Cryptocurrency has become a popular means of payment worldwide. Famous tokens like Bitcoin, Ethereum, and Litecoin are closely monitored by financial experts, analysts, and crypto enthusiasts. Many governments allow the registration of crypto exchanges and the use of digital currency alongside fiat. Tokens are rapidly integrated into various financial institutions and used by startups to secure investments in their projects. Some countries even use coins to address issues in the financial sector.
Some countries are hostile towards cryptocurrencies. Their governments are concerned about the use of decentralized assets and place various restrictions on Bitcoin and other cryptocurrencies, sometimes even prohibiting them entirely. In some jurisdictions, digital coin circulation is not regulated, while others have partial limitations. It is essential to identify which states are opposed to cryptocurrency activities.
Reasons for Government Hostility Toward Cryptocurrencies
The governments of individual states restrict or ban cryptocurrencies for several reasons:
- The trading of decentralized assets can pose a risk to the financial stability of the state.
- The possession of digital assets goes against anti-money laundering (AML) legislation.
- Cryptocurrency transactions are challenging to control, making them non-compliant with anti-terrorist financing (CFT) policy.
- Purchases made with digital currency do not come with a receipt, consumer protection, or the option for refunds or exchanges.
- Lose control over the money supply.
- At the end of last year, crypto exchanges were accused of undermining sanctions against the Russian Federation, causing geopolitical harm.
In fact, these beliefs are simply myths. The governments of cryptocurrency-friendly countries believe that digital currency boosts the economy and does not undermine state policies when its circulation is regulated by law.
Countries with the Most Hostile Policies Towards Cryptocurrencies
Consider the top seven countries that are unfriendly to cryptocurrencies. These jurisdictions are taking strict measures against cryptocurrencies, citing concerns about economic stability, financial crime, and security.
China
In 2021, China initiated a widespread campaign to prohibit cryptocurrencies. This included restrictions on cryptocurrency transactions, as well as the buying and selling of mining equipment and tokens themselves.
Previously, conducting ICOs was forbidden. Many experts believe the large-scale testing and implementation of the digital yuan influenced this policy.
Kuwait
In mid-2023, the Kuwaiti government prohibited the use of cryptocurrency for any purpose. Tokens could not be bought, sold, or stored as crypto assets.
The official reason for the restrictions is the results of a study conducted by the National Committee for Combating the Financing of Terrorism and Money Laundering. Analysts and experts have concluded that the regulation of cryptocurrencies and control of their turnover at the state level is a complex process. The use of tokens poses a danger to the state and economic security of the country.
India
The status of cryptocurrency in India as of mid-2024 still needs to be determined. In 2018, the Reserve Bank of India imposed a ban on all cryptocurrency transactions. However, in early 2020, the country’s Supreme Court lifted this ban. As a result, the use of cryptocurrency is not prohibited in the country, but there has been no formal legalization of cryptocurrencies either.
Algeria
The Algerian government has always been cautious about digital currencies and has expressed concerns about the use of bitcoins and other tokens in the country. Cryptocurrency transactions were officially banned in 2018.
The government did not provide clear explanations or comments on the reasons for the restrictions. Perhaps, like many other countries that have abandoned the use of tokens, the Algerian leadership saw them as a potential threat to the economy, financial, and national security.
Russia
The Central Bank of the Russian Federation is concerned about the high level of confidentiality associated with cryptocurrencies. According to the regulator, this level of privacy could potentially enable the financing of terrorism, money laundering, and other illegal activities. It is the Central Bank’s position that leads to the regular rejection of bills aimed at legalizing and regulating cryptocurrency transactions.
The Central Bank considers cryptocurrency a threat to the economy and a high-risk investment. The Ministry of Finance disagrees with the bank’s stance and advocates for the prompt development of financial oversight and regulation mechanisms for the cryptocurrency market, similar to those in place in the United States. Currently, it is possible to invest in cryptocurrency in the Russian Federation, but transactions using tokens are not permitted.
Turkey
Turkey banned the use of cryptocurrency at the end of April 2021. This means that tokens cannot be used as a form of payment in the country. Trading platforms have stopped exchanging traditional currency for digital currency. This decision effectively stopped the circulation of bitcoins and other cryptocurrencies, both through intermediaries and directly between parties.
Bangladesh
Cryptocurrency has been banned in Bangladesh since 2017. The central bank issued a statement that digital transactions and blockchain technology are against the law. The government supported the Central Bank and banned the use of cryptocurrency in the country, recognizing it as illegal according to the Law on Regulation of Currency Transactions.
Consequences of Anti-Cryptocurrency Policies
Banning blockchain technologies and cryptocurrencies results in the loss of talented software developers and entrepreneurs. They contribute taxes, attract investments, and drive economic growth.
While some countries are abandoning the benefits of digital assets, others are working on a legal framework to regulate cryptocurrencies and receive many benefits from this:
- Economy development
- Attraction of international investors
- Receiving taxes to the budget from local and foreign cryptocurrency companies registered in their territory.
Future of Cryptocurrency Regulations
Some states that had previously banned cryptocurrency have reconsidered their stance and acknowledged the potential and lost profits associated with it. Over time, they have changed their attitude towards this promising financial instrument. For instance, Bolivia lifted its multi-year ban on digital assets. India has also made a similar decision, but there has yet to be official permission to use it as the government is still working on this matter.
In Russia, the issue of cryptocurrency legalization remains unresolved. The Ministry of Finance is currently developing bills for market regulation. However, the use of cryptocurrencies in the country is being hindered by international sanctions. For instance, some cryptocurrency exchanges like Binance have exited the Russian market and prohibited Russian users from creating accounts. Furthermore, the US Treasury has imposed restrictions on Bitcoin mining in Russia.
In the UK, the government has announced its plans to include stablecoins in the existing local legal regulations in order to address any ambiguities and uncertainties. This move will bring the United Kingdom one step closer to establishing comprehensive cryptocurrency legislation that will oversee transactions and the market in general.
If you are considering opening a cryptocurrency business and want to choose a country where it can be done safely and legally, please reach out to our experts. We can assist with consultations, selecting the proper jurisdiction, and handling all registration procedures. Additionally, we offer account opening services for cryptocurrency companies.
Conclusion
Cryptocurrencies have carved out a significant role in the global financial landscape, with tokens like Bitcoin, Ethereum, and Litecoin being closely monitored by financial experts and enthusiasts. While some countries embrace and regulate cryptocurrencies to harness their economic benefits, others impose stringent restrictions due to concerns over financial stability, money laundering, and national security. The contrasting approaches highlight the diverse perspectives on digital assets and underscore the ongoing evolution of cryptocurrency regulation. As countries reconsider their stances, the future of cryptocurrencies remains dynamic and full of potential.
15 July 2024 