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The Policy Direction of Cryptocurrency Regulation in Emerging Economies

With India banning the use of cryptocurrency rather than opting for regulation, could it end up costing the country?

Tuesday July 30, 2019 10:39 PM, Hena Farhat, ummid.com

Bitcoin

[Buying Bitcoin and other cryptocurrencies in Eastern Europe has usually been conducted through exchanges, but there are progressive ways to get around that. (Image: Pixabay)]

With India banning the use of cryptocurrency rather than opting for regulation, could it end up costing the country? Cryptocurrency regulation is in its formative stages of development around the world, but for emerging economies, it offers a unique opportunity to realise the benefits of adopting wider, large-scale crypto networks which can give them a head start on the rest of the world, and India could end up being left behind. Using Eastern Europe as a case study, we look at how emerging markets have reacted towards cryptocurrency.

Eastern Europe is at a crossroads right now and is on the receiving end of influences from the direction of China, Russia and the European Union. But, just as Bitcoin was the world’s first cryptocurrency and has paved the way for the likes of Ethereum, Litecoin, Ripple and Dash, this region increasingly has a role to play in the development and the future of cryptocurrency regulation.

Positive Approaches To Cryptocurrency Are Widespread

Eastern Europe has been long known to offer cryptocurrency exchanges short shrift. In 2017 bankers in Bulgaria shut down Bulgarian Bitcoin exchanges amid banking fears it was gaining too much traction in trading circles, too soon. Banking clampdowns like this are not uncommon. In 2018, Slovakia’s Central Bank made a move, insisting banks withdraw their services to customers trading in cryptocurrencies.

Buying Bitcoin and other cryptocurrencies in Eastern Europe has usually been conducted through exchanges, but there are progressive ways to get around that. Platforms such as IG now offer traders alternative Bitcoin trading strategies, where users can speculate on its price instead of buying and selling the cryptocurrency in a direct interaction with an exchange. This is progressive in that the latter can be fraught with disadvantages for traders, such as poor regulation or fees and restrictions.

In addition, attitudes towards cryptocurrency in Eastern Europe continue to vary but seems to be increasingly positive. Belarus has made Bitcoin mining tax-free, the Czech Republic has installed cryptocurrency ATMs in its metro stations, and Slovenia has embraced cryptocurrency with regulation that currently only taxes the mining of Bitcoin, but not for the trading of digital currencies. It has also gone one step further, constructing its own cryptocurrency-friendly and blockchain-run shopping center, aptly called Bitcoin City, launched in October last year.

Cryptocurrency Regulation

[As mentioned previously, India has restrictive policies like other countries such as Ukraine and Poland. (Image: Pixabay)]

Still, not all governments have progressive cryptocurrency policy

While Slovenia’s Bitcoin City, which is run by its own (adopted) cryptocurrency, the ELI Token, aims to push forward the country’s economy to compete with larger European countries, this attitude isn’t matched throughout the region.

Ukraine for example still has largely unregulated exchanges, although there have been calls for taxes to be applied to cryptocurrency gains, there have been increasing attempts to get regulations through its parliament regarding the legal policy on cryptocurrencies. And while Hungary, Romania and Slovenia remain more optimistic, choosing to introduce or debate more progressive regulation with blockchain technology, they have yet to commit to anything more concrete.

Then there is Poland and Bulgaria, who have decided to align themselves with the European Union in regards to both regulation and controls. This means limiting the trade and exchange of cryptocurrencies. This is particularly unsurprising as far as Bulgaria is concerned, as the European Union has welcomed bids from the country to join the Euro in 2022, suggesting that their policy on cryptocurrency is going to continue to mirror the European Union.

Emerging Economies

[Then there is Poland and Bulgaria, who have decided to align themselves with the European Union in regards to both regulation and controls. (Image: Pixabay)]

China has already invested billions into Eastern Europe and the Balkans, and Russia gets closer to China all the time. It is currently considering an ‘offshore’ financial centre for cryptocurrency and international trading near the Chinese border. It means policymaking for smaller European nations is critical: the direction they take could be huge for their future wealth and trading prospects.

Eastern Europe has long held a deep well of talented developers and entrepreneurs. This talent, alongside a boot-strap approach to tech startups, has the potential to provide the building blocks for wider cryptocurrency adoption and greater influence on the direction their governments take on cryptocurrencies like Bitcoin.

Slovenia has made some of the biggest regulatory moves in this direction but every country is different. As mentioned previously, India has restrictive policies like other countries such as Ukraine and Poland. It is yet to be seen which direction will be the more prudent, or how and when government cryptocurrency regulation will become as mainstream as that for regular currencies.

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