As regulation of the crypto space develops worldwide, some nations are taking the lead on supporting the development of both blockchain and cryptocurrency.
Countries without an extensive tax base, those cursed with a relatively low GDP, or those not traditionally lauded for their liberal policies are taking advantage of the lack of regulatory clarity elsewhere to attract cryptocurrency businesses to their shores.
The Eastern European country has both willingness to explore blockchain at a state level and now has laws in place regulating the legality of cryptocurrency usage.
As President, Alexander Lukashenko has shown strong support for enhancing the Belarusian economy by favouring crypto-friendly laws.
According to Lukashenko’s official website his broadly liberal business ordinance ‘Concerning the Digital Economy’ was passed on 22 December 2017. It took effect in late March 2018.
It states that natural and legal Belarusians are allowed to buy, sell, mine and exchange cryptocurrency coins and tokens, as well as store virtual currencies in cryptocurrency wallets.
In a speech Lukashenko noted: “Its goal is to give people the opportunity to develop their business rather than think about the many bureaucratic formalities. There are no more obstacles. You just need to file one document [and] you can get down to work the next day.
“The main goal of the document is to create conditions to attract world IT companies to Belarus [as well as] the application of cutting-edge financial instruments and technologies. In fact, Belarus becomes the first state in the world which opens up broad opportunities for the use of the blockchain technology. We have all opportunities to become a regional centre of competence in this field.”
Cryptocurrency and blockchain companies have also been given leave to set up in Belarus’s 2005-created special economic zone in the capital Minsk, called the High Technologies Park (HTP).
Only companies working in this area are allowed to operate cryptocurrency exchanges or other trading platforms, attract funding through ICOs and use smart contracts on Ethereum to fulfil business requirements. Thus, Belarus became the first country in the world to legalise smart contracts at government level. Tax breaks are in force, as companies do not have to declare income from their cryptocurrency operations until January 1, 2023 and HTP operators enjoy simplified rules for hiring foreign workers including a 180-day window to stay in Belarus without a visa.
As a self-governing Channel Island 12 miles off the coast of northern France, Jersey is a crown dependency of the United Kingdom.
This 100,000-population island does not have to follow the laws of the UK Parliament and has much more concrete (and favourable) legal status for cryptocurrency and blockchain businesses.
This is evident in its rules designed to attract cryptocurrency exchanges to register in Jersey.
Any cryptocurrency exchange with an annual turnover of more than £150,000 is fully supervised by the Jersey Financial Services Commission (JFSC) and must comply with existing anti money-laundering legislation, including counter-terrorism financing and know-your-customer rules.
Smaller crypto exchanges with a turnover less than £150,000 are exempt from these stringent rules and are allowed to operate in a regulatory sandbox. Any exchange that deals with transactions higher than €15,000 are denoted 'high value dealers' under the Proceeds of Crime Act 1999 therefore must be supervised by the JFSC and comply with all the above mentioned anti money-laundering laws.
On July 4 2018 this European island nation passed three linked bills through Parliament, becoming, in the words of the President Joseph Muscat, “Blockchain Island”.
The Malta Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act and the Virtual Financial Asset Act include specific laws against misleading advertising on ICOs or cryptocurrencies, market manipulation, and insider trading. They are slated to take effect in October 2018.
Malta’s government has also backed the EURS stablecoin, pegged to the price of the Euro.
Stablecoins offer a way to own and move fiat (state-backed) currency across different exchanges without the need to convert into less vulnerable traditional currencies. In theory, that means transactions are fast and cheap, without the wild volatility that affects many other cryptocurrencies.
Blockchain companies are already undertaking contracts for public sector projects in Malta. For example, middleware firm Omnitude has signed a memorandum of understanding with the Maltese government to use its hyperledger blockchain-based parts tracking service to reduce theft and fraud in the country’s public transport sector.
Junior Minister for Financial Services Silvio Schembri explained to Forbes : “While other countries are typically looking at crypto and blockchain for short-term gains, we understand what blockchain technology can offer in the long run.
“It is also noteworthy that Malta did not have to amend our present legislation to fit these DLT (distributed ledger technology) regulations.
“If a company would like to issue an ICO here, that company would be allowed six months to get into line with the bills we have passed. This will be extended to one year for crypto exchanges.
“There are three basic core principles that we abide to: market integrity; consumer protection and industry protection.”
The banking hub of Europe has become one of the foremost supporters of blockchain and crypto-tech companies, who come for the business-friendly registration rules and tax codes and stay for the prestigious neighbours the area attracts.
The 30,000-population city and administrative region of Zug is home to ‘Crypto Valley’ with around 200 blockchain companies taking up residence, including the Ethereum Foundation, cloud computing firm DFinity, blockchain smartphone manufacturer Sirin Labs, Bancor, Shapeshift, and crypto card payments company Monaco.
The city made headlines in 2016 when its Stadtzuger Einwohnerkontrolle started accepting cryptocurrency as payment for some council services.
Trading with any digital currencies like Bitcoin and operating any payment system with cryptocurrencies falls under the 1997 Swiss Federal Act (AMLA) on combating money laundering and terrorist financing.
Switzerland’s financial regulator FINMA took an early regulatory position announcing in February 2018 that ICOs would be treated as securities, and has laid out clear rules about which companies are subject to FINMA oversight, and which of those must comply with anti money-laundering regulations.
Changes globally have been trending towards crypto-friendly policies, led by greater adoption of blockchain-based technologies. The rate of progress, however, is highly dependent on location and economic climate.
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