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2018 opened with public announcements by commentators that “a storm of regulations [were] going to clamp down on cryptocurrencies.” More than a year later, it is time to analyze and provide feedback on what happened.

Back in early 2018, various politicians (more or less technically knowledgeable, e.g., Bruno Lemaire) made repeated and strong statements calling for the regulation of Bitcoin and other cryptocurrencies. Reacting to crazy price increases, politicians felt the need to explain and then express some sort of position on cryptos, and they did what politicians do: claimed to be in control of what was going on.


In effect, the reality has been much more nuanced when financial market authorities around the world were asked or decided, to look at the situation, most found that existing laws were very relevant and adequate in most cases.

Further, the primary requirement to “protect investors” actually led to the realization that Bitcoin and other currencies in decentralized infrastructures were, by definition, beyond the control of any particular government, and there was not much they could do about it, even if they thought it was necessary. In other words, imposing restrictions on cryptos required some laws that would limit the freedom of citizens – and indeed, laws that limited freedom has been enacted exclusively by regimes that qualify as authoritarian.

So, the only real action that ended up being taken by governments and regulators was to impose strict KYC procedures on crypto-verse professionals and their operations. That was an easy and obvious action, because what matters to governments is to ensure that taxes are collected, and financial flux is controlled. So, this happened, and beyond just decentralized exchanges; today any financial service starting a crypto-related business has no choice but to comply with KYC / AML / CFT laws applicable to its customers (often including extraterritoriality.


Apart from that, regulators in most countries have instead refrained from implementing stringent requirements and controls. Blockchain is regarded by all as an unexpected factor of innovation that, if mastered and embraced before other nations, has the potential to deliver a significant competitive advantage. So, competition is on between jurisdictions to attract DLT-related businesses, and this has proved to be a powerful incentive for many rulers not to adopt a “wait and see” or “laissez-faire” approach.


Interestingly as well, we can observe that nations that were open to cryptocurrencies and DLTs from the beginning are speeding up their 
progress on adoption, while most of the formerly suspicious jurisdictions are opening up. So, the trend is in a positive direction, and not the opposite way around. In conclusion, the anticipated 2018 regulatory storm has not eventuated, and the ground on which start-ups are venturing is becoming firmer and less uncertain as each month passes. All in all, the situation is quite favorable.


From here, what should we expect?

  • Anonymous blockchains will no doubt be the focus of many governments, with some already proposing a complete ban. This will be a running extension of the KYC/AML/CFT battle.

  • Bitcoin (and similar non-anonymous fully-decentralized friends) now seem to have survived significant regulatory danger. Most officials seem to have conceded, more or less reluctantly, that they have no choice but to accept them as objects that exist beyond their empire. We can, however, expect that the management of cryptocurrencies by financial services will continue to be carefully examined.

  • BTC and other cryptos not being banned does not mean that they are going to gain legal tender status (i.e., businesses obliged to accept it). We will probably see this in very few jurisdictions, if at all.

  • Security token offerings (and maybe ICOs) are going to be strictly controlled everywhere on the planet, with countries that were permissively remaining so, and cautious countries moderating their position and accepting tokenized securities.

  • A significant issue for some countries is the prevention of capital outflow. Even though this is currently of limited concern for most nations, shortly, cryptocurrencies will enable increased mobility of financial wealth and will make it very easy to escape the impositions of a given government. This will then become a problem for jurisdictions with high tax rates, compared to countries with low tax rates. At that time, we are likely to see some bans on the conversion of national fiat to crypto, or conversions limited to a specific amount within a given period.


In recent months, there has been considerably less news about regulators working on crypto/DLT frameworks than there was before. Pressure from governments eased in 2018, thanks to prices of crypto assets coming back down to earth. So, as soon as prices look as though they are rising again, regulatory pressure is likely to return as well!




















In line with our comments above, international coordination concerning cryptocurrencies is probably at its lowest since the early 2018 declarations. Governments have other hot topics to tackle. And meanwhile, with DLTs appearing to struggle, other priorities have diverted the attention of regulators.

The Basel Committee on Banking Supervision BCBS (linked to the Bank of International Settlements) stated that cryptocurrencies represent a danger to banks, with crypto adoption a significant concern. They further acknowledge that the continual growth of cryptocurrency exchanges poses a threat to its members. The Committee continues to name the good old crypto demons: volatility, lack of control, lack of safety due to no backing, etc.


