The spectacular rise – as well as fall – in market capitalization of crypto assets in the past year and beyond has led to an increased discussion among nations and international organizations about how, and even whether, to regulate cryptocurrencies. This discussion has even been amplified by the ascent of assets such as NFTs, that have expanded into popular culture, and whose economic impact could no longer be ignored by politicians and institutions. However, the fact that crypto assets, and the whole ecosystem in general, are evolving at such a fast pace, makes writing down and passing into law certain regulatory frameworks a difficult undertaking.
Some countries have already introduced or amended strict legislations regarding crypto, others are still at the drafting stage and others have very loose laws regarding their use. Essentially, different nations’ legislations have taken diverging regulatory approaches regarding crypto assets, especially in the second half of 2021 and 2022. On the whole, financial institutions like the IMF have called for a coordinated and consistent approach by all nations that would “ensure a level playing field”, but that is not how reality works.
The most strict regulatory frameworks so far have come out of China, where crypto exchanges are banned from operating, and who has also banned Bitcoin mining in May of 2021, forcing all miners to relocate entirely to other countries where frameworks are looser regarding their activity. In late 2021, the ruling party outright banned the use of crypto, a move that was met with some confusion abroad as it is common knowledge that the country has been working towards the development of a digital Yuan for a while.
India has also been a bit inconsistent when it comes to crypto regulation, although they have not yet gone as far as China: the peninsular country has continuously swayed between regulation and an outright ban, all the while imposing a 30% tax on all crypto investments. And, similarly to China, they are also working on a digital version of the Rupee, a currency that has continued to lose value this year, especially following the Ukraine crisis and a spike in interest rates from the US Federal Reserve.
Some Western countries, on the other hand, have provided a much more open framework for those wishing to use and invest crypto assets. Canada, for example, treats crypto like any other commodity, and was the first country to approve a Bitcoin exchange-traded fund (ETF), now on the Toronto stock exchange. Japan and Australia recognize cryptocurrencies as legal property, a move that was probably made for the tax benefits the governments would receive from such a decision, but it leaves the door wide open for crypto investments in the countries, pending registration with the relevant authorities.
Lastly, Europe has also been quite flexible when it comes to crypto regulation. The UK considers crypto as property and taxes them accordingly, while the EU is still lagging behind in regulatory terms, but plans to “ensure a harmonized market, guarantee a level playing field for service providers and ensure high standards for consumer protection.”
While it may seem that the EU could implement harsher policies on crypto assets in order to ensure financial stability following a string of recent exchange-related crashes and fight the carbon footprint left behind by miners, the situation may not be as bleak as it appears. After all, crypto investments – including NFT purchases – have exploded in Europe, and it may eventually be in the policymakers best interests to find some common ground on which to regulate these asset, as Europe is one of the smaller crypto markets around but it is growing exponentially, and, who knows, the latest string of financial insecurities may well steer a certain fraction of the population towards crypto adoption – after all, the Euro is certainly not one of the most beloved currencies around. Much of the world’s future regulatory frameworks will depend on what the European Union ultimately decides – similarly to its data privacy policy of a few years ago that became the defacto global standard, at least in the West.
