Cryptocurrencies are a new and disruptive technology that challenges the status quo and the established order of the world. While some countries have welcomed the innovation and opportunity that crypto offers, others have been more resistant or even hostile. The reasons for this hostility vary from country to country, but they often include factors such as:
One of the main reasons why some governments and central banks are reluctant or hostile towards cryptocurrencies is the fear of losing control over the monetary system and the economy. Cryptocurrencies are decentralized and peer-to-peer, meaning that no single entity can manipulate or interfere with the supply, demand, or value of the digital assets. This challenges the traditional role and power of governments and central banks to manage the money supply, influence interest rates, and stimulate or restrain economic activity.
Another reason is the concern about the security and stability of the financial system and the national currency. Cryptocurrencies are volatile and unpredictable, subject to market forces and speculation. They also pose a threat to the dominance and sovereignty of national currencies, especially in countries with weak or unstable currencies. Additionally, cryptocurrencies are vulnerable to cyberattacks, hacking, theft, and fraud, which could undermine the confidence and trust in the financial system.
A third reason is the worry about the legal and regulatory implications of crypto, such as taxation, consumer protection, and anti-money laundering. Cryptocurrencies operate outside the existing legal and regulatory frameworks, creating challenges and uncertainties for governments and regulators. How to tax crypto transactions and income, how to protect consumers from scams and losses, how to prevent money laundering and terrorism financing, and how to enforce compliance and accountability are some of the questions that need to be addressed.
A fourth reason is the lack of understanding and awareness of the benefits and potential of crypto. Many governments and central banks are not well-informed or educated about the advantages and opportunities that cryptocurrencies and blockchain technology offer. They may not fully grasp the innovation, efficiency, transparency, inclusivity, and empowerment that crypto can bring to various sectors and domains of society.
A last reason in my humble opinion is the preference for a centralized and hierarchical model of governance and authority. Cryptocurrencies are based on a distributed and democratic model of consensus and participation, where anyone can join, contribute, verify, and validate transactions. This contrasts with the centralized and hierarchical model of governance and authority that most governments and central banks are accustomed to and comfortable with.
Despite all the obstacles, the cryptocurrency market has been growing rapidly in the past few years, attracting investors, innovators and enthusiasts from all over the world. Bear in mind that not all countries have embraced this new form of money with the same enthusiasm and openness. Some governments have imposed strict regulations, bans or restrictions on the use, trade or mining of cryptocurrencies, citing concerns over money laundering, tax evasion, financial stability or national security.
In this article, I will explore some of the countries that are currently not very crypto-friendly but may become more so shortly.
China
China has been one of the most influential and controversial players in the crypto space, as it is home to some of the largest mining pools and exchanges in the world. However, the Chinese government has also been cracking down on the crypto industry since 2017, when it banned initial coin offerings (ICOs) and shut down domestic exchanges. In 2021, China intensified its efforts to curb crypto activities, banning financial institutions and payment platforms from providing services related to cryptocurrencies and launching a nationwide campaign to shut down mining operations. The Chinese authorities have cited environmental, financial, and social risks as the main reasons for their harsh stance on crypto.
However, some analysts believe that China may soften its attitude towards crypto in the future, as it seeks to promote its digital currency, the digital yuan, which is currently being tested in several cities and regions. The digital yuan is a central bank digital currency (CBDC) that aims to enhance the efficiency and security of the payment system, while also giving the government more control and oversight over the money supply and transactions. Some experts suggest that China may allow some degree of interoperability between the digital yuan and other cryptocurrencies, especially those that are compliant with its regulations and standards. This could create new opportunities for innovation and collaboration in the crypto space and increase the global adoption and influence of the digital yuan.
India
India is another country that has a large and vibrant crypto community but also faces significant regulatory uncertainty and challenges. India has not officially banned cryptocurrencies, but it has also not recognized them as legal tender or regulated them as assets or commodities. The Reserve Bank of India (RBI), the central bank, has issued several warnings and circulars to discourage banks and financial institutions from dealing with crypto-related businesses or individuals, creating difficulties for crypto exchanges and users to access banking services. I remember that RBI issued a directive prohibiting banks from providing services to crypto entities, effectively cutting off their lifeline. However, after approximately 2 years, the Supreme Court of India overturned this directive, ruling that it was unconstitutional and disproportionate.
Since then, the crypto industry in India has seen a resurgence of growth and activity, as more investors, traders and startups have entered the market. The legal status of cryptocurrencies remains unclear and ambiguous, as the government has been deliberating on a draft bill that proposes to ban all private cryptocurrencies in India, except for those issued by the state. The bill also proposes to create a framework for a CBDC, similar to China’s digital yuan. The bill has not been introduced or passed by the parliament yet, but it has created a lot of anxiety and confusion among the crypto community in India.
Some observers believe that India may not go ahead with such a drastic measure, as it would stifle innovation and growth in one of the most promising sectors of the economy. Instead, they argue that India may adopt a more balanced and nuanced approach to regulating cryptocurrencies, taking into account their potential benefits and risks. They point out that India has a strong tradition of entrepreneurship and technology development, and that it could leverage its talent and resources to become a leader in the crypto space. They also suggest that India may explore ways to integrate its CBDC with other cryptocurrencies, especially those that are aligned with its national interests and values.
