Russia has struggled to pass cryptocurrency reform for over
two years, since January 2018. Various government agencies and the central bank
worked on several different bills—including the law on digital financial assets
and the law on crowdfunding—without regularly consulting one another. While the
law on crowdfunding passed this August, going into effect on Jan. 1, 2020, the
law on digital financial assets was fought over until the term “cryptocurrency”
was removed from the bill, making the bill’s regulatory scope unclear and
Russian Prime Minister Dmitry Medvedev set the newest
deadline for the bill on digital financial assets for November 1, 2019. The
bill no longer has the terms “cryptocurrency,” “token,” or “smart contact” and was
adopted in its first reading in May 2018 and again in March 2019.
The latest version of the law does contain the concept of
“digital operating symbols,” a term defined as a set of electronic data or
digital code for the purpose of organizing the circulation of the digital
financial assets (without being digital financial assets themselves). Their use
and release needs to be determined by the Bank of Russia.
The law specifies that the operator of digital financial
assets and their exchanges have certain requirements. However, these
requirements are not specified and will require further acts to explain them.
In May 2018, Russia’s Ninth Arbitration Court of Appeals
recognized cryptocurrency as valuable property as part of a bankruptcy case. Later
that month, it was decided that cryptocurrency would fit in the legal category
of “other property”.
In 2019, a Russian Supreme Court plenum became the first
time that cryptocurrencies were officially documented, by way of a plenum on
In March 2019, a bill amending Article 128 of the Russian
Civil Code was passed in the third reading, which introduced the concept of
digital rights as a type of property rights. A previous draft had contained a
provision for digital currency, but that had been removed before its passing.
Article 309 of the Civil Code also now includes the stipulation that smart contracts
can be used in specific circumstances.
The Standing Committee of the 13th National People’s
Congress in China passed a cryptography law that is effective on January 1,
2020. The announcement came immediately following Chinese President Xi Jinping
calling on the country to seize opportunities in blockchain technology.
China currently bans cryptocurrency trading and its national
digital currency is not yet hatched. However, the integral underpinning of
blockchain technology, cryptography, are seen as key to the country’s push to
be more competitive in emerging technology spaces.
The new law aims to tackle emerging regulatory and legal
challenges in commercial cryptography use-cases as these have an increasingly
important role in developing the Chinese economy.
Proponents hope the new law will encourage research and
development on commercial cryptography technologies, while building up an
inclusive standardized regulatory system for the market. It is also hoped that the
new law will also encourage nationwide educational efforts, such as public
exhibitions, to promote cryptography among government officials, companies and
The Chinese congress released a draft proposal for the new
law in July, soliciting public comments. The proposal includes a range of
issues from how compatible the industry standards should be with other
international cryptography systems, to whether companies should voluntarily
verify their commercial use-cases with authorities.
Facebook’s plans to launch its very own cryptocurrency was
met with heavy opposition last week. CEO Mark Zuckerberg’s Libra proposal to
Congress turned into a hearing of the company’s past mishandling of data and
information. Without a clear structure for regulation, there is significant
concern that the Libra project could undermine the national dollar, as well as
contain loopholes for criminals to exploit.
Facebook touts that the value of the Libra coin would remain
relatively constant. Unlike other cryptocurrencies like BitCoin, Libra wants to
be backed by real-world currencies, namely the US dollar, Euro, Japanese Yen,
Singapore dollar and British pound. Libra would somewhat reflect the overall
economic status of these five nations. Unless there is a global recession,
Libra should remain steady. With over 2 billion users active Facebook service
users worldwide, Libra could bring all users together with a single currency.
Digital payment apps are currently regionally localized or have to account for
The currency is also watched over by a Libra Association, a
group of global companies, but many companies have since pulled out. Paypal,
Mastercard, and Visa are among the company that left Libra’s internal governing
However, a user base this size does not put Libra in
competition with other cryptocurrencies, but with banks. With the involvement
of money and a lack of regulation, Facebook would have access to the spending
habits of billions of people.
Beyond transparency, the lack of regulation and oversight also
makes cryptocurrencies a useful platform for black market deals and illicit
activity. The difficulty in monitoring cryptocurrency transactions allow for
various forms of tax evasion, among other issues.
