BitOoda Regulatory & Geopolitical Analysis, 6/1/2020: Mixed Approach by Emerging Crypto Markets Prolongs Uneven Global Adoption
Putting aside for a moment the growing global focus on CBDCs, we focus our geopolitical assessment this week on the uneven approach still being taken by several of the world’s key emerging markets — India, Russia, and Iran — and how that will affect the global adoption of digital assets.
· India’s central bank clarified that commercial banks can provide services to crypto firms and traders, following the Supreme Court’s decision in March to remove the years-long ban. Trading volumes are increasing across domestic platforms, and BitGo announced it is now providing custody service for CoinDCX, India’s largest exchange. We continue to believe that India will represent a significant market for digital assets as government restrictions gradually loosen.
· Iran continued to advance its position on crypto mining with a presidential order to draft an updated national strategy. The regime already supports the mining industry with a national licensing system that has enabled mining companies operating in Iran to build up 4% of bitcoin’s total hashrate. However, Iran’s parliament simultaneously is attempting to stem capital outflow by including crypto in the country’s strict foreign exchange and currency smuggling regulations.
· Russia has introduced new legislation to criminalize issuing or transacting in digital currencies. While the country’s parliament has been discussing various crypto laws for several years, the tenor behind its stance against digital asset activities has remained consistent.
What do these countries’ differing policy approaches mean for global regulatory adoption? Our view is that these three examples — with one country slowly opening up to digital assets, one supporting a specific segment of the ecosystem but restricting the rest, and one retaining an outright ban — show that policy stances around the world will remain distinct and independent, which will result in the continued uneven nation-by-nation approach that has characterized crypto regulation to date.
With the absence of global coordination and the fact that no authoritative international body has jurisdiction over the space, what are some potential ways of developing the infrastructure and governance frameworks needed for global adoption?
(1) CBDCs: The continued push toward the use of CBDCs for retail use has the potential to overcome concerns from anti-crypto governments about threats to their monetary sovereignty. We are encouraged by the quickly-growing recognition that CBDCs will need to be developed as partnerships between the public and private sector, as noted this week in the Digital Dollar Project’s whitepaper as well as comments from a senior IMF official.
(2) Industry Self-Regulation: Digital asset trade associations can help fill the gaps between government regulatory frameworks, and can aid policy development as countries struggle to define their approaches. For example, three associations — the Chamber of Digital Commerce, Global Digital Finance, and the International Digital Asset Exchange Association — collaborated to develop messaging standards for compliance with the FATF Travel Rule, and ADAM earlier this year launched its Code of Conduct to define and promote market fairness and efficiency.
(3) Migration toward Regulated Participants: As governments define their policies and approaches for the digital economy and institutions increase their engagement, the use of regulated platforms and participants will be critical to ensuring the continued legitimization of the full range of digital asset activities and financial instruments.
BitOoda will continue to play a lead role in the advancement of this landscape through our focus on compliance, our participation in initiatives to drive the industry forward, and our continued innovation and introduction of new products and data-driven insights to expand the sophistication of the global market.