryptocurrencies to fund illegal activities as well as to take part in money laundering. Most regulators argue that this is the main reason why they have a concern with cryptocurrency.
Countries Where Cryptocurrency Is Banned
Turkey Bans Crypto Payments
Most recently, the central bank of Turkey decided to ban cryptocurrency payments. However, this move wasn’t a surprise, as the country had been tightening restrictions on cryptocurrency exchanges over the last few months.
Turkey’s reason for this ban is the lack of regulation and a lack of central authority for the coins. They consider this a risk to investors who can’t recover any losses.
India Continues To Threaten A Ban
India’s government is yet to pass anti-crypto regulations. However, a draft bill proposing the ban on private cryptocurrencies will soon be brought before the Indian parliament. One of the reasons for this is that the government believes cryptocurrencies fund illegal activities.
However, the government isn’t against digital currencies entirely. It is also looking at its own central bank digital currency (CBDC), the digital rupee.
Nigeria Says No To Crypto Exchanges
Nigeria doubled down on its crypto ban in February 2021. The largest cryptocurrency market in Africa has had a ban on banks and financial institutions providing on and off-ramp crypto services since 2017.
In addition, the announcement even threatened to close bank accounts found using cryptocurrency exchanges.
Bolivia’s ban continues
Bolivia’s central bank banned any decentralized cryptocurrencies in 2014, however it made provisions to allow those created by the government. This ruling was put in place to protect the national currency and to protect investors.
At the time, Bolivia was the only country in South America with an outright ban.
Ecuador Follows Bolivia In Banning Crypto
Ecuador quickly followed Bolivia, implementing an outright ban on decentralized currencies, later in 2014.
In a vote in the National Assembly, the government amended the monetary and financial laws to allow for payments using “electronic money,” while prohibiting coins not controlled by the state.
Algeria Doesn’t Support Internet Money
In 2018, Algeria outlawed the use of cryptocurrencies. A translation of the law from Arabic defines cryptocurrency as:
“A virtual currency is one used by internet users over the internet. It is characterized by the absence of physical support such as coins, paper money, or payments by check or credit card.”
Those breaking this ban are punishable under the financial laws already in place.
Crypto Could Mean Jail In Nepal
Nepal banned cryptocurrencies in a 2017 notice by the Nepal Rastra Bank.
Shortly after this notice, law enforcement arrested seven people for running a cryptocurrency exchange. At the time, they faced fines and possible jail time. Currently, the case is still pending.
South Korea is not interested in privacy coins
Cryptocurrencies are legal in South Korea, with some big players in the space coming from the region. However, the country started its bans in 2021 by banning privacy coins like ZCash (ZEC) and Monero (XMR). The government told crypto exchanges in the country to delist the coins from March 21.
The reasons for the ban are related to cybercrime syndicates and money laundering. As a result, the South Korean government considers the extent to which privacy coins provide anonymity a hindrance to law enforcement.
Qatar Prohibits Banks From Dealing With Crypto
Qatar warned banks against trading in cryptocurrencies, in 2018.
A circular from the Supervision and Control of Financial Institution Division at Qatar’s Central Bank warned banks to not “deal with bitcoin, or exchange it with another currency, or open an account to deal with it, or send or receive any money transfers for the purpose of buying or sell this currency.” Those caught were told they will face penalties.
In Egypt, Crypto Is Haram
Cryptocurrencies are not directly banned in Egypt, however, the Islamic legislator declared transactions with cryptocurrencies ”haram” (prohibited) under Sharia law, in 2017.
The Dar al-Ifta considers cryptocurrencies possibly damaging to national security and the economic health of Egypt.
Bangladesh Doesn’t Support Crypto
Since 2017, Bangladesh has banned cryptocurrencies. The central bank warned against transactions in bitcoin. As it said, these are illegal. As a result, trading with unnamed people may go against the country’s Money Laundering Prevention Act.
It asked citizens “to refrain from performing, assisting, and advertising all kinds of transactions through virtual currencies like Bitcoin to avoid financial and legal damage.”
China is notorious for banning cryptocurrency. However, the most recent ban by The People’s Bank of China and several other regulatory bodies in the region has seen an umbrella ban on all things cryptocurrency in China, including cryptocurrency mining, cryptocurrency exchanges, and cryptocurrency investing.
Bans Come And Go, But Crypto Stays
This list isn’t exhaustive, and bans on cryptocurrencies often change. As mainstream acceptance of bitcoin grows, it’s possible the legal landscape globally will change even more.
While it appears some countries are moving towards more restrictive policies, other governments are considering ways they can participate in the future of digital money. In most cases, this is through a central bank's digital currency.
How each country will engage with the future of money is uncertain, but digital currencies in all forms are likely not going anywhere anytime soon.
Crypto Regulation: Conclusion
Cryptocurrencies pose a threat to governments, banks, and regulators across the globe. The reason behind bans, according to those in charge, is because they want to protect the people they are in charge of from falling victim to financial crimes, but one can argue that there are ulterior motives. This is why some countries are starting to ban cryptocurrencies in their jurisdiction. However, cryptocurrency has been at war with centralized governing bodies since Bitcoin started gaining market traction more than a decade ago and the cryptocurrency space and community continue to take every regulatory knock that comes and still find a way to work around it.
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