Countries Creeping to Cryptonize: Do they really know what they are doing?
By Wallex on The Capital
If you have been a cryptocurrency wallet keeper for some time, watching, studying, learning, and joining the cryptosphere with eyes wide open, chances are your country could be, too. The crypto brouhaha and the blockchain technology that goes with it were sort of gifts from the gods that left the strong and the mighty in awe with what possibilities it can bring to the world long been in a state of status quos for who knows when. The disruptions that these disruptors brought let loose entrenched foundations and systems and bestowed a breathing space of another dimension for change never before thought of.
Take the case of money.
Money was an invention of ancient times that came in many different physical forms commonly accepted by peoples as a measure of value to buy or acquire goods and services. Its value is not diminished even when kept for a time. It is used to measure the value of things compared to other goods that make it a standard medium of exchange. Many came in forms of precious stones such as gold or silver, others as a produce of nature such as grains, fruits, wood, animals, and lands. Soon after were the works of man in blankets, carpets, gems, arts, and crafts. The increase in mobility made it hard to carry or transport these early mediums of exchange that precious stones were minted and paper notes were printed to represent a stored value kept in banks. Until such time that countries, governments, and banks can no longer keep up with the intrinsic value of gold as the standard of money, currency took over as representations of other commodities such as oil and gas, and other currencies. With governments as issuers and central banks as controllers, people put their faith and trust in the currencies — the fiat money — as we know and use them today.
Now here comes the disruptors.
Since the advent of the Internet, much of our standards of living shifted to more efficient methods of doing things. The financial world among others was affected too much that FinTech became the buzzword for any financial transaction that requires the use of technology. Not longeth after, two research papers came together, almost like a husband and wife, and gave birth to a novel cryptocurrency called Bitcoin and its core Blockchain blueprint. And the rest is history.
All hell broke loose.
The proof of concept soon opened the floodgates for creators to create Bitcoin-like currencies which, to this date, number to the thousands. Its decentralized, transparent, and anonymized use, among others, contributed to its universal appeal as a digital alternative to the physical fiat. Not a few of the governments of countries were caught up in the bandwagon that they, too, came up with their own versions of the same. Ecuador became the first country to roll out digital cash. The Marshall Islands was the first country to adopt cryptocurrency as a national legal tender with their Sovereign (SOV). Venezuela followed suit with their Petro (P), or petromoneda. China, Senegal, Tunisia, and Singapore have also joined the cryptonation craze. Other countries that are finalizing their crypto plans include Russia, Japan, Sweden, Estonia, and the Palestine State. Those that are on the exploratory stage are China, Israel, and Dubai.
Hoping all, but not all.
At the opposite end of the spectrum lies, obviously, the opposition of the crypto advocacy. While some state anti-money laundering measures and dark web shady activities as reasons, others have complicated tax laws. Others are banning it outright. The European Union for its part had not allowed any member to introduce its own token, apart from the euro. Though we can see a digitally open Estonia being creative with an ideal estcoin dreamed to simulate the euro value without subverting it to further facilitate ease of transactions. Something like a sidecoin to the euro. We can take a look at a growing list of countries affected directly or indirectly, so far, by the crypto craze, as researched and published by Thomson Reuters:
Argentina– Bitcoins are not legal currency strictly speaking since they are not issued by the government monetary authority and are not legal tender. Therefore, they may be considered money but not legal currency, since they are not a mandatory means of canceling debts or obligations.
Australia– Removing Bitcoins from double taxation policies, the government also legalized Bitcoin and said it can be used just like money.
Austria– Austria has not regulated virtual currencies and has not issued a cohesive policy on how to treat virtual currency.
Bangladesh– Bangladesh Bank issued a warning against conducting transactions in cryptocurrency and reportedly stated that such use is punishable by up to 12 years in jail.
Belgium– It has refused to issue any stance regarding Bitcoin and along with a whole host of other countries is waiting for European wide guidance. They have issued a public warning that there is no Government oversight.
Bolivia– The Bolivian government has banned the use of Bitcoin in the belief that it will allow tax evasion and monetary instability.
Brazil– The Brazilian government has declared that Bitcoin is not a currency but an asset and therefore subject to 15 percent capital gains taxes above a threshold.
Bulgaria — Bulgaria has accepted the digital currency. Its National Revenue Agency had issued new taxation guidelines stating that income from the sale of digital currencies such as Bitcoin will be treated as income from the sale of financial assets and taxed at a rate of 10 percent.
