Journalist / Gitana
Reporter: What is your stance on cryptocurrencies?
Most Governments: We caution all investors to conduct their due diligence on any investment.
Reporter: What is your stance on cryptocurrencies?
Most Governments: We are keeping our eye on the cryptocurrency market. The technology underlying cryptocurrencies, blockchain, is a fascinating innovation with many use cases.
Reporter: So, no stance?
Most Governments: ╮(╯▽╰)╭
Governments around the world have not decided how to regulate cryptocurrencies. This is new territory for nations, how do you regulate a completely ‘borderless’ currency? Once a precedent is set it will be hard to change direction from there, as a result very few have taken a clear stance for or against cryptocurrencies. Most have adopted a “wait and see” or “hands off” approach. Each nation is waiting for the other to make a decision and see how that fairs for them. Crypto assets, which include currencies, securities, and utilities, are not going away and sooner or later governments are going to have to find a way to deal with them.
To better understand how nations have responded to cryptocurrencies we will make our way around the world, one region at a time and learn their reactions. Each region will be looked at from four different characteristics; government’s public stance, self-regulation attempts, business adoption, and consumer adoption. First stop, North America.
North America
United States
The U.S. continues to be the global leader of blockchain startups and fundraising in 2018. It also hosts more bitcoin ATMs than any other nation in the world. However, when it comes to regulations, it’s still unclear where the U.S. stands. The Financial Crimes Enforcement Network (FinCen) has said that virtual currencies are not legal tender. The Securities and Exchange Commission (SEC) has warned investors about cryptocurrencies and released guidelines of what to look for but has not deemed them illegal. They have claimed that most crypto assets are securities, with a few exceptions such as bitcoin and ethereum who they say may have started off as securities but are now utilities as a result of their decentralized nature. The SEC has also taken steps to monitor and shut down some ICOs, but crypto exchanges remain open.
A report about virtual currency exchanges was released by the New York Attorney General’s (NYAG) office expressing concern about crypto markets. The report ends with a series of questions that are yet to be answered by crypto exchanges specifically in regards to the lack of market surveillance to detect and prevent market manipulation and abusive trading.
Crypto trading remains legal but is taxable by law. According to the IRS“The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability”. While taxable, how crypto assets and exchanges are recognized differ by state. Hawaii is the only state in the union that has recognized bitcoin as legal tender. While California remains home to the most blockchain based start-ups in the U.S., It is also home to hundreds of businesses who accept bitcoin as payment with “at least 177 BTC-accepting businesses in San Francisco alone” according to one report. Legal and financial representatives in the U.S. in the meantime have taken the initiative to produce self-regulatory frameworks as a reference for both the state and the federal government. The Uniform Law Commission, a non-profit comprised of over 350 legal professionals, have drafted the Virtual Currency Business Act in October 2017 to provide a legal framework for states adopting crypto assets. No state has adopted the VCBA so far.
As a global power, all eyes are on the United States. Which way they will move on crypto assets remains uncertain.
Overall,
Government Stance: Friendly, until further notice
Self-Regulation: Present
Business adoption: Yes
Consumer adoption: Yes
Canada
Canada directly follows the U.S. in bitcoin ATMs numbering more than 300 nationwide. With an energy surplus and cool temperatures, Canada is also a crypto mining capital. Bitmain began mining operations there in 2016. Several miners, especially from China, have moved to Canada where they have found a friendlier environment.
While Canada does not consider cryptocurrencies legal tender it was one of the first countries to have clear regulations for virtual currencies. Canada has been debating virtual currency regulation for years. After several hearings including testimony from Andreas Antonopoulos, a bill regulating digital currencies was passed in 2014, one of the worlds first bills regulating virtual currencies. Earlier this year, the Canadian government announced that “businesses ‘dealing in virtual currency’ will now be regulated as a Money Services Business (MSBs).” The announcement goes on to state that “all MSBs, persons and entities dealing in virtual currencies would need to implement a full compliance program and register with FINTRAC.” FINTRAC is the Financial Transactions and Reports Analysis Centre of Canada.
Overall,
Government Stance: Friendly, on a case-by-case basis
Self-Regulation: Government has already done it
Business adoption: Yes
Consumer adoption: Yes
Mexico
Earlier this month, the government of Mexico officially released a notice regulating virtual currencies within its borders. The notice states that anyone who wants to conduct transactions involving virtual currencies must get clearance from the central bank of Mexico. The central bank will decide which virtual currencies can or cannot be used. The list of approved virtual currencies has not been released. According to La Verdad news agency, the government notice has given a “green light for the exchange of cryptocurrencies for cash.” Crypto enthusiasts would argue this measure is a red light to the very nature of cryptocurrencies to be free of centralized control.
The hope for Mexican regulators is to provide a market for the growing fintech sector in the country to access the more than half of a 120 million population who remain bank-less and offer solutions to the $70 billion per year remittance market. The move is welcomed by others who believe the regulations will attract more foreign investment into the country.
What is interesting is the day to day use of cryptocurrencies on the ground level away from the big banks and businesses. Cryptoinsider tells a story of crypto enthusiasts promoting the virtual currency in Mexico for everyday goods, comic books, beer and sending money to family. With only 12 ATMs in the country “more often than not, simply asking, informing, and helping will at least land you a couple of beers and a new friend.”
Overall,
Government Stance: Centralized control of all virtual currency operations
Self-Regulation: Unclear
Business adoption: Minimal
Consumer adoption: Rising