CRYPTOCURRENCY AND INTERNATIONAL REGULATION
Japan: One of the most progressive regulatory
climates for cryptocurrencies, where Bitcoin is widely considered to be legal
tender and a law passed in mid-2017 recognizing cryptocurrencies as legal
property. In early 2018, reports came of efforts to create self-regulating bodies
for crypto markets to preempt the government. In late 2018, Japan approved
self-regulation for the crypto industry. By April 2018, the Japanese Virtual Exchange
Association (JVCEA) was formed. The JVCEA emerged mostly as a reaction to the
January 2018 Coincheck hack with the theft of more than $530 million in NEM
(XEM) tokens. The association focuses on the Japanese crypto trading arena,
working together with the country’s Financial Services Agency to enforce strict
compliance among its members. JVCEA has worked to enforce regulations for hot
wallet use and limits for crypto margin trading. The association became a
recognized SRO in October 2018.
China: Currently has one of the most restrictive
environments in the world. China banned bitcoin transactions in 2013, as well
as ICOs and crypto exchanges in 2017─though many have found workarounds through
sites not yet firewalled. Before the “crypto frenzy” of the late 2017, China
was the only major market to have issued any definitive ruling in the form of a
ban on digital currency trading and initial coin offerings (ICOs). In the
aftermath of the meteoric rise in crypto prices and the subsequent increase in
global consciousness, the start of 2018 begun to see more serious government
consideration of the market.
South Korea: As early as February 2018, Cointelegraph
reported that the Korean Blockchain Association (KBA) was already considering
the creation of a self-regulatory framework for local exchange platforms. At
the time, regulators in the country had already started taking stringent
measures against crypto exchanges. By April 2018, the KBA had finalized rules
for the self-regulation of cryptocurrency exchanges. The rules focused on
Anti-Money Laundering and Know Your Customer compliance. The KBA framework also
mandated that its members manage client funds separately from their own while
maintaining minimum equity of $1.8 million. Exchanges under the KBA also have
to publish regular audits and financial statements.
EU: Cryptocurrency and exchange regulations in the EU
are determined by individual member states, and are considered legal across the
bloc. Switzerland has one of the most open climates for cryptocurrencies and
exchanges in Europe. In 2016, the city of Zug, known as “Crypto Valley”,
started accepting bitcoin as payment for city fees. Swiss Economics Minister
Johann Schneider-Ammann announced his goal in 2018 to make Switzerland the
world’s first “crypto-nation”.
UK: Crypto stakeholders in the United Kingdom also
joined Asian countries in pioneering self-regulation for the industry in early
2018. Formed in February 2018, CryptoUK is the first-ever self-regulating trade
body for cryptocurrencies. Coinbase, CEX.IO, eToro and other major crypto
businesses came together to form the association. With the U.K. having no
cryptocurrency regulations, CryptoUK has sought to lobby members of Parliament
to create favorable laws for the local crypto industry.
Both Canada and the U.S. take a similar approach to
cryptocurrency legislation at the federal level, as both countries view
cryptocurrencies as securities. However, provincial and state regulations
differ widely in their taxation requirements of profits from crypto
US: Crypto exchange and custody giants like Coinbase,
Bittrex, and Kraken established the Crypto Rating Council (CRC) in the end of
September 2019. The CRC is an independent body that provides insight on whether
crypto tokens can be classified as securities or not. In its first crypto
ratings, the CRC examined 20 different cryptocurrencies, classifying crypto’s
like Bitcoin (BTC), Litecoin (LTC) and Monero (XMR) as not securities. CRC is a
country-based SRO focusing on how to carefully navigate unclear regulations
about which crypto tokens constitute securities.
The U.S. Securities and Exchange Commission (SEC) has
consistently maintained that most ICO tokens are securities, causing some U.S.
platforms to geofence tokens or create separate local exchanges that list only
tokens deemed not to be securities.
Before the CRC, U.S. crypto exchange platform Gemini
proposed the formation of an SRO for digital commodities. Gemini was joined by
Bittrex, Bitstamp, and bitFlyer USA to establish the VCA or Virtual Commodity
Association. VCA would focus on nonsecurity crypto tokens.
In the past, several commentators have called on the crypto
industry to pursue self-regulation.
Regulations throughout Latin and South America run the full
Bolivia: Unilateral ban on cryptocurrencies and
Ecuador: The first country to launch its own token;
ban on all cryptocurrencies aside from its government-issued SDE token (Sistema
de Dinero Electrónico = electronic money system)
Mexico, Argentina, Brazil, Chile: Cryptocurrencies
widely accepted as paymentVenezuela: Cryptocurrencies widely accepted; this makes
sense, considering the economic crisis and subsequent freefall of