Canada– In November 2013, the Canada Revenue Agency declared that Bitcoin payments should be treated as barter transactions. The Canadian federal government also announced its intention to regulate Bitcoin through its anti-money laundering and counter-terrorist financing legislation.
Chile– The first Bitcoin exchange in Chile, where citizens can buy Bitcoin with pesos, launched in 2015 with funding from the Chilean government. This would appear to be in line with the Chilean government’s ambition to transform itself into an innovation and entrepreneurial hub for Latin America. The government has also committed to providing regulation and oversight in the form of financial audits and anti-money laundering regulation.
China– In late 2013, China’s Central Bank (the People’s Bank of China) barred financial institutions from partaking in digital currency and Bitcoin transactions, but individuals are free to trade as they wish — Chinese yuan to Bitcoin is the most traded daily fiat to Bitcoin pair.
Colombia — It has decreed that cryptocurrency is not illegal, but at the same time, it won’t be getting legal recognition any time soon.
Croatia– On December 6, 2013, the Croatian National Bank (CNB) reportedly conducted a discussion on the circulation of digital currencies and concluded that the Bitcoin is not illegal in Croatia.
Cyprus- The use of Bitcoins is not regulated in Cyprus. On December 11, 2013, the Central Bank of Cyprus issued a statement on Bitcoins, stating that “It considers the use of any kind of virtual money as particularly dangerous, given that it is not under any regulatory system and its operation is unchecked.”
Czech Republic– The Czech government recently introduced a law requiring virtual currency exchanges to determine the identity of customers. Alongside this, the country’s authorities will also soon add a Value Added Tax (VAT) to virtual currencies in the near future.
Denmark– The Danish government and Financial Supervisory Authority have announced that Bitcoin businesses will be taxed in a normal manner, and individuals will not be subject to taxation from trading. “The Danish central bank is considering a digital-only e-krone.”
Ecuador– The Ecuadorian government has banned all Bitcoin use in the hope of promulgating its own digital currency based on the principles of Bitcoin.
Estonia– Bitcoins and digital currencies could be declared as an alternative payment means, subjecting them to capital gains liabilities and VAT.
Finland– The Finnish regulatory body has declared that Bitcoin should be treated as an asset and be subject to VAT and capital gains, although the capital gains losses would not be deductible.
France– The French government has shown some interest in the technology, but according to pundits has yet to launch major initiatives in the field.
Germany — The German government released a report in August 2013 saying that Bitcoins should be treated as a trading activity and therefore be subject to capital gains taxes unless they were held for a year or more. The German Federal Ministry of Finance further clarified its position by saying that Bitcoin should be treated as a unit of account and private money and should, therefore, be subject to sales taxes and VAT.
Greece– No specific legislation on bitcoins exists in Greece, nor has the National Bank of Greece issued any statement on Bitcoins. A private company has listed a few businesses that accept Bitcoins as a form of payment, however.
Hong Kong– Hong Kong Money Authority doesn’t formally ban a bank from trading Bitcoin, but no bank has asked for permission, and it’s pretty clear that no bank has asked for permission because the answer is likely to be “no.”
Hungary– The National Bank of Hungary (MNB) has issued a public statement warning citizens who use or invest in cryptocurrencies such as Bitcoin, citing their unregulated nature amid increasing instances of high-return investment schemes abusing the cryptocurrency.
Iceland– The government, worried about capital flight, has banned Bitcoin.
India– While Bitcoin is already being widely used in India, there is still “no clear law stating whether Bitcoin and other cryptocurrencies are legal in India.”
Indonesia– Bitcoin has penetrated deeper into the Indonesian market even though there is currently no legal umbrella for the currency’s use in the country.
Iran — The Iranian Central Bank has adopted a “wait-and-see” policy toward cryptocurrencies. While trading cryptocurrencies is illegal, the police have no legal mandate to stop it and a study by a group of 15 official bodies started to work on a framework for regulating digital currencies in the country back in 2013.
Ireland– Cryptocurrency is still unregulated in Ireland, but the Bank of Ireland’s innovation team has overseen experiments with Deloitte that showed blockchain technology could be used to automatically trace transactions in line with forthcoming EU finance rules.
Israel– Israel’s government is set to apply capital gains tax to Bitcoin sales, categorizing digital currencies as a type of property.
Italy– Tax authorities appear to be treating Bitcoin as a form of currency. They have clarified purchases and sales made with Bitcoin remain exempt from VAT. However, Italian tax officials appear to be applying income tax to speculative uses of Bitcoin, or events in which money is made during a sale or purchase. Those buying Bitcoins outside of the scope of speculative activity, it indicates, aren’t required to pay income tax.
