According to the World Economic Forum’s Global Future Council on Cryptocurrencies, there has been no internationally coordinated regulation of cryptocurrencies through international bodies that have been working on assessing risks and appropriate policy responses to the rise of cryptos.
Globally, central banks and regulators already have their eyes on this growing trend. Though they share a common objective of stabilizing their monetary systems and spurring innovation and economic growth.
The objectives of governments appear to broadly align: protect the consumer, prevent illicit financing, protect the integrity of the market and promote innovation. Their approaches, however, vary.
Here are the major announcements from governments and central banks in the last month.
Central African Republic becomes the second country to adopt bitcoin as legal tender
- Lawmakers in the CAR’s parliament voted unanimously to pass a bill legalizing bitcoin and other cryptocurrencies.
- Bitcoin will be considered legal tender alongside the regional Central African CFA franc.
- Obed Namsio, chief of staff to President Faustin-Archange Touadera, called the move “a decisive step toward opening up new opportunities for our country”.
Panama Assembly Passes Bill Regulating Bitcoin
- The goal is to foster job creation and make the country a leading technology hub in Latin America, a Congressman said. There will be no capital gains tax on bitcoin investments.
- The new legislation regulates the trading and use of cryptocurrencies, the issuance of digital value, tokenization of precious metals and other assets, and payment systems, and dictates other provisions, according to the country’s Legislative Assembly
Honduras’ Roatán Island, Portugal’s Madeira to ‘Adopt Bitcoin’
The announcements were made by representatives from the three countries, who were brought to the stage of the Bitcoin 2022 conference in Miami.
According to the announcements:
- The Island of Roatán in Honduras will have Bitcoin “operate as legal tender,” including giving Bitcoin tax-free status. In addition, the island’s economic free zone, managed by Honduras Prospera Inc., will enable Bitcoin bonds as a way to bring foreign direct investments into the country, Joel Bomgar, President of Honduras Prospera, an economic development platform, said.
- Madeira, an autonomous region of Portugal, will “adopt Bitcoin” in this archipelago, according to the President of the Government of Madeira, Miguel Albuquerque. “I believe in the future and I believe in Bitcoin,” Albuquerque said on stage at the conference. He added that his government will “continue to work to create a fantastic environment for Bitcoin in Madeira.”
- New legislation focused on Bitcoin and fintech more broadly will be proposed in the Mexican senate, Senator Indira Kempis from Mexico said. “We want to sit down with the president to talk about making Bitcoin legal tender in Mexico,” she added.
Cuba approves cryptocurrency services, requires central bank license
- The Cuban Central Bank has granted the right to issue licenses for cryptocurrency-related services. This new ruling is set to come into effect on May 16th of this year. Official Gazette number 43 outlines the new regulations for virtual asset service providers.
- Under the new rules, the Central Bank of Cuba will be authorized to issue licenses of approval for any services using Bitcoin or virtual assets for up to 1 year.
Buenos Aires City to Allow Residents to Make Tax Payments With Crypto
- Buenos Aires, the capital of Argentina, will allow the payment of taxes using cryptocurrencies, Mayor Horacio Rodríguez Larreta announced on april 26th.
- According to Mayor Larreta, the Buenos Aires City government will not receive crypto directly from residents but instead Argentine pesos, via conversions to be carried out by “leading” crypto companies.
- “The city is not going to have crypto in public accounts, but through an agreement with virtual wallets we are going to add one more payment option to the ones we already have, with the idea of making things easier,” Rodríguez Larreta said in his announcement.
Bahamas to Allow Citizens to Pay Taxes With Digital Assets
The Bahamas government will allow Bahamians to pay taxes using digital assets, according to a white paper that outlines the nation’s digital asset strategy until 2026.
- The government will also start enabling Bahamians access to digital assets using the Bahamas sand dollar, a central bank-issued digital currency that was launched in 2020.
- “We have the vision to transform the Bahamas into the leading digital asset hub in the Caribbean,” Prime Minister Philip Davis said.
Fort Worth, Texas, has announced it will start mining the cryptocurrency Bitcoin
- The City Council voted unanimously to move forward with mining after three machines were donated by the Texas Blockchain Council.
- Fort Worth’s city government said it is launching a pilot program using three S9 Bitcoin mining machines that will run 24 hours a day and seven days a week.
- Mayor Mattie Parker said the goal is to not make money from Bitcoin mining but to try out the new technology and see how it works for the city.
- The energy costs of running the three machines will be offset by revenues generated from mining Bitcoin, the city council said.
