The 2019 year is shaping up to be the year of crypto legislation. In July 2018, Malta became the first country in the world to set up regulatory frameworks for blockchain, cryptocurrency, and Distributed Ledger Technology (DLT). Soon after, countries like Russia and India also started the ball rolling, implementing national legislation for cryptocurrency regulation. Let us take a look at the new trends and tendencies in crypto legislation expected to be seen throughout 2019.
Current Trends in Crypto Legislation in 2019
One of the main drivers of formal crypto legislation is the crackdown on money laundering and financing of terrorism using cryptocurrency. In October 2018, the G20 countries signed a declaration to regulate cryptocurrencies and combat against the financing of terrorism in line with the Paris-based Financial Action Task Force (FATF) by June 2019.
The ability to use cryptocurrency to make transactions globally has made it a useful tool for criminals and terrorists, thus leading to the rise of anti-money laundering (AML) and combating the financing of terrorism (CFT) laws.
The same G20 meeting also led to these countries making progress towards an international cryptocurrency tax. However, this is yet to be confirmed, as the declaration talks about “the impacts of the digitalisation of the economy on the international tax system,” but does not mention cryptocurrency specifically or provide a particular course of action. Key leaders in the crypto industry are still concerned about this, with speculation that a crypto tax could still occur on a national level.
There has also been a clampdown on Initial Coin Offerings (ICOs). For example, the European Parliament’s Committee on Economic and Monetary Affairs published a paper that would impose new laws against ICOs, and U.S. Representative, Warren Davidson of Ohio unveiled a plan to send a bill before Congress that would create a separate asset class for tokens issued under ICOs. While ICOs have been used to crowdfund money for crypto projects, there has been no regulation effort between countries, which has made investors susceptible to scams and frauds.
Instead, there has been a greater move towards Securities Token Offerings (STOs), where investor tokens are part of an actual electronic stake in the business or project. Security tokens give holders a form of equity or ownership of a specific asset, and which are regulated similarly to that of traditional financial instruments. Previously in ICOs, investors would obtain tokens that were unusable until the project took off, with no legal obligations for companies to deliver the project once funding was secured. New players like Polymath and CentrumCoin have emerged to help companies and retail investors participate in this changing ecosphere.
Key Players In Crypto Legislation
Malta
Malta is one of the more progressive countries with regards to crypto legislation. The Maltese government announced the Virtual Financial Assets Act (VFA) and the Innovative Technology Arrangement and Services Act (ITAS) which came into effect on November 1st, 2018. The ITAS will regulate “innovative technology arrangements and innovative technology services,” and certificates issued to approved technology providers. The VFA will regulate the issuance of ICOs in the country. The VFA stipulates that the issuer must publish a white paper that is clear and comprehensible, and signed by all members of the issuer’s Board of Administration.
Malta does not recognise cryptocurrency as a legal tender, but it is defined as a “digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account, or a store of value.”
Singapore
A key financial hub in Asia, Singapore, has taken an open approach to cryptocurrency, with the Monetary Authority of Singapore (MAS) even publishing a guideline to understanding how cryptocurrencies relate to the Securities and Futures Act and how the government regulates these activities. Cryptocurrency exchanges and trading are legal, and Bitcoins are considered as ‘goods’ and subject to Goods and Services Tax.
Japan
In Japan, cryptocurrencies have been recognized as legal tender under the Payment Services Act since April 2018. It is also the biggest market for Bitcoin, and the National Tax Agency has now ruled that gains on cryptocurrencies are taxed as ‘miscellaneous income’ at rates of 15 to 55%. Crypto exchanges are legal in Japan, but have since been regulated through registration with the Financial Services Agency. Future compliance will fall under the legislation of the Japanese Virtual Currency Exchange Association.
Russia
Meanwhile, Russia’s bill to regulate the activities of electronic platforms and marketplace has been submitted since the end of December 2018 and is expected to be adopted by February 15, 2019, to launch a pilot project between 20 licensed credit institutions and the Moscow Stock Exchange.
However, Alexander Konovalov, Russia’s Minister of Justice also recently said that legislation on cryptocurrencies will not be formalised anytime soon. Konovalov also reiterated that the official currency of Russia is the Ruble, implying that the introduction of other currencies such as crypto is against the Russian constitution. The government has already postponed the passing of three draft crypto bills in 2018, leading to confusion of the status of crypto legislation in the country.
Using Crypto in a Fiat World
For countries that have embraced cryptocurrency, getting people to use it for day-to-day purchases is another story.
Malta reportedly has a two-way Bitcoin ATM, run by company MoonZebra, which helps users to buy and sell cryptocurrencies — like Bitcoin — instantly with cash. Retail Point of Sale (POS) software by Recruit Lifestyle and Coincheck has been rolled out to 260,000 retail stores in Japan to accept Bitcoin as a form of payment. This software allows customers to simply scan a code on the Mobile Payment app to make a transaction using cryptocurrency. In Singapore, customers can now use the Crypto.com’s MCO Visa card to withdraw cash, tap and pay with cryptocurrency and do interbank transfers with cheap rates. The Visa card can be recharged with major cryptocurrencies like Bitcoin and Etherum.
While these new crypto developments seem to be encouraging for the industry, governments like Russia are still standing on the sidelines with a wait-and-see approach towards legislation. Alternatively, by having a clearly defined stance on the issue, governments can start to tame this ‘Wild crypto West’ and bring more credibility to cryptocurrencies.
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