Brazil
Brazil is another country that has a large and active crypto community but also faces some regulatory hurdles and challenges. Brazil does not have a specific law or regulation for cryptocurrencies, but it treats them as assets subject to capital gains tax and reporting obligations. The Central Bank of Brazil (BCB), the securities regulator (CVM) and other authorities have issued several guidelines and warnings to inform and protect investors and consumers from the risks associated with cryptocurrencies. However, they have also recognized their potential for innovation and inclusion in the financial system.
However, Brazil has also faced some political and economic instability in recent years, which has affected its crypto industry. Mercado Bitcoin had intended to launch its fintech expansion in 2021 but faced delays due to regulatory approval. On the day this announcement was made, Mercado Bitcoin was instructed to return more than 2,182 Bitcoin (BTC), valued at $59.3 million at the current time, to a group of investors. The allegations stated that a co-founder and former executive had allegedly held back funds in a falsified hacking incident back in 2013. In 2023, the Brazilian Senate approved new income-tax regulations that could mean citizens will face paying up to 15% on earnings from cryptocurrencies held on international exchanges, creating a compliance burden for the crypto industry.
Experts believe that Brazil may become more crypto-friendly in the future, as it seeks to improve its economic and social conditions. They note that Brazil has a large and young population, with high levels of internet and smartphone penetration, which creates a huge demand and opportunity for digital and financial inclusion. They also highlight that Brazil has a vibrant and diverse crypto ecosystem, with many startups, projects and initiatives that are developing innovative solutions for various sectors and segments of society. They also point out that Brazil may benefit from the regional and global trends in the crypto space, such as the adoption of Bitcoin as legal tender by El Salvador, or the development of CBDCs by several countries. They suggest that Brazil may adopt a more proactive and supportive stance towards cryptocurrencies, as it recognizes their potential for economic growth and social development.
Russia
Russia is another country that has a mixed attitude towards cryptocurrencies. The country has not banned crypto outright but has also not recognized it as legal tender or property. The Russian government has issued various warnings and guidelines about the risks and liabilities of using crypto but has also acknowledged its potential for innovation and development.
The Russian parliament has passed a law that defines crypto as a type of digital asset that can be used for transactions, but only through authorized operators. However, in my perspective, Russia might surprise the world in 2024 by becoming more crypto-friendly and open to the adoption and integration of technology. One reason for this could be the geopolitical implications of crypto, which could offer Russia an alternative to the US dollar and other Western-dominated currencies. Another reason could be the cultural affinity of Russians for crypto, which reflects their values of freedom, independence, and creativity.
In conclusion
Cryptocurrencies are a complex and controversial phenomenon that has different impacts and implications for different countries. Some countries are not very crypto-friendly now, but they might surprise us in 2024 by adopting a more open and positive attitude towards crypto.
This could happen for various reasons, such as:
– The realization that crypto is an inevitable and unstoppable trend that offers many benefits and opportunities for innovation, growth, and inclusion.
– The recognition that crypto is a competitive advantage and a strategic asset that can enhance the economic and geopolitical position of a country in the global arena.
– The adaptation and improvement of the legal and regulatory frameworks to accommodate and facilitate crypto activities, while ensuring the security and stability of the financial system and the national currency.
Therefore, we should not dismiss or underestimate the potential of crypto to transform the world and the future. We should also not assume that the current stance of some countries towards crypto is fixed or irreversible. Rather, we should keep an open mind and a curious eye on how the crypto landscape will evolve and change in the next few years.
What Factors Drive Governments' Hostility or Reluctance Toward Cryptocurrencies?
Anndy Lian highlighted that governments and central banks exhibit reluctance towards cryptocurrencies due to fears of losing control over the monetary system, security concerns, legal implications, lack of understanding of crypto's benefits, and a preference for centralized governance models.
How Has China's Stance on Cryptocurrencies Evolved, and What Might the Future Hold?
China has a historically strict stance on crypto, citing environmental and financial risks. However, experts speculate a potential softening as China explores its digital currency (digital yuan) and potential interoperability with compliant cryptocurrencies.
What Challenges Does India Face Regarding Cryptocurrency Regulations?
India grapples with regulatory uncertainty despite a vibrant crypto community. Legal ambiguity persists despite a Supreme Court ruling against the Reserve Bank of India's directive, creating anxiety and confusion within the Indian crypto sphere.
What's the Regulatory Landscape for Cryptocurrencies in Brazil?
Brazil views cryptocurrencies as assets subject to taxation and regulations. Political and economic instability in recent years has led to regulatory delays and compliance burdens for the crypto industry.
How Does Russia's Approach to Cryptocurrencies Differ from Other Nations?
Russia demonstrates a mixed attitude, acknowledging crypto's potential while issuing warnings about its risks. Speculation suggests Russia might embrace a more crypto-friendly approach in 2024 due to geopolitical considerations and cultural inclinations.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
