- The nature of cryptocurrency
built on decentralized blockchain architecture
and without the need for any intermediaries
or institutional oversight
means there are no technical barriers
to global deployments in use.
Assuming there's internet access, cryptos can function.
Building and rolling out Bitcoin, for example,
didn't require any special licenses or permits
and it was able to operate independent of national
and international monetary regulations.
This frictionless operating model was exhilarating
to early users and a curiosity to authorities
such as governments and traditional financial institutions.
At first, Bitcoin and a few other cryptocurrencies
seemed like a novelty with some expectations
that they wouldn't amount to much.
After all, it was believed by many
that a digital currency with no centralized management
and no real basis for value was doomed to failure.
Early on, governments and regulating agencies
mostly adopted a wait and see approach.
But as Bitcoin, Ethereum, and others
showed no signs of going away,
and in fact began rapidly growing in value in consequence,
authorities started to change their position.
Today, the world is divided into countries
where cryptocurrencies are legal,
and into those that have banned it completely.
One country, El Salvador, an outlier as of now,
has been the first to adopt Bitcoin as legal tender.
The countries with outright bans include Algeria,
Bangladesh, China, Egypt, Iraq, and Tunisia.
A much larger group including Vietnam and Kuwait
haven't directly banned cryptos,
but they have imposed restrictions such as prohibiting banks
from dealing with cryptos and outlawing crypto exchanges.
Those would outright and implicit bans
cite the use cryptos for illegal activities,
including money laundering and avoiding tax,
absence of consumer protections,
environmental impact through high energy use,
and destabilizations of their financial systems
as the main justifications.
Depending on the specific country,
other reasons are given too.
Those caught using cryptos can face penalties
and potential jail time.
Unfortunately,
the number of countries limiting use of cryptos
continues to increase,
doubling between 2018 and 2022.
Even in countries where crypto use is legal,
many governments are engaged in active debate,
focused on what steps, if any, they should take next.
In the United States,
the Securities and Exchange Commission, the SEC,
tasked with protecting investors
and maintaining order in the markets is getting more active.
Their approach early on was one of observation,
stating their position
as wanting to keep an eye on developments,
while supporting innovation.
The momentum now appears though to suggest that regulation
will eventually come.
In an interesting twist,
a number of countries, including those with some form of ban
have either launched or are actively exploring the creation
of national cryptocurrencies.
These include the United Arab Emirates,
China, Venezuela, Estonia, Russia, and Sweden.
While this approach may provide the control
and oversight they seek,
centralizing a cryptocurrency is clearly at odds
with its original intent.
In the months and years ahead,
the position that countries take on cryptocurrencies
will evolve.
Those with bans will lift them.
Others where it's legal, will prohibit them.
It's going to be a highly fluid environment
for a long time to come.