Bitcoin is outlawed. How government agencies try to regulate cryptocurrencies
In April, the total capitalization of the cryptocurrency market exceeded $2 billion for the first time. Because of this, some states and regulators are trying to control and, in extreme cases, even ban cryptocurrencies. But how can decentralized cryptocurrencies be controlled?
The legal status of cryptocurrencies, and bitcoin in particular, varies greatly from country to country. In Europe, bitcoin and other coins can already be used to pay for goods and services. People can easily deposit and withdraw money from cryptocurrency exchanges, use crypto to pay for goods and for other purposes.
In Russia and CIS countries the situation is not so favorable. In Russia, bitcoin has a semi-legal status. Since 2021, Russian citizens can legally conduct transactions with digital financial assets, although it is still impossible to use them as a means of payment. Russian banks and exchanges will be able to carry out transactions of purchase, sale and exchange of assets, and for this they must be included in a special register of the Central Bank.
The Russian government issued a draft law “On Digital Financial Assets” back in 2018. Over the course of three years, the draft law has been changed and new amendments have been made to it. The last amendment to the law came out on January 1 of this year, but in reality it had almost no impact on the crypto industry in Russia.
Kazakhstan plans to ban cryptocurrencies, as they are mainly used for speculation, quick earnings and fraud, rather than as a means of payment — this position is held by the government of the country.
The status of cryptocurrency in Ukraine at the moment is not precisely defined, but in the latest regulatory act of the National Anti-Corruption Agency from 2019, cryptoassets are denoted as tokens — according to insiders, this bill will be worked out in more detail by 2023.
Belarus is the most advanced state among the CIS countries in the field of cryptocurrencies. Since March 28, the country fully legalized mining, blockchain technology, cryptocurrency exchanges and any transactions with digital money. Until 2023, the state will not levy any taxes on cryptocurrency transactions.
Countries with weak economies will either tend to ban cryptocurrencies altogether or encourage their spread. Digital currencies are very useful for people in countries where the domestic currency is unstable, such as Bolivia, Guatemala, Kenya, Zimbabwe and many other countries in Africa and Latin America.
Turkey was the first country to ban cryptocurrencies. In April, Turkey’s Central Bank signed a ban on the use of cryptocurrency payments. Turkey’s largest cryptocurrency exchanges Binance, Ininal and Papara stopped withdrawals and deposits of Turkish Lira into cryptocurrencies on April 29.
While some countries took the second path, El Salvador’s President Nayib Buquele announced the decision to make bitcoin the official currency of the state. If the head of state’s idea is approved by the parliament, El Salvador will become the first country to grant the cryptocurrency the status of official means of payment.
According to Buquelet, the legalization of the first cryptocurrency will give El Salvador a number of advantages. Since El Salvador does not have its own domestic currency, once bitcoin is legalized, it will be much easier for its citizens to transfer funds abroad
“In the short term, it will lead to new jobs and help attract thousands of people living outside the formal economy to the financial world,” Buquelet said at the conference.
When a country’s government bans cryptocurrency, the argument is always the same. High risk of fraud, money laundering and other criminal activities related to digital money. And this is true, but the same risks are present when using fiat money.
The real reason to ban cryptocurrency is that the government loses leverage over the economy. After all, if you use cryptocurrency to buy goods, the government has no way to monitor and control your transfers.
Bitcoin runs on a blockchain, which is a decentralized system with no specific place to “close. Cryptocurrency is traded online and a citizen of a country where cryptocurrency is banned can easily buy and sell digital assets on cryptocurrency exchanges.
Bitexcard cryptocurrency platform analysts believe that despite the efforts of authorities and stakeholders, it is impossible to stop the use of cryptocurrencies completely — and even if regulators get their hands on major cryptocurrencies, there will always be an anonymous and fully decentralized alternative, similar to Monero cryptocurrency, in the market.
As for the issue of regulation — so far it’s practically a blank slate. We believe that in the coming years the status of cryptocurrencies will be fully determined first by the U.S. Securities and Exchange Commission (SEC), and then by other financial regulators. The influx of institutional investors into cryptocurrencies acts as a catalyst in this scheme, and if the growth of crypto-assets continues at a Q1 2021 pace, regulators will be forced to rush to determine the legal status of digital assets.
This article was translated from Russian to English. Here is original publication:
