[Opinion] Regulation of Remittances using Cryptocurrency in the Asian Region
By Jay Jung
During the past month or so, the REMIIT project team conducted a survey of most of Asia and the Western Pacific countries on the regulation of foreign remittance using cryptocurrencies. As a result, we discovered that many countries have regulated foreign remittances using cryptocurrency, but some have been open to a considerable degree, and some have taken the lead in the country and attempted to issue cryptocurrencies used for remittances.
Before looking at the countries where the governments are leading the way and issuing cryptocurrency, let’s look at why many countries regulate cryptocurrency and remittances using it. Currently the countries that have banned cryptocurrency remittances are Central Asian countries — Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, South Asian countries — Bangladesh and Nepal, and many countries in Southwest Asia including Iran and Iraq. All of these countries are dictatorships or politically unstable countries. They are banning the current cryptocurrency, fearing that cryptocurrencies will be used for money laundering or terrorist financing. Regulations on the remittance of these countries using cryptocurrencies are also being made on this basis. This is because the remittance of the cryptocurrencies cannot be regulated or traced by the supervisory authority.
The fact that a dictatorial country or a country with unstable political conditions ban cryptocurrencies and crypto remittances means that cryptocurrency can be a threat to the rulers of these countries. The most important part of national governance is the allocation of resources and the effective use of money and finance in carrying out national economic execution, but in countries where economies are developed and political systems are stable, the effective use of money and finance is made by a considerable number of markets. However, dictatorships or countries with unstable political systems control money and finance because of the lack of market or private sector development. Under these circumstances, it is assumed that the use of cryptocurrency is prohibited because it shakes the foundations of the national economy.
Representative countries that recognize cryptography are Australia and Japan. In Australia, in early 2015, the Australian Senate Economic Reference Committee reported through the“Digital Currency — Game Changer or Bit Player” report on how to efficiently regulate cryptocurrency, control its potential impact on the Australian economy, and how Australia could benefit from it. Based on the report, Australia’s National Tax Service announced a guideline in May 2016 to tax cryptocurrency. In Japan, both cryptocurrency and cryptocurrency exchanges are legal. The Payment Service Act, as amended on April 1, 2017, defines cryptocurrency as having an asset value that can be used as a means of purchasing goods or services and as a means of payment, and can be traded through an electronic transaction system. However, the law does not recognize cryptocurrency as an asset that represents a currency and limits cryptocurrency to be an asset that can be stored electronically. These countries, which legalize cryptocurrency have a developed a financial market, thus do not make cryptocurrency transactions illegal forcing trades in the black market, but rather foster them to provide a foundation for collecting taxes and regulating them effectively.
Finally, there are countries in the gray area that have neither confirmed nor denied cryptocurrency. Korea is the most representative of all, with the real name financial system currently applied to cryptocurrency transactions, but only a limited number of banks are allowed to create accounts for cryptocurrency exchanges, and the cryptocurrency exchanges are listed in government-designated, prohibited projects by VCs. The Korean government’s stance puts many cryptocurrency market investors in uncertainty. We often mix risk and uncertainty, but risk knows what will happen and knows the probability of what will happen, while uncertainty refers to situations in which we know what will happen but do not know the probability. In other words, users who invest and trade in cryptocurrency in Korea are exposed to uncertainty that relies entirely on government decisions. If this continues, cryptocurrency is likely to become a black market, which is probably the most worrisome situation for the government.
As you can see in the 2008 white paper by Satoshi Nakamoto, as the beginning of cryptocurrency transactions, comes with the emergence of bitcoins for peer-to-peer financial transactions that are outside the government or regulators’ control. In reality, however, it is very difficult to have a free financial transaction that is beyond the scope of regulation of a sovereign state. Currently, even if it is cryptocurrency, it is related and traded with the fiat currency issued by the central banks of each country. That’s why various regulatory aspects appear, as we’ve seen earlier.
The goal of the REMIIT project is to create an remittance platform that meets the different regulations of different countries and functions reliably while ensuring that Satoshi Nakamoto’s ideal peer-to-peer financial transactions (remittances) are carried out smoothly. To this end, the REMIIT team is currently working to compare and develop various alternatives, and also to carry out a variety of studies on various aspects connected to regulation in the process of remittances. If the initial overseas remittance of cryptocurrency was a quick remittance through bitcoin, overseas remittances to be made by REMIIT would be not only be quick remittances, but an advanced way to have a stable value and meet each country’s regulations.
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