The latest cryptocurrency regulations in Asia are wins for Bitcoin adoption but come at the cost of privacy. South Korea is tightening cryptocurrency regulations while India will likely lift its 2018 ban giving cryptocurrency companies bank accounts.
Meanwhile, an American lawmaker has proposed a new bill that follows suit but is not expected to pass.
India — Central Bank Overruled
India’s supreme court has overruled the Reserve Bank of India (RBI)’s 2018 ban that prevented banks within the country from working with cryptocurrency-related businesses. Sunny Ray, the global head of business development for cryptocurrency exchange Kraken and previous founder of the first regulated cryptocurrency exchange in India, described the significance in a blog post.
“This is an incredibly emotional moment for India,” Ray wrote. “Satoshi created Bitcoin because he felt that central banks were inefficient. The fact that the crypto industry just battled, and won, against the central bank located in the second-most populous country in the world is a massive achievement. We fought for 1.5 billion people to have the right to access crypto.”
Ray’s comments are not overblown. The Indian Supreme Court’s 180-page ruling boils down to a limit on the RBI’s power, by acknowledging how disproportionate the ban is for dealing with the often purported risks of cryptocurrency — enabling money laundering and terrorist financing. The court acknowledged that rather than prevent these risks, outright prohibition could have even exacerbated the problem by driving illicit activity underground. Though legislation will take time, reversing the ban means the Indian government will regulate cryptocurrency businesses with AML/CFT controls.
Although it’s easy to imagine what the RBI’s real intentions for such a disproportionate ban actually were, this overruling is a win for Bitcoin adoption and a limit on consumer privacy.
Despite the overrule, India’s central bank is now seeking a review. Meanwhile, cryptocurrency businesses inside and outside India are moving quickly. For example, Kraken stated, “The future is bright for crypto in India, we’re going to be there every step of the way.”
South Korea — FATF Guidelines Become Law
South Korea’s latest significant cryptocurrency regulation announcement is less palpable. Where there was previously no law, only guidelines, its new bill provides a framework for regulating cryptocurrency to the Financial Action Task Force’s (FATF) AML standards.
The announcement is both a win for legal certainty and an imposition of heavier requirements for cryptocurrency businesses in the country. In short, the bill will necessitate more alphabet soup compliance accreditation for cryptocurrency businesses through the real-name verification system to hold a bank account within the country as well as certification via the information security management system (ISMS) from the Korean Internet Security Agency (KISA).
We spoke with Joyce Yang, CEO of Global Coin Research, to break it down.
“[People] could already trade cryptocurrency with over 30 exchanges in Korea prior to the amendment passing, but with the amendment, the permitted and licensed exchanges actually goes down to just five to seven exchanges,” Yang said.
This number will probably increase as unaccredited exchanges have until September 2021 to meet the requirements. However, Yang is also hopeful that this new law will ultimately bring in more institutional money to Korean exchanges which, according to Yang, has plateaued as a retail market for the last six months.
U.S. — Regulatory Action Lacks Political Backing
These regulatory movements in Asia are without a doubt being followed closely in the West. Yang pointed out that U.S. Securities and Exchange Commission (SEC) Commissioner Hester Pierce has frequently visited Asian countries such as Singapore, expressing the need to accelerate cryptocurrency regulation guidelines within the United States. However, she is also less sure something will be moved forward in the short term due to the coronavirus.
Valid concerns still circulate in the American Bitcoin ecosystem about staying relevant. Most recently, this conversation has shifted to the “Crypto-currency Act of 2020,” proposed by U.S. Rep. Paul Gosar. This act would create a “Federal Digital Asset Regulator” and divide cryptocurrency regulations according to their classification as currency (stablecoins), commodities (Bitcoin), security (Tezos) and privacy coins (Monero, Zcash). However, Jerry Brito, executive director of advocacy group Coin Center, does not believe the bill has legs.
When assessing how important a cryptocurrency bill proposal is in the U.S., Brito underlined the importance of political reputation and clout. In his estimation, Gosar doesn’t appear to have enough.