Section 7: Regulation developments overview by country
Regulations in Japan have never been made many headlines. Cryptocurrencies are still legal and widely accepted there; it is among the most permissive countries in the world.
Japan’s part in the crypto sphere has decreased due to the growth in other countries especially in Asia, but it still accounts for a great part of the trading. The focus from Japanese regulators is on KYC, with lately a pressure on exchanges to delist privacy-oriented currencies. Main 16 Japanese exchanges are federating to issue self-regulating principles.
Meanwhile, authorities are working on ways to allow fundraisings through coins offerings.
Another event is that conclusion of big trials in tokens thefts have lead adjudicators to sell crypto assets in large quantities that some have argued did destabilize the markets.
The head of the Bank of Japan said that there was no need for further regulation because cryptos were means of investment and speculation, and not de facto payment methods. Would it change in case of wider adoption?
It has turned into one of the hottest places on earth as far as crypto speculation is concerned. In reaction to cool down the situation, ICO was banned, and rules applicable to exchanges were tightened.
Currently, just like in Japan, 14 Korean exchanges are working on finishing complying with the regulation, mainly on KYC. Exchanges have started to organize among themselves and issued self-imposed principles; under this situation, the government declared that they would support cryptocurrencies transactions and enforce the traditional banking sector to work within fact the crypto banks. To be highlighted, South Korea exchanges and individuals have been reported to have been attacked by North Korea, who stole amounts of digital assets as it is dying for liquidities.
China used to be at the forefront of pretty much everything in the crypto space. However, the Party did not allow the whole technology to escape its grip, with regulation passed to prevent Yuan to be changed to cryptocurrencies thereby ensuring the local’s money would not flow away.
In principle, the Chinese government would not be against crypto technology, but their concern is to be able to control it. In this sense, NEO understood very early that they need to comply with traceability and identifications if they wanted to propose a blockchain platform in financial asset management. China will make so that Chinese blockchains are operated by Chinese to serve China in a Chinese way, just as they manage to have their own companies managing the web services.
Despite the bans on this ground, China did not prevent its citizens from holding bitcoin & co, and concerns about the mining power still largely in possession of Chinese comes from environmental and power economical grounds.
The good point of having China already expressed the toughest position they could is that now it cannot harm further on the crypto space. Nevertheless, the issue is that one-fifth of humankind thereby has now limited access to international crypto assets. Lately, some articles mention that China would head towards regulating rather than an outright ban as today; it should be expected little opening though, but indeed if crypto assets become widely accepted elsewhere, China will not accept to be distanced.
The country announces to plan a comprehensive crypto regulation for November 2018. This intervenes as the country host an anti-money laundering conference end of the year: the purpose is for Taiwan to be clear on its side to be able to debate serenely then on the matter.
Taiwan had until now appeared rather undecided on what they should do from a legal point of view about cryptos.
Note: a crypto entrepreneur (crypto-exchange platform) female candidate will run for Taipei mayor also in November. While this is still isolated, it is proof that crypto interests have made some people rich and these people want to defend their interests at the political level.
The Little Red Dot is joint with HK a hub for Chinese ICO that cannot be done from Mainland China. This even though neither SG nor HK has clear specific rules for ICOs. As it is, the situation is to let people do an experiment.
Cryptocurrencies are still illegal in India, where in fact trading of cryptos has been cracked down by preventing exchanges from obtaining banking services depending from the Reserve Bank of India. Indians individuals are trying to overcome this difficulty – in banks not depending on RBI. Moreover, in the parallel black market is developing, which is an issue while it makes it closer to illegal activities usages.
Australia & NZ:
Australia has issued AML/CTF regulation for exchange and ask them to register since April 3rd, 2018. They are clarifying as well as ICO conditions.
More importantly, Australia followed Japan in declaring bitcoin a legal tender in July 2017. Overall, Australia is viewed as quite friendly open-minded towards cryptos.
A bill is presented to the Дума legislative assembly, that does not seem to address all question or not satisfactorily. The text seems quite heavy on controls, and blur in definitions. To be continued.
Has recently approved very friendly cryptocurrencies regulations
EU has been as expected slow to move and among others, French ministery of finances Bruno Lemaire has proven his amateur understanding of the topic many times.
The countries in the EU and especially in the euro-zone understand that the regulation they would issue can only be a common one. EU Commission has set-up an observatory for blockchain, and currently, experimentations for asset transfer thanks to the blockchain (various ones, Ethereum-based, Corda, etc.) are being conducted.