Nevertheless, for financial institutions that wish to venture down the path of proposing some crypto-related services, the BCBS has issued strict guidelines: carry out careful analyses, put in place some risk management, etc.


The International Monetary Fund, on the other hand, has been consistently positive about the blockchain technology. Christine Lagarde, its president, while touring and meeting crypto-entrepreneurs at the end of 2017, strongly encouraged the financial services sector to embrace distributed ledgers fully. She also declared that cryptocurrencies were “definitely shaking the system.”

It is also significant that the IMF and the World Bank are experimenting with the technology: they have launched an internal “Learning Coin” as part of this initiative.



Many countries are exploring the feasibility of a central bank digital currency (CBDC), including several developing or under-developed countries.

Cambodia is among them; anyone who has visited this country, which is among the poorest in South East Asia due to its troubled recent past, will be aware that the country’s tourist industry operates exclusively with the US dollar. Transactions based on blockchain would be a clear alternative to that. It could allow authorities to reclaim monetary control, a primary sovereign tool that cannot be left untackled if the country is to have a chance to develop.


Among the latest concrete developments: The Eastern Caribbean Central Bank is preparing to test a pilot of a blockchain-based central bank digital currency, and is planning for a potential roll-out in 2020; the Bank of Thailand is collaborating with the South African Reserve Bank in experimenting with interbank payments and settlement efficiencies using blockchain.


On the topic of CBDC, it is worth noting that two different approaches are not incompatible, but with various outreach. It depends whether these officially-tokenized fiats will be available only to banks for inter-bank settlements, or whether they will be circulated at the primary level among the population. The former approach involves only a technological change. But with the latter approach, we have the potential to witness a refreshing move, in the sense that money demultiplication by the commercial banks would be competing, with each one benefitting from its cost reductions. The position of central banks on this issue is unclear; logically we can expect a continuation of the current approach, but we hope that some jurisdictions will try to experiment with the disruptive approach!


As we expressed in the previous paragraph, KYC is the one thing that governments relentlessly impose 
on crypto-related businesses. The level at which it is imposed always exceeds what is required of noncrypto businesses. The fear behind this has been that the borderless transfer of value avoids standard processes that are intended to prevent tax evasion, money laundering, and financing of terrorism.

There is no limit to the level of detail that regulators may expect crypto investors to report, and businesses to enquire of their customers. Extending the control to higher levels is easy, but the pressure is never released: it always goes in only one direction; more and more inspections, audits, checks. In our view, it is not always reasonable for regulators to expect all risks to be eliminated, and in some caes they should resist enforcing KYC because business is always about taking at least some risks. The question is, what is a reasonable level of risk?

So, in the short-term KYC will remain a pain for all crypto-related businesses – except those that are profiting from it. And here it becomes interesting: if you concede, as a prerequisite, that all your financial activities will be monitored by authorities, then an on-chain ecosystem with KYC done once per customer would make sense. In this case, all transactions occurring within this controlled environment would allow fiscal administrators as well as anti-money laundering entities to audit what is going on transparently. In turn, this would remove all the operational burden for customers and businesses to do the checking. On-chain address bans could be available, and identity mapping could be possible to relevant official bodies.

It is likely that this will be coming, and it will not be the only paradox related to cryptocurrencies, which were invented to escape governmental control of financial activities. On the other hand, we should also expect a non-KYC environment to be created and to thrive.

One other consideration is that KYC is a condition sine qua non for traditional financial institutions to provide any crypto-related service. This is because there is significant pressure on all of them to have to deal with a scandal and a damaged reputation.



Taxation bodies are traditionally among the most efficient and active services within the administration of any country. Of course, going after money is much more interesting than fighting inefficiencies in the system. As a result, fiscal authorities are all working actively to close any loophole in their policies, so that gains can be identified and taxed.

Countries particularly active in this area include:


Denmark, which asks exchanges to report on the activities of citizens.

Japan, probably due to the extent to which the population invests in cryptos-assets.

The USA, where ad hoc software and consulting companies have sprung up to assist people with their crypto tax declaration.

Switzerland, where some cantons even accept tax payments in cryptocurrencies – Ohio in the USA is following this example.

Some other countries, however, have low taxation rates on crypto assets, as an attractive differentiator to seduce crypto-related businesses.

Interestingly, as soon as a country takes a position concerning taxation of crypto-assets, this is actual recognition of the existence and legality of these crypto assets, and the legitimacy of citizens to trade, own and use it. So, in a sense, efforts to tax gins related to crypto-assets trading is a part of it becoming recognized and ubiquitous.

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