Japan– Japan has eliminated the consumption tax on Bitcoin trading on April 1, 2017, when it officially declared Bitcoin as a legal tender. Japan also eliminated the possibility of double taxation on trading of Bitcoins.
Kazakhstan — Seeking to become the regional hub for cryptocurrencies. In June 2017, Kazakhstan announced plans to begin selling blockchain-based bonds, and the country’s President announced that “It is high time to look into the possibility of launching the international payment unit. It will help the world get rid of monetary wars, black marketeering, and decrease volatility at markets.”
Kenya– The Central Bank of Kenya (CBK) has warned that virtual currency is insecure and could fund terrorism.
Kyrgyzstan– The Kyrgyzstan government has completely banned the use of Bitcoin within its national borders.
Latvia– The government issued a warning about Bitcoins and other digital currencies a day after the national airline carrier announced that it would accept Bitcoin as an alternative payment method for flights.
Lebanon– Lebanon’s Central Bank issued a Bitcoin warning in 2013, raising a number of risks associated with digital currencies, and pointing out that issuance and use of “e-money” are prohibited under a decree issued in 2000. The warning prohibited the use of Bitcoin by financial institutions in the country but left the situation for private citizens unclear.
Lithuania– The Lithuanian government has declared a wait and see policy as the regulatory landscape evolves across Europe.
Luxembourg– In April 2016, it granted a payment institution license to a Bitcoin exchange, making the company the first nationally licensed Bitcoin exchange in the world.
Malaysia– Bitcoin is not recognized as legal tender, and Bank Negara Malaysia does not regulate the operations of Bitcoin. The central bank has advised the public to be cautious of the risks associated with the use of such digital currency.
Mexico– The Mexican government has not banned the use of alternative digital currencies outright but instead is in talks with government regulators to try and introduce their own form of Bitcoin and their own blockchain specific to Mexico.
The Netherlands– In June 2013, the Dutch Finance Minister released a report that gave Bitcoin the status of an item of barter, meaning it needed no specific licensing or compliance requirements. He said, “Bitcoin is not a financial product as defined by law; purchase or sale of Bitcoins is not a financial service either, so the financial services act does not apply.”
New Zealand– The Reserve Bank regards cryptocurrencies as a “vulnerability” and considers cryptocurrency as a payment system rather than a currency.
Nigeria– On January 19, 2017, the Central Bank of Nigeria “officially outlawed digital currencies.” The CBN cited reasons like money laundering and terror financing to prohibit banks to use, hold or transact virtual currencies, and they should ensure “existing customers that are virtual currency traders have effective AML/CFT controls.”
Norway — The Norwegian tax authorities declared at the end of 2013 that “Bitcoins don’t fall under the usual definition of money or currency” and therefore making them subject to the usual capital gains tax laws, but Norway’s largest online-only bank, Skandiabanken, recently announced plans to offer clients the ability to link their regular bank accounts with their Coinbase account.
Pakistan — The Pakistani government hasn’t taken any stance on Bitcoin as yet; it believes that Bitcoin is a commodity and not a currency.
Philippines– In February 2017, BSP the Philippine Central Bank said it plans to officially regulate local Philippine Bitcoin exchanges as remittance companies and recognize Bitcoin as a legitimate payment method while issuing a proper regulatory framework for Bitcoin users, exchanges and companies.
Poland– It has officially recognized the trading and mining of virtual currencies as an “official economic activity” but has said that regulation should come from the EU.
Portugal– Taxable, but unregulated.
Russia– The Russian Deputy Finance Minister has stated that regulators will be looking to recognize Bitcoin and other cryptocurrencies legally next year. The government is eager to tackle money laundering, which certainly incentivizes greater oversight and regulation, ultimately leading to its legitimacy.
Singapore– In early 2014, the Singapore government declared Bitcoin as a good purchased to purchase goods and therefore subject to a specific tax. The Monetary Authority of Singapore then required exchanges and ATM providers to Green-list, or de-anonymize their users to allow while simultaneously declaring that virtual currencies such as Bitcoin are not securities and not subject to regulation.
Slovenia– Slovenia took a middle road in December 2013 in declaring that Bitcoin was neither a financial asset nor a currency and should be taxed based on the circumstance it was used, whether it was via trading profits or through mining.
South Africa– The South African Revenue Service has stated that any transaction or speculation in Bitcoin is subject to general tax rules; it has added that it is the responsibility of both citizens and residents of South Africa to report each and every Bitcoin transaction detail to the South African Revenue Service.