The European Parliament end April voted in favor of closer regulation for virtual currencies as part of its crackdown on money laundering and financing of terrorism. This will mean more constraint and checks as a burden on the exchange platform.
EU is rather unconcerned by the US issue on considering ICOs securities; the approach is to let it be. The issue in European regulation is rather about GDPR that no one knows how blockchain can cope with, but this is a technical consideration to make it work. French and Germans central bankers stand on the statements that cryptos are no currencies. Note that dutch and Nordic countries show openness for using official blockchain tokens in replacement of fiat.
To end the anonymity associated with cryptocurrency, the EU stated that both cryptocurrency exchanges and wallet providers must introduce customer due diligence procedures, including identity verification, as is done in the banking sector.
Swiss crypto laws are taken as an example worldwide. Crypto is legal tender and legal to trade.
The Confédération Helvétique have divided coins into three categories: payment tokens like bitcoin, utility tokens that provide access to a service, and asset tokens that represent participation in hard assets, companies, or profit or capital flows. Any category can be ICOed, but only the latter have to comply with security obligations; payment tokens must comply with AML/ATF, and the utility token does not have to worry much about anything.
England has taken a “wait and see” posture until now, and actors starting by Ripple are now urging the prime minister to take measures to clarify frameworks so that they can work on firm soil. English people consider themselves somewhat lagging in the crypto field.
Canada takes a position of innovation in technology, due in part of the origin of Ethereum being in Toronto.
Then regulation concerns mining that many companies want to set-up in Québec due to very low electricity price, but Couillard claimed that Hydro-Québec would need to check the supply vs. demand before granting new contracts.
Apart from that on the acceptance of coins and ICOs, Canada is quite liberal for now.
The US looks very much still focusing on ICOs. Some private interests call for SEC to speed up its thoughts to be able to work in certainty. However, overall, Americans are not yet ready to take positions. Some officials are starting to say that money vs. equity is not necessarily binary, but it is a spectrum (for what it can mean). Whatever, the current investigation to decide if Ripple and Ethereum are securities seems to balance in favor of Yes, given the efforts made by the foundations to promote the value of the tokens. The discussion to decide if ICO tokens are shares or note lies in their differences: stocks can only be changed for cash, an ICO token most of the time has an exotic function; then not all the reporting, auditing etc. that shares of companies have to do are applicable at all to tokens – despite that they trade, settle, change hand just like stocks, even if on a different support.
Each jurisdiction is concerned by itself, so the SEC worries on securities and the rest of the technology would be attended by which bureau is concerned. The fact that every state can deal differently does not help to have a good view of regulation there. Arizona and California, for instance, look eager to recognize information and securities registered on the blockchain.
Various small countries
Various small countries, islands, and dominions are trying to take advantage of their financial hub reputation and facilities, including low taxes & fees and pass regulations especially attractive to crypto-businesses and ICOs:
• Gibraltar was making moves to be the first country to issue a regulation to legalize ICOs
• Liechtenstein wants to avoid excessive blockchain regulation
• Malta has attracted Finance, due to simply presenting a well established crypto regulation
• Belize did attract OKEx
• Bermuda who recently made a partnership with Binance, primarily to train a workforce able to propose financial services based on blockchain
• Marshall islands plan to issue their legal tender cryptocurrency
One special case for Venezuela
President N. Maduro issued its Petro token based on 1 Petro = 1 barrel crude oil. Venezuela raised over 3 Bn USD through this offering of tokenized oil, which is impacting the country’s economy.
Generally speaking, observers have expressed their skepticism. Some state that only foreigners could buy the Petro and only Venezuelans can spend it; others claim that it is a perversion of the cryptocurrencies spirit; many talks of a scam as no way is identified for the Venezuelan government to deliver back the crude oil in exchange for the Petro token.
Moreover, indeed whether you consider or not that you buy oil when you acquire a Petro, it remains to see if N. Maduro one day will buy back the token in exchange for the collateral in nature or its value in any sort of currency at a later time. Trusting Venezuela for such an operation is somewhat of a risk!
Few countries from LatAm or Africa are in the headlines; a few expressions of intentions like in Nigeria, or try to attract with adequate legal framework like Kyrgyzstan; Morocco has declared outlaw all transactions involving cryptocurrencies.