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Cryptocurrency is a new financial instrument whose main rival is traditional fiat currencies. Given the growing demand for digital assets, many countries have begun to create legal norms for virtual coins.
We suggest that you take a look at the regulatory frameworks that have already been established for cryptocurrencies to understand how the authorities see the future of digital assets and how to make money off these views.
Russia’s authorities began work on regulating the digital asset market in 2017 by personal decree of President Vladimir Putin.
In May 2018, a package of legal norms passed the first reading in parliament, after which the initiative disappeared from the news for more than a year.
In May of 2019, during a speech at an international legal forum in St. Petersburg, former Russian Prime Minister Dmitry Medvedev made it clear to cryptocurrency market participants that regulating the digital asset market was not a priority for the country. Forming a legal framework for cryptocurrencies was a minor issue, according to Medvedev.
Despite this statement, in 2020, the State Duma continued to develop a bill ‘On Digital Financial Assets’. The regulatory standards were quickly approved and entered into force on January 1, 2021.
Unfortunately, there are many gaps in the measures adopted by the lawmakers. Here are a couple of examples:
Cryptocurrency received legal status in the Russian Federation as of January 1, 2021. At the same time, the owners of digital assets do not have the right to use digital coins as an alternative to the ruble.
Mining in Limbo
The laws do not fully reflect the rights of participants in the mining industry. Earlier, in November 2019, specialists from the Russian Association of Cryptoindustry and Blockchain (RACIB) proposed a way to legalize the production of cryptocurrencies through the formation of a national mining pool.
The project made it through the Bank of Russia’s regulatory sandbox, but, in September 2020, the Central Bank nonetheless decided to refuse to launch the platform.
During the same period, Russia’s Finance Ministry presented its own proposal for regulating the mining market. According to their team, the issue can be solved by making it illegal to receive income in the form of cryptocurrency for mining digital assets.
Recall that mining is the process of extricating coins from the cryptocurrency’s network. In other words, miners always receive payment in cryptocurrency. Whether the Ministry of Finance knows this or not is anyone’s guess.
During the development of the bill to regulate the digital asset market, Dmitry Medvedev proposed that the words ‘cryptocurrency’ and ‘mining’ be abandoned, as he considered them to be slang. As a result, a number of new terms have emerged that have complicated the understanding of the regulatory measures.
Also, the law does not clarify what role regulators should play in taxing participants of the cryptocurrency community. While the authorities voice their intention to exact a fee, the process by which this is to take place is not presented in detail.
As a result, participants in the cryptocurrency community have to be guided by explanations from the Ministry of Finance and the opinions of lawyers.
The main center of the cryptocurrency industry in the West is the United States. In many ways, the decisions of US regulators regarding the new financial instruments form the basis of legal norms in other countries.
American participants in the cryptocurrency community must pay a capital gains tax, which, among other things, takes into account the amount of income earned from cryptocurrency operations.
With Joe Biden taking office, the cryptocurrency industry is preparing to undergo a number of adjustments.
In particular, the new president intends to tighten tax regulations on the cryptocurrency market by 2023. Here are a couple of the changes the American cryptocurrency community will face in two years’ time:
With such measures, Joe Biden wants to replenish the country’s coffers at the expense of those who have previously evaded taxes. Bloomberg noted that thanks to the plan, the president should obtain the necessary funding to implement his economic development program.
Regulators in most countries have agreed that they need to bring cryptocurrencies into the legal arena, only because they do not have the tools to completely ban the new financial instrument.
The fact of the matter is, one of the fundamental principles the digital asset industry is based on is decentralization, where centralized financial management can be rejected thanks to the blockchain.
With the help of this technology, the cryptocurrency community has created an independent financial system that is dependent on no one, in which each user can independently control their own assets.
Of course, regulators can ban cryptocurrency in a country. At the same time, no one can prohibit cryptocurrency community participants from conducting operations with digital coins.
To do this, the authorities would have to find all cryptocurrency users and deprive them of access to the equipment with which they support digital asset networks. In theory, this is possible, but in practice, it is not feasible.
This is probably why a map showing the legality of Bitcoin (BTC) – the world’s most capitalized digital asset – looks like this today:
At the same time, the citizens of many countries freely buy digital assets despite bans. For example, a ban on BTC does not prevent Vietnamese citizens from buying this new financial instrument with their national currency.
So, while each country has its own way of addressing the digital asset market, the decentralized nature of cryptocurrencies still allows anyone to conduct operations, no matter what the regulatory approach.
As you can see from the map presented above, the governments of most countries are moving towards legalizing the digital asset market.
The creation of legal norms makes the new financial instrument more attractive to institutions. As a result, the legalization of cryptocurrencies can be considered an important condition for attracting investment in cryptocurrency space.
As of the end of May 2021, digital assets are just over 12 years old. During this period, cryptocurrencies have gone from being completely rejected by regulators to being legalized in many countries.
Twelve years is a short time for an instrument that many people see as the future of the financial market. Given the world’s movement towards digitalization, it can be assumed that the cryptocurrency industry will continue to develop.
Many companies see the potential of cryptocurrencies and use them to make a profit. Today, the list of BTC investors includes Tesla, MicroStrategy, Meitu, Nexon, and many other large organizations. In 2021, anyone can follow the example of these companies.
Most digital asset exchanges require you to register and provide proof of identity. Given the increased interest of regulators in the cryptocurrency market, this arrangement does not suit many users. However, there are ways of getting around this problem.
For example, you can anonymously purchase cryptocurrencies on the Alfacash platform. Among its many advantages, the following points are worth noting:
The digital asset market is still in the initial stage of development. Its potential can be exploited through timely investments in cryptocurrency. To profitably purchase digital assets while bypassing regulators, it’s worth paying attention to platforms like Alfacash.
The opinion of BeInCrypto staff in a single voice.