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The Current State of Cryptocurrency Policy Around the World

by Megha Patel and Daniel Pietikainen, FiscalNote

A look at how countries around the world are responding and positioning themselves towards the rising cryptocurrency market.


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As cryptocurrencies and crypto-assets become more technologically advanced, challenges arise for organizations that want to leverage these resources. With the market’s enthusiasm for digital assets exploding over the past few years, brands and companies are racing to apply these technologies as a means to interact with buyers, improve efficiency, and maximize revenue.

Governments across the world are noticing the trend and have expressed worries about the vastly unregulated market, which is even outpacing major traditional currencies. Here’s an overview of the global cryptocurrency landscape today.

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Cryptocurrency Primer

At a broad level, crypto-assets encompass all resources that are secured cryptographically, meaning data is encrypted and only viewable for recipients with a specific “key.” Powering most crypto-assets is the blockchain, where encryption keys are contained within blocks of data and are strung together including an irreversible timestamp. Cryptocurrencies are built onto this system and have their transactions recorded in digital ledgers by the system.

While not cryptocurrencies by themselves, Central Bank Digital Currencies (CBDCs) are digital tokens issued by national monetary authorities that are pegged to the value of that country's fiat currency. Also, Non-fungible Tokens (NFTs) are cryptographic assets with unique identification codes and metadata that distinguish them from each other, allowing for a digital proof of ownership over specific virtual assets.

Challenges and Opportunities of Cryptocurrency

As these resources evolve, there are clear avenues for companies to take advantage and continue to both innovate on or invest in these areas. A key illustration of this phenomenon is Bitcoin. As the first and most widespread cryptocurrency, it retains a high price point and is subject to high volatility. Despite this, an increasingly large number of organizations and governments are still interested in holding Bitcoin on their balance sheets, mirroring consumer behavior.

As regulations continue to develop across the world, learning how to navigate these new technologies will be a major challenge for organizations to overcome.

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The State of Crypto in the United States

Currently, the regulatory approach to cryptocurrency in the United States has been slower than in some countries due to uncertainty around the evolution of digital assets and the pressing need for consumer protections. The Securities and Exchange Commission so far is not greatly involved with regulating digital assets out of concern that prescriptive regulations will become obsolete quickly. In a similar vein, the United States Government Accountability Office has reported it does not want to slow down financial innovation and is also unwilling to prescribe specific regulations regarding crypto assets or cryptocurrencies.

On the congressional level, the U.S. is active in its efforts to regulate or become involved in the global development of these financial technologies. The Keep Innovation in America Act (H.R. 6006), describes amending the Internal Revenue Code of 1986 to clarify the definition of a broker to include those who trade and barter with digital assets, signal an interest in more studies, and addresses the country's interest in expanding their scope globally through blockchain technologies. In subsequent related bills, Congress has continued to modify the provisions in the original document to clarify the inclusion of digital asset holders as brokers. The United States has also shown interest in observing the adoption of cryptocurrencies in other countries, including El Salvador’s recent adoption.

As CBDCs are rolled out in other countries, the U.S. has shown some tentative interest in their adoption. In terms of adopting a CBDC within the United States, the general policy stance of the Federal Reserve has been to gather opinions or study the effects of a CBDC to examine the pros and cons. The Congressional Research Service has reported that the Federal Reserve would consider the use of CBDCs only if it would provide a benefit to households, businesses, and the overall economy. The Federal Reserve has also identified that the use of the CBDC must be privacy-protected to deter criminal use, intermediated through a financial institution, widely transferable among holders, and identity-verifiable.

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State-by-State Approach

The pressing need for regulations is encouraging some states to study the effects of digital assets, including cryptocurrencies and crypto assets. These programs, called “regulatory sandboxes,” are designed to test the various tech innovations, services, business models, or delivery mechanisms around digital assets. They are meant to study its uses further via a framework without directly implementing any regulations or legislation in the country.

Regulatory sandboxes and pilot programs are also a mainstay at the state and local levels with ongoing proposals for pilot studies for the adoption or research of blockchain technology, cryptocurrencies, and digital assets.

California and New York are considering studies, task forces, adoption of pilot programs, and building regulatory sandbox programs to analyze blockchain or cryptocurrencies. Data from the FiscalNote platform shows that Texas, Nebraska, Minnesota, Michigan, Illinois, the District of Columbia, and Delaware have enacted some form of legislation on considering the use, education, or revisions to requirements for asset management of cryptocurrencies.

Opportunities for Private Organizations

Sluggish policy changes within the U.S. signal an opportunity on the market for private entities or other organizations to continue investing or innovating on cryptocurrencies and crypto assets. Policy changes must balance financial innovation and consumer protection, causing a slower adoption of regulations. Consequently, leveraging any type of digital assets, crypto assets, CBDC, or cryptocurrency has been largely isolated to private use with limited regulations or legislation.

The current atmosphere is an opportunity for organizations to take on the challenge of learning how to tackle these assets. Creating timely policy responses is an ongoing challenge for governments. For organizations, it's a time for innovation and expansion.

Global Trends in Cryptocurrency

After an explosive 2021 for cryptocurrencies, global regulators are now concentrating their efforts on legislating new means to manage the evolving market. While worldwide standards for regulating crypto assets are still in early stages, consensus is starting to form around the need for coordinated monitoring of not only digital currencies, but also trans-border exchange platforms and new forms of investment. The widespread adoption of crypto assets and their increased use in conventional products and services have national policymakers racing to shield their economies from emerging risks — and to reap the rewards.