South Korea– There are currently no laws in South Korea regulating the use of Bitcoin, where people are able to buy Bitcoin in 7-Elevens.
Spain– Notable among EU members, Spain is lobbying to establish a cryptocurrency regulatory framework. The Spanish government has confirmed that cryptocurrencies are exempt from Value Added Tax, and Spain has whole streets full of Bitcoin-friendly stores. Plus, many Bitcoin companies call Spain their home, and Spanish banks BBVA and Bankinter now invest in Bitcoin companies.
Sweden– Looking to shift to digital currency, the central bank’s decision to cut interest rates into negative territory has led to an increase in demand, supporting appetite for Bitcoins, and alternatives to protect capital. Unlike neighboring Denmark, the Swedish regulator has publicly declared Bitcoin as a legal currency.
Switzerland– Switzerland’s financial markets regulator has approved the first Swiss private bank for Bitcoin asset management, potentially paving the way for other global banks to offer digital currency products.
Taiwan–Taiwan’s Financial Supervisory Commission has indicated its stance on Bitcoin remains neutral despite recent speculation it was moving toward more restrictive policies.
Thailand– In 2013, the Thai central bank declared the use of Bitcoin illegal in Thailand, but changed its opinion in early 2014 to make it not illegal. However, buying Bitcoin in Thailand and then selling it outside the country was still strictly prohibited.
Turkey– The Turkish authorities have issued guidance saying that Bitcoin does not meet the standards of electronic money and that the volatility leaves users with a high level of risk; a major Bitcoin exchange has ceased operations after local banks closed the main accounts of the company without prior notice.
Uganda– Unregulated but not illegal; the Bank of Uganda has asked Ugandans to stay away from Bitcoin and other digital currencies.
Ukraine — Despite vague Government regulations and political uncertainty in some areas, a major bank announced the ability to purchase Bitcoins in any of its nationwide ATM terminals.
United Arab Emirates — The exact status of cryptocurrencies is currently under review.
United Kingdom– The Bank of England continues to monitor Bitcoin technology, while it continues to be classified as private money, with VAT applied and also subject to capital gains tax, where their P&Ls are involved.
United States– The U.S. has the highest number of cryptocurrency users, the highest number of Bitcoin ATMs, and also the highest Bitcoin trading volumes globally. However, there is a differing picture state by state: Texas, Kansas, Tennessee, South Carolina, and Montana appear to be the friendliest based on state regulation, whereas New York, New Hampshire, Connecticut, Hawaii, Georgia, North Carolina, Washington, and New Mexico have regulations not favorable to virtual currency. The other 37 states/territories are gray areas currently.
Venezuela– Government crackdown arrests and torture of those found using Bitcoin, despite the growing popularity of use by the people.
Vietnam– The government has moved from banning Bitcoin in 2014 to now wanting to streamline the industry so as to be able to tax, monitor, and eliminate any so-called negative impacts.
Zimbabwe– The country is not yet ready for regulation, says a government regulator.
Some specifics will help us understand why countries have futuristic attitudes that others do not have.
1. Online Transactions made easier. — The blockchain infrastructure allows for greater liquidity in money transfers and payments of transparent nature. Thus, corruption and fraud are virtually eliminated.
2. Foreign Exchange facilitation — Currency exchange and payment processing transactions can be challenging for any foreign trading partner. Digital currency exchange online makes transactions a lot more simplified and standardized.
3. National Debt Solution — The frequency of use by its citizens can make the national cryptocurrency appreciate and grow in value. There is the possibility of it being listed on major exchanges, and if that be so, would help a lot in the reduction of the national debt and stabilize the economy in the process.
4. Cashless Society — Without long lines of waiting, manual paperwork, and high transacting fees, a cashless society is indeed a new lifestyle of convenience wanting of practice, saving a lot of precious time and treasure.
It takes a ton of political power to undo and redo incumbent systems for a more forward outlook in the delivery of goods and services through the use of cryptos. And that is just one side of the coin. The acceptance of the majority is another hurdle to overcome or else, the status quo remains. The unbridled character of cryptocurrencies and being kept that way according to their proponents can clash against the oversight and regulatory provisions that await it. But during the course of its existence, it appears that its volatility can be tamed when met halfway on acceptable terms. Scalability can turn to worse if millions of users await inline transaction after transaction, given that just a hundred thousand will slow down the process. Solutions such as increasing the size of the block are yet to be proved to be effective. Even then, it is always a good point to start somewhere. Technological advancement and breakthroughs are coming in on a more frequent basis. Difficult yet as it may be, the possibilities to cryptonize are endless.