World’s leading economies continue to legitimize financial role of cryptocurrency
What many have deemed as a long time coming is beginning to take shape across the globe.
Thus far, the definition of cryptocurrency assets as money, commodities, securities, or something else entirely has remained largely open to interpretation – but certain countries are now starting to lean toward a more concrete definition.
So far in 2020, several of the world’s largest economies have put into motion official changes to the way cryptocurrency is recognized and traded within their respective countries. These changes are likely to have a positive impact on the popularity, application, and value of crypto, no longer halting its innovation and relevance in mainstream financial circles.
Here’s a look at four countries that have recently shifted their stance on cryptocurrency toward that of an increasingly legitimate financial medium.
In late February of this year, a French commerce court officially qualified bitcoin as a fungible, interchangeable asset much like fiat currency.
The decision came via a dispute between two parties over a bitcoin loan, and ultimately identified bitcoin lending as a form of consumer loan, wherein the ownership of the property is transferred to the borrower during the complete term of the loan. In specifying these terms, bitcoin was defined as an official form of legal currency.
This decision could have major implications throughout the industry, as it also suggests that future crypto loan contracts could include a clause for the return of extra assets created by a fork, e.g. bitcoin cash being created as a fork of bitcoin.
In early March, India’s Supreme Court lifted its ban on cryptocurrency trading.
This ban had been in place since April of 2018 when the Reserve Bank of India (RBI) cited various risks in dealing in crypto. The opposition argued that the RBI could not explicitly deny access to banking channels for the purposes of crypto transacting, to which the Supreme Court agreed – thus legitimizing crypto as a legal currency in the country.
Since this decision was something many had anticipated for a couple years, much of the infrastructure needed to support crypto on a national scale is already largely in place. Many of the crypto-related organizations that had previously shut down as a result of the ban are now beginning to reenter the space, as well.
Cryptocurrency became fully legalized in South Korea in early March, marking the first official entry of crypto into the nation’s legal system. This is expected to result in significant restructuring within the domestic blockchain industry.
Exchanges in the country now have until September 2021 to become fully compliant or risk being shut down.
Many applaud this change as the beginning of a “New Coin Age” in Korea, where other official guidelines are also being put in place. Industry organizations are now required to have a real-name verification partnership with an approved bank – a measure aimed at preventing money laundering by assigning a verified individual to a single bank account with which they can deposit and withdraw fiat currency from an exchange.
The Federal Financial Supervisory Authority (BaFin) has officially defined cryptocurrencies as financial instruments in Germany, opening the door for citizens to trade in crypto in addition to a bevy of new opportunities for crypto-based businesses.
BaFin laid out specific guidelines for the definition of crypto centered around five key characteristics:
- It is not issued or guaranteed by any central bank or public body.
- It does not have the legal status of currency or money.
- It can be used by individuals or entities as a means of exchange or payment.
- It can serve investment purposes.
- It can be transmitted, stored, and traded electronically.
Much like in South Korea, this change comes in the wake of new requirements in the EU for members to comply with anti-money-laundering procedures, including the need to disclose traders’ identities and to report any suspicious activity.
The continued growth of crypto
Japan, the United States, and China were all ahead of the curve in officially recognizing crypto as a legitimate financial medium – and now several of the world’s other top markets are following suit.
As the dominoes continue to fall, this could mean big things for the growth of crypto. And, bitcoin mining is one of the most compelling ways to get exposure to this developing digital asset for investors with a longer-term time horizon.
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