legal Regulation of Crypto-businesses: Global Research
Lawyers from Axon Partners together with experts from ForkLog Research, a cryptocurrency consulting company, prepared the report on the legal regulation of Bitcoin businesses in Australia, Great Britain, Hong Kong, European Union, Canada, China, Latin America, Russia, USA, Ukraine, and Japan.
In this report, we provide analysis of certain jurisdictions for the cryptocurrency business in the context of its regulation by governments. The purpose of this document is to provide as much information as possible on the legal requirements for cryptocurrency activities and changing trends in legal regulation.
Before publishing, we showed our report to the key figures in the Ukrainian finance, cryptobusiness, law and asked them to share brief and as contraversial, as possible thoughts and outlooks on the future of cryptobusiness. Here is what we have gotten:
We have to decide what we want our future to be like
The difference between fiat money and digital currencies is that fiat money is issued by central banks, while issuers of digital currencies are decentralized. We have to decide what we want our future to be like:
1. A variety of jurisdictions. In this case, things will be more or less like they are now.
2. A globalized world without countries and borders. In this case, we will have a single global government and one decentralized currency.
3. A totally decentralized world. Decentralized money fits this purpose.
The first and second and versions would be possible if they do not create any inconveniences for governments. Governments may control the whole process of turning the idea of decentralization into fiction, since every centralized regulation of a decentralized system is an oxymoron.
Cryptocurrencies are one of the key drivers of global social and political reform
The level of citizens’ trust in governments falls from year to year all over the world. The most forward-looking members of society are determined either to liquidate the state in its current form, or to replace it with a group of service companies operating on a competitive basis.
In this context, major changes will be shaped not only by the so-called public contract, but also by the international legal system as a whole. Decentralized systems are among of the key tools of these changes. This summary covers the problems faced by governments around the world trying to create the most appropriate legal frameworks for cryptocurrency businesses.
Due to their historical background, most countries cannot truly embrace innovation and technological progress. In this context, this summary may be considered as a kind of chronicle of regulatory entropy. And, most importantly, the situation with cryptocurrencies correlates with unsystematic attempts to regulate numerous other innovative phenomena.
In fact, cryptocurrency is in a legal vacuum
What is cryptocurrency? Is it a currency or a commodity? Is it subject to VAT? Are cryptocurrency exchanges required to obtain licenses? Actually, there is no unified approach to dealing with cryptocurrencies: regulators’ opinions differ from jurisdiction to jurisdiction (local authorities within one jurisdiction may even disagree on the matter). The key questions remain unanswered, causing additional law enforcement issues. Without specifying the legal status of digital money, it is difficult to even determine tax treatment rules for income (or profits) obtained in cryptocurrency. In fact, cryptocurrency is in a legal vacuum. It is hard to tell whether it is for good or for bad: the answer depends on the specific situation.
One can endlessly argue about the nature of cryptocurrencies and their legal status. However, it looks like in the coming months regulators in most jurisdictions will continue to keep a watch on the development of the cryptocurrency industry and warn about the risks associated with the use of digital currencies.
“First they ignore you. Then they ridicule you. Then they fight you and then you win”
In recent months hardly a day goes by without some luminary of global finance labelling ICOs as a bubble or a ponzi scheme. The one thing that unites all of these naysayers, asides from their vested interest in traditional investment classes, is that they don’t seem to have taken the time to learn much about crypto and the technology and regulation which backs it up.
This report from Axon Patners and Forklog dispels many misconceptions and shows that while in many ways crypto is in a legal vacuum for now, regulators across the world are already beginning to engage constructively.
Simply put, crypto is here to stay.
A major advantage of Bitcoin is that it has a decentralized ledger, meaning that a single party is no longer in control of the records of previous transactions. Coupled with lower transaction costs from eliminating third-party transaction costs this generates lower costs for merchants and makes it less expensive to send remittances abroad.
Fiat currencies face their own existential risks from “quantitative easing” by major central banks while Bitcoin users don’t have to worry about inflation (Bitcoin will only ever issue 21 million coins).
In many parts of the world, digital currencies are becoming “real” as ATMs proliferate offering novice users the option to buy and sell Bitcoin. The underlying technology is complex, but moderately sophisticated Internet users can now easily grasp the consumer side of Bitcoin transactions.
While Bitcoin transactions are becoming less intimidating for even novices, still many people may be reluctant to jump in without understanding the relevant laws and regulations. This report is a great starting point to bridge that gap.
Our generation’s task is to finally turn conventional currencies into digital money
Dima Gadomsky: Throughout history, when people felt the need to use money, they used all kinds of different, materials including shells, domestic animals, corn, and tobacco. Ancient Spartans used iron money that looked like a bunch of sticks. It wasn’t easy to use these sticks, and they were meant to discourage Spartans from theft, corruption or even accumulating wealth. Another example is Russian Alaska, where walrus hide was used for notes (nobody knows, why).
Throughout the ages, mankind has been trying to take a new look at the form and role of money. Our generation’s task is to finally turn conventional currencies into digital money.
Are cryptocurrencies purposed to become the most used currencies in the world?
Cryptocurrencies are still brand-new. They are used more and more often but fiat currencies are still dominating the market. Whilst persons use them to gain anonymity on the internet and businesses utilize them as innovative tools to receive payments and serve other purposes, cryptocurrencies are only emerging. Are they purposed to become the most used currencies in the world in a couple of years? I strongly doubt it. For now they are unknown to people and governments regulate them as commodities, real moneys or even assets. Since no one regulates the market, they are also unstable and even a bit untrustworthy.
On the other side — remember the era of tape players? At the end of it floppy drives had 1,44 Megabytes of storage and CD’s and flash drives were wildly new. People could not even imagine technology moving so rapidly that within about ten years we already had terabytes of storage and flash drives with a size of a small candy bar. People see innovative things as something new and even threatening. I think cryptocurrencies are exactly this type of thing.
We believe in cryptocurrency. This research is for you, ready to serve various purposes. It should be a valuable tool on the way to understanding how cryptocurrencies are regulated and how governments treat them. Welcome to the new turning point of technology!
Don’t sit on the sidelines and learn by walking that
Software has been the leading driver of change in the world. Be a first mover. Don’t watch hows innovation happen, don’t sit on the sidelines and learn by walking that. Give the tech giants a model that plugs nicely to their business structures, that they’ll partner you
