2020 Cryptocurrency Regulations that could change the industry forever
This year started as a promising new chapter for the cryptocurrency market. A Bitcoin halvening, a global pandemic, and seven months later have made 2020 a completely different year for the industry than what anyone expected.
There are plenty of reasons to remember 2020 for many years from now. For the cryptocurrency community, this year could go down as the one with some of the most representative regulatory changes in history.
Today, we take a closer look at the 2020 cryptocurrency regulations that took place over the past six months across the world, and what they mean for the industry’s future.
In the U.S., the Securities and Exchange Commission classifies cryptocurrencies as securities, and the Commodity Futures Trading Commission considers them to be commodities. None of the statues allow virtual currencies to replace USD in conventional transactions.
The United States started 2020 with a clear intention of restricting the use of cryptocurrency in its territory even more. After all, the US Dollar is the most used fiat currency in the world, and the federal regulators do not want to encourage any threat to its position, including Bitcoin and other digital assets.
However, the COVID-19 pandemic that spread like wildfire in March forced the U.S. to consider alternative solutions for long-term economic relief, including cryptocurrency-friendly ones.
In this regard, the U.S. Treasury designated Square Capital, a company founded by Twitter CEO Jack Dorsey that supports crypto payments, to offer low-interest rate loans to small businesses. As per the agreement, those in need could apply for loans through the crypto application CashApp.
The event was seen by many as a small opening towards cryptocurrency adoption from the U.S. In the meantime, however, the online feud that started between Jack Dorsey and President Trump has cast a shadow on any positive outcome that may result from this collaboration.
The U.S. Government is reluctant to embrace virtual currency anytime soon. The consistency with which it impedes the regulation of Facebook’s cryptocurrency Libra is a clear sign of the Administration’s intentions.
The only good news comes from the U.S. Immigration and Customs Enforcement. The department responsible for fighting cross-border crimes managed to generate a new method to track unlicensed cryptographic activity. Its progress has led to the creation of the Cryptocurrency Intelligence Program, which will launch in 2021, and facilitate the long-expected adoption of blockchain technology in America.
The European Union
The new regulation classifies virtual currencies as “digital representations of value,” and the owners/investors as “obliged entities who are subject to the same laws imposed by the EU’s Anti-Money Laundering and Combating the Financing of Terrorism.
The recent regulation forces crypto exchanges to work with Intelligence Services across the EU and monitor transactions as well as suspicious accounts. This new approach to cryptocurrency flow throughout the Union has resulted in some companies and services like Bottle Pay to shut down.
In Canada, new guidance to regulate cryptocurrency exchanges came into effect in early January. The directive was issued by the Canadian Securities Administrators (CSA) to force some of the crypto exchanges to comply with the country’s laws.
In March 2019, CSA stated that exchanges had to abide by the Securities Law in Canada for every crypto transaction that they facilitate. In Canada, cryptocurrencies are considered securities and derivatives. However, some of the exchanges chose to go around the law saying that some of the digital tokens that they supported were neither securities nor derivatives.
Through the latest guidance, CSA states that the transfer of every crypto asset should comply with Canadian laws and regulations, regardless of their purpose.
The Russian Government is playing a waiting game when it comes to cryptocurrency adoption. The authorities have been trying to regulate its existence under several forms in the past decade, but they have yet to settle on a definition. It seems that they are waiting for other nations to adopt and use crypto assets as legal tender before they follow suit.
Nevertheless, 2020 has recorded a small step ahead for the cryptocurrency regulations in Russia. A department of the Russian Government has recently initiated a bill called On Digital Financial Assets that would help the authorities tax Bitcoin miners.
According to this law, the miners would have to register as private companies to operate legally. Also, the BTC that they would obtain would be considered property. We are still far from seeing Russia regulating the crypto industry, but baby steps are still steps, so investors remain optimistic.
South Korea followed up on the EU’s new directive regarding anti-money laundering by emitting a similar law. In March 2020, South Korea’s National Assembly passed a revised bill that forces cryptocurrency exchanges would have to report their operations to the Financial Intelligence Unit (FIU) under the Financial Services Commission.
The purpose of this law is to identify suspicious accounts and illicit transfers in the early stages of their existence. Giving the Intelligence Services a peek into the network real name-confirmed accounts from commercial banks should increase security in the industry. On the other hand, it goes against the principles of anonymity that have governed cryptocurrency transactions from their early beginnings.
One of the biggest wins for the cryptocurrency industry in 2020 came in India. This time, it wasn’t a regulation, but a court decision that overturned a ban imposed by the Reserve Bank in India (RBI) in 2018. The ban prevented all regulated financial institutions in the country from transacting with cryptocurrency exchanges.
In March, the Supreme Court of India overturned RBI’s decision by deeming it unconstitutional and excessive. The Court also stated that RBI stepped outside its jurisdiction by imposing an unlawful ban on one of the country’s most progressive sectors.
With India back in the crypto game (legally), and with the other countries making decisive steps forward in regulating cryptocurrency, the long-expected adoption of virtual assets on a global scale gets closer to reality. There is still a long road ahead to the day when crypto payments and blockchain solutions become widely available, but 2020 already seems like a good start to that journey.