Central Bank of Portugal Grants Country’s First Crypto License to a Bank
Bison Bank, a Portugal-based financial institution, has received a license from the Portuguese central bank (Banco de Portugal) to operate as a virtual asset service provider (VASP), Banco de Portugal announced on April 15th
- Bison Bank will create a special business division, Bison Digital Assets, to operate as a virtual asset exchange, according to Portuguese media outlet Sapo.
- The division is the first entity in Portugal owned by a bank to be authorized by Banco de Portugal to offer custodian and crypto trading services.
- Bison Bank provides wealth management, depositary, and investment banking services to individuals and institutional clients, according to its website. It is owned by a Hong Kong-based Chinese private capital group.
- In March, Banco do Portugal granted the first full all-categories VASP license to Utrust, a Portugal-based on-chain crypto payments firm.
Slovenia Unveils Plan for Flat Tax on Crypto Transactions
- The Slovenian government on April 7 unveiled a flat-rate tax proposal on crypto redemptions and asked the Slovenian Parliament to move quickly to approve it.
- The proposed tax, which is part of the government’s post-COVID recovery plan, would be due when virtual currencies are sold or exchanged and would be set at an effective rate of just under 5%. The goal is to help “debureaucratize” and simplify the current system, and improve Slovenia’s competitive position as crypto markets take off, the government said.
- If the legislation passes, Slovenia “will be one of the few countries, if not the only country in the world, with such a simple taxation” for digital currencies, according to the press release announcing the proposal.
- This law was first introduced by the country’s financial agency last year. Documents published by the government suggest that the tax will be charged at 5% of the value of the redemption, after subtracting an allowance of 10,000 euros ($10,900).
U.S. state of Tennessee prepares to hold crypto
- Tennessee is seeking a contractor to hold cryptocurrencies on its behalf
- The state’s treasury posted a request that potential vendors explain how their companies would manage their virtual currencies, including bitcoin.
- Tennessee currently holds no crypto, but is seeking a vendor in order to “be prepared in the event that unclaimed virtual currency is remitted to the state’s unclaimed property program”.
Virginia Approves Bill Allowing Banks to Offer Cryptocurrency Custody Services
Virginia passed a new bill (HB 263) permitting banks in the Commonwealth to provide its customers with crypto custody services “so long as the bank has adequate protocols in place to effectively manage risks and comply with applicable laws.” Prior to offering custody services, a bank will need to carefully examine the risks involved in offering the service, which includes meeting the following three requirements referenced in the bill:
- Implementing effective risk management systems and controls to measure, monitor, and control relevant risks associated with custody of digital assets;
- Implementing insurance coverage for such services; and
- Maintaining a service provider oversight program to address risks to service provider relationships.
Germany’s Commerzbank applies for Iocal crypto license
- Commerzbank is the country’s first major institution to seek such a license. With approval, the bank will be allowed to provide crypto safeguarding services to its customers and expand its crypto custody offering.
- To encourage regulated enterprises to enter the crypto industry, Germany proposed a new licensing scheme for crypto services in 2020 and an amendment to the EU’s Money Laundering Directive. In January, the bank had sought a license from BaFin, Germany’s Federal Financial Supervisory Authority.
- According to the Borsen-Zeitung report, Bernd Reh, a senior spokesman of Commerzbank, said that in the spring of 2021, the bank had formed a partnership with Deutsche Borse and Fin-Tech 330x to achieve this goal.
- The bank is also trying to come up with its digital asset strategy. Reh said that in the future, they were planning their offerings for customers. They have applied to the BaFin for a license to keep crypto-assets safe.
After largely standing aside for years as cryptocurrency grew from a digital curiosity into a volatile but widely embraced innovation, regulators across the world are racing to address the potential risks for consumers and financial markets.
Their concerns have only grown as both new and established firms have rushed to find ways to profit from bringing the massive wealth held in cryptocurrency into the traditional financial system through quasi-banking services like interest-bearing accounts and lending.
With more and more banks adopting crypto in one way or another every year, there’s no doubt that crypto will continue to grow within the banking industry over the coming decades
The White House’s Executive Order is a noteworthy step in the right direction toward enabling cross-agency collaboration. A globally coordinated approach, encompassing international cooperation around regulation for crypto-assets, will be economically optimal, protect consumers and prevent abuse of cryptocurrencies for illicit activities.
Paul Tudor Jones says it best, “Bitcoin has this enormous contingent of really, really, smart sophisticated people who believe in it. You’ve got this group which by the way is crowdsourced all over the world that is dedicated to seeing Bitcoin succeed in becoming a commonplace store of value and transactional to boot.”
Adoption has grown to a saturation level (in terms of scale and diversity) which makes a future bitcoin standard for the world inevitable.
