Cryptocurrency Regulation in the East
When the CoinLoan team started looking into global markets, we had no idea how diverse the laws on cryptocurrency were. In our first article on the legal outlook of the Western world, we stumbled upon acronyms like FinCEN, SEC, and FCA. If you haven't encountered them, make sure to read about cryptocurrency regulation in the US, Mexico, the UK, and Germany.
We realized the residents of Asian and Eastern European countries are more accepting of cryptocurrencies than of Western Europe or North America. This article surveyed many active young entrepreneurs engaged in small business and acting decisively to gain profit. They found a particular interest in fast financial transactions and omitting intermediaries. However, some remain skeptical.
A survey on crypto made by the Times of India showed a can-do attitude towards non-fiat currencies. But since then, the situation has worsened. The government was holding back on fully legitimizing crypto. Now its outlook is rather negative. The new legislation governing Bitcoin is coming soon and will result in a complete ban on investment in cryptocurrencies via domestic and foreign exchanges.
Unlike tech-savvy Japan, crypto-friendly Switzerland, and forward-thinking Singapore, India suffers from the lack of technical specialists that can make crypto work for the benefit of the national economy and the people. Despite the banking restrictions put in place by the Reserve Bank of India (RBI) in 2019, India is still on the list of countries where Bitcoin maintains legality, unlike Egypt, China, Vietnam, and others.
However, RBI (Reserve Bank of India) banned Indian banks from providing services to crypto-related individuals and businesses. Hence, all concerned departments and law enforcement agencies, such as RBI, Enforcement Directorate, Income Tax authorities, etc., take action based on the relevant existing laws. Indian government inter-ministerial committee (IMC) is strongly opposing "cryptocurrencies created by non-sovereigns." If the recommendations in the "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019" will come into force, then anyone who "mines, generates, holds, sells, transfers, disposes of, issues or deals in cryptocurrencies" will face a 10-year prison sentence.
A third of the world's biggest crypto exchanges are based in China and account for the lion's share of Bitcoin transactions. China remains the most active region in the cryptocurrency industry, with Chinese miners controlling 65% of Bitcoin's hash rate, according to a new report from Messari analysts.
This is how the crypto frenzy started. In 2019, President Xi Jinping declared Beijing's support for blockchain technology but not for digital currency. In the aftermath of Xi's remarks, China cracked down on crypto, trying to regulate – if not ban – cryptocurrency exchanges, BTC transactions, and all crypto activities in the country.
Within a month, China has become so negative on crypto that the situation began to resemble the country's 2017 trading ban. Xi's remarks have indeed had the effect of an "open sesame," suddenly unlocking a blockchain treasure trove for China, which companies across the country have rushed towards to try and seize. An official bolstered the President's sentiment, saying China has to gain an edge over other major countries.
As for the regulations, in the April of 2020, rumors spoke of a possible ban on cryptocurrency mining in China. The National Development and Reform Commission passed a bill defining mining as an "undesirable industry," and proposed banning it. In 2021, China's government tested its own national digital currency called the Digital Currency for Electronic Payment (DC/EP) - a centralized virtual currency issued by Commercial Banks and the People's Bank of China (PBOC). According to the South China Morning Post, citing representatives of the Chinese central bank, by October 2020, the total turnover of the digital currency had reached 1.1 billion yuan. Payments were made as part of limited testing in four cities in recent months. Digital yuan could pay for public transport, electricity bills, or government services. You can find more information in our July post.
Cryptocurrency in Eastern Europe is history in motion. You may be surprised by how active Eastern European countries are in the cryptocurrency space. According to Statista research, Poland, Latvia, Georgia, Estonia, and Lithuania are ranked among the top 15 countries by the total value of alternative finance market transactions in Europe in 2018. In the same year, per capita funding of alternative online finance transactions was highest in the UK, followed by Latvia and Estonia.
Ready for some crypto revelations? Let's start Belarus - this country has its own Silicon Valley that operates on the principle of extraterritoriality. Hi-Tech Park (HTP) is a Belarusian tax and legal zone facilitating IT evolution and being home to 450 companies working in software development.
In 2017, the cryptocurrency activities of HTP residents received full comprehensive legal support from the government. The administration of the HTP, together with the National Bank, the Department of Financial Monitoring of the State Control Committee, international experts, and other bodies, compiled and signed all the necessary documents.
For instance, Decree No. 8 "on the development of the digital economy," legalized crypto exchanges and cryptocurrency exchange operators, including mining, smart contracts, blockchain, tokens, etc.
The Czech Republic was one of the first European countries open to operations with Bitcoin, even before the cryptocurrency market boom of 2017. In April 2015, the Czech National Bank issued a document that clarified the state's attitude towards cryptocurrencies: "Safety of online payments and virtual currency from the Czech National Bank point of view." According to it, operations with cryptocurrencies were not limited by the country's law but by only EU legislation norms.
The Bulgarian government sees cryptocurrencies as a financial asset (and owns 213,519 BTC confiscated from criminals, which is more than Bulgaria's GDP). The state has neither recognized the legitimacy of Bitcoin nor declared it to be illegal. The primary condition for the use of cryptocurrency in Bulgaria is paying 10% tax for the token exchange or sale.
Slovakia is on the list of countries that have officially recognized Bitcoin and other cryptocurrencies. However, in 2018, the authorities tightened their stance on digital business. Following the initiative of a national regulator — the Slovak National Bank — all banks began to close the accounts of firms associated with cryptocurrencies. A similar hostile reaction was seen in the Czech Republic and Bulgaria.
The Republic of Poland is quite forward-thinking when it comes to finance. The attitude of local financial regulators towards investing in cryptocurrencies is quite positive. The country's Central Statistical Office (GUS) has recognized the trading and mining of virtual currencies as an official economic activity.
The Verkhovna Rada of Ukraine has registered a bill proposing to legalize cryptocurrency. Along with that, recent introductions to the legislative structure haven't been that positive. The law "On Amending Certain Legislative Acts of Ukraine on Ensuring the Effectiveness of the Institutional Mechanism for the Prevention of Corruption," which entered into force on October 18, 2019, made amendments to the law "On Prevention of Corruption" and established the need to declare cryptocurrency as an intangible asset.
The Prospects of Cryptocurrency
Some countries know where they stand when it comes to cryptocurrency legislation. They employ favorable tax rates that attract foreign entrepreneurs to register their companies in the free industrial zones where their tax burden is almost zero. Mining becomes so widespread that it withstands any restrictions. For instance, a study by the Cambridge Alternative Finance Center (CCAF), published in 2018, indicated that Georgia ranks second globally in terms of mining volume after China.
Many governments want to tap into the benefits of blockchain. All these factors stimulate countries like Georgia and the Republic of Belarus to take full advantage of the economic perks of mining. Hopefully, new laws and amendments (especially the impending Indian Bitcoin ban) will not impede the development of the crypto industry in the East. Still, they will help this region grow into a world blockchain hub. China proves that the world is entering the era of government cryptocurrencies. By all means, this will greatly change the international monetary system and lead to the mass adoption of digital assets.We are glad to make our contribution to the mass adoption process — one CoinLoaner at a time!