On a global level, some countries have signaled willingness to implement and regulate the crypto and digital currency market. The G20’s Financial Stability Board is aiming to develop recommendations for common standards for crypto regulation in attempts to harmonize requirements for each type of crypto asset with existing financial instruments. Managing the risks associated with the crypto asset market, which has grown in market capitalization by 3.5 times in 2021 to $2.6 trillion, will also address the lack of transparency and concentration of dominant cross-border trading platforms.

On the other hand, the Atlantic Council is tracking the fast progress of CBDC adoption across the world, with nine launched currencies, 15 in the pilot phase, and a further 16 in development. One such deployed program is the DCash regional digital currency in the eastern Caribbean. This ambitious project spanning several countries has highlighted the technical difficulties of implementing such a solution. With economic superpowers moving to create and mainstream their own systems of governance for crypto assets, the question of how global regulation will shape up remains open.

The EU’s Solution

Perhaps the most ambitious legal framework for crypto assets comes in the form of the European Union’s Markets in Crypto-assets (MiCA) proposal, which would apply to all its 27 member states. Targeting all assets, markets, and service providers that are currently not regulated at an EU-level, MiCA would replace existing national frameworks with an “even playing field” for companies and consumers across the European market. Although it may not come into force before 2024, MiCA’s requirements concerning due diligence, safekeeping, minimum capital, business structures, and numerous other areas may serve as a template for other countries in the process of building up their systems with the aim to maximize financial stability.

Latin America Bets on Crypto

Regions such as Latin America will likely unveil their individual crypto regulations much sooner. After El Salvador’s adoption of cryptocurrency as legal tender, many lawmakers in the region have been drawn to the possibility of boosting financial inclusion and tackling inflation through crypto assets.

The Brazilian Senate will debate two key proposals for cryptocurrency regulation in the coming weeks. This debate will empower the Central Bank and Securities Commission as market enforcers to lay down rules for exchange platforms. Paraguay is close behind with its own regulation and in Colombia, national financial institutions have partnered with crypto exchanges to run a pilot for a crypto trading framework in the country. Moreover, Peru and Chile have seen new legislative initiatives submitted for the regulation of cryptocurrencies against the advice of cautious financial authorities. As adoption grows in the region, financial authorities and lawmakers are working to lay the legal groundwork for financial inclusion to harness the foreign capital flooding into the region’s fintech industry.

A Stricter Environment in Asia for Cryptocurrency

Some countries have decided to take a hardline stance against cryptocurrencies. China announced in September 2021 that it was making all cryptocurrency transactions illegal, due to fears around financial risk and illicit finance. The country has seemingly given up its prime position to influence the nascent global cryptocurrency market in favor of retaining control over the financial system. Instead, China will focus on cracking down on enablers of corruption and greening its economy while launching its own Blockchain Service Network. On top of its framework, local governments and businesses can develop their own applications, with China hoping the service becomes widely adopted in trade digitalization and subsequently across various other sectors.

Elsewhere, Thailand has announced it is moving to place restrictions on the use of cryptocurrencies, following similar steps from regional neighbors Vietnam, Malaysia and Singapore. Countries with booming crypto markets are increasingly worried about the stability of the financial system and regulatory oversight, as the volatility of these currencies continues. Indian authorities have recently imposed a 30 percent tax on digital asset trading profits and financial regulators have advised for their complete banning.

Blockchain technology as a whole is not the target of these worries, as other countries are moving forward with the pilots for their CBDC. The “digital yuan” is being piloted across Chinese cities, with major brands accepting purchases in the trial currency and digital payment platforms mandated to follow suit. The NFT market is also growing in the country, led by domestic tech giants, although separated from cryptocurrencies.

Meanwhile, despite harsh words by Indian regulators, the “digital rupee” is slated for release within the year. Crypto enthusiasts in the country are taking the new taxes on transactions as a sign of future regulation and are flocking to crypto exchange platforms. Thailand, too, is on the verge of launching a retail CBDC. Its prospects of implementing a cross-border Multiple Central Bank Digital Currency (m-CBDC) with Hong Kong are also increasing.

A Lodestar in Africa

Nigeria launched its e-Naira CBDC in October 2021. As customers slowly move from widely used cash and banks’ e-payment options to the e-Naira, the country of 200 million could exit the pandemic with an efficient system to distribute state aid and to send remittances. Moreover, South Africa has joined a pilot project to use CBDCs for cross-border payments, named Project Dunbar.

Looking to the Future

The landscape for crypto assets is set to change as regulation catches up to the latest technology. While certain countries will continue to attempt to shield their economies and consumers from volatility, blockchain technology is here to stay.

Many nations will race to attract investment and innovation, while others will aim to develop their own systems. Companies will have to both be cautious, and seize the opportunities that arise.

While many of the current 1,800 cryptocurrencies in existence will undoubtedly disappear within the year, individuals will continue to demand a decentralized system for safeguarding their assets. Similarly, CBDCs will prove useful for digitizing payments and removing the need for intermediaries, reducing costs. The NFT market, while initially fueled by excitement and high-profile players, will evolve beyond marketing and art into a key component of decentralized finance, club memberships, and supply chains.

Keep Up with Cryptocurrency Policy Around the World with FiscalNote

With a fluid landscape and a high volume of legislation and regulation at all levels of government, changes in cryptocurrency policy can prove difficult to monitor. FiscalNote’s legislative tracking solutions can provide policy information at the global, federal, state, and local levels when you need it, so you can craft and execute a successful government affairs strategy that keeps your team and wider organization in the know.

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