Update on wordwide legal & regulatory of crypto-assets

Updated: Jun 1, 2019

In this article, we discuss the major trends in the regulation of blockchain applications and crypto-assets globally.

Sources: BQ Intel, Law Library of Congress, Bitcoin Market Journal


Current general approaches by governments

A wide variety of approaches are continuing, with some countries still banning cryptocurrencies and ICOs, while some smaller countries are keen to propose forward-looking frameworks to attract innovative fintech businesses, however, most countries are active in issuing guidelines or monitoring the compliance of crypto actors.


As emotions have calmed down, there is less urgency for officials to act and clamp down on crypto businesses, as they once claimed they would. Central banks have almost unanimously concluded that cryptocurrencies are not a threat and not something they should be engaging with any urgency.


As an observation, civil law countries deploy regulations faster than common law countries—in which case, more framework is likely to be better than no framework, as finance people are among the most averse to uncertainty. However, every country agrees that the profits made in trading crypto-assets should be subject to taxation. An increasing number of countries are taking actions to tax private crypto-asset traders. Examples highlighted in the press lately include Bulgaria, Denmark, and others. These moves include obtaining information from the exchanges (located in their territory—at least for the moment) of holdings and the activities of private traders.


Worldwide coordination

The worldwide financial stability has confirmed the view that cryptocurrencies do not threaten the global economy. Arguably, the crypto sphere is too small, even more so now that the total market cap is back in the region of 100 billion dollars.


At the World Economic Forum gathering in Davos in 2018, the comments around crypto-assets and bitcoin were skeptical, but not completely closed to the emerging technology. This year, round tables and debates on blockchain were again held, and Davos participants have chosen sides. A lot of opposing views were expressed, and crypto-asset valuations were heavily criticized. The common ground found by panelists has been that the value of tokens will be derived from how useful the underlying protocol is. Hence wealthy, powerful people on the planet agree that what matters is the technology behind crypto, rather than the tokens themselves.

Status of official initiatives to pass fiat on DLT

Currently, it appears that officials have resolved this matter. Most countries have concluded that they will disregard possible sanctions at this time. The latest statement by the Bank of International Settlements says: “No central banks reported any significant or wider public use of cryptocurrencies for either domestic or cross-border payments in their jurisdictions. Usage of cryptocurrencies is assessed to be either minimal (‘trivial/no use’) or concentrated in niche groups.” BIS member central banks believe cryptocurrency use “will remain minor” due to “low retail acceptance, compliance issues, better understanding by the general public of the risks involved and, for some jurisdictions, outright bans.”


Only a few outliers are progressing in the area, of which Russia, China, and Japan are the most significant.

KYC, AML and CFT

The status is still very much the same as it has been in recent months, that is: very stringent, with systematic and effective implementation requirements imposed on businesses that want to register, irrespective of the jurisdiction. A business starting in cryptos today cannot debate this: KYC, AML and CFT checks of its customers are compulsory to be able to operate.


One observation one can make here relates to the questionable actions undertaken by the United States. When a US citizen wants to buy an asset issued abroad, with a non-USD currency, from a non-US counterpart, there is still concern about how US law may apply to the transaction. No other country in the world adopts this extraterritorial approach with its legislation, and there is no reciprocity when a non-US citizen does business with a US citizen. This situation impacts the KYC process. As a result, businesses prefer to discard US citizens from their pool of investors and clients. This asymmetry is, without question, a form of protectionism on the part of the US and is neither fair nor sustainable in the long run.

Check the full version of Blockchain Quarterly (Q1 2019) report for more Insights.

© 2020 bqintel.com

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