How Central Governments Are Dealing with the Rise of Cryptocurrencies

Bitcoin and other cryptocurrencies seem to have come to stay. Although not yet widely accepted,
they are gradually making their way into the mainstream consciousness of the society, growing
in leaps and bounds along the way. On Monday April 5, increasing demand by institutional and
retail investors pushed the cryptocurrency market capitalization to an all-time high of $2.02
trillion. For a week, from late March to early April 5, 2021, Bitcoin also steadily held at the $1
trillion market capitalization mark.

Source: China Daily
Although the regulatory climate for cryptocurrencies is still tense, if you are resident in either the
United States or the UK, you can benefit from the many opportunities cryptocurrencies present
as they are legal in both. Sadly, if you are in either India or Pakistan, you cannot. Next two
sections are dedicated to discussing conditions in the four of them.
Cryptocurrencies in the US and the UK
Generally, the US has been friendly towards cryptocurrencies. However, for the protection of
their users, it ensures cryptocurrencies are overseen by agencies such as the Financial Crimes

Enforcement Network (FinCEN). Bitcoin is classified as a money services business (MSB) and
is taxed by the Internal Revenue Service (IRS) as a property. Many companies in the US such as
Microsoft, Home Depot, Namecheap, Starbucks, and Tesla, among others, now accept Bitcoin as
a means of payment. The Financial Conduct Authority (FCA) of the UK is also supportive of
Bitcoin and other cryptocurrencies.
On Tuesday, April 20, 2020, Treasury Chief, Rishi Sunak, announced that the UK government
would explore the possibility of the creation of a new digital currency to be known as “Britcoin”
amidst a decline in cash payments as a result of the COVID-19 pandemic.
Cryptocurrencies in India and Pakistan
However, the reverse is the case in India and Pakistan. In 2018, India directed banks to suspend
dealing in cryptocurrencies. In April 2021, the Ministry of Corporate Affairs (the MCA) moved a
bill to ban their mining, holding, selling, and issuance. Punishment for offenders can be up to 10
years. The Indian government, through the Reserve Bank, however, has proposed the creation of
a digital rupee for use as legal tender. In Pakistan, cryptocurrencies are neither legal nor banned.
According to the State Bank of Pakistan, nowhere in the country is anyone authorized to transact
in them – except in the province of Khyber Pakhtunkhwa where they were first legalized in
December 2020.
Countries Where Cryptocurrencies are Banned
Over a decade after the invention of the first cryptocurrency, Bitcoin, cryptocurrencies are still a
contentious digital asset in many countries. Because of their decentralized and trustless nature
which makes their transactions anonymous, they have attracted both the interest and cynicism of
government authorities. On Tuesday, January 19, 2021, Janet Yellen, the then Secretary of the
Treasury nominee, raised an alarm about cryptocurrencies being used for “illicit financing.”
However, that is not entirely true.
Most cryptocurrencies are not used for criminal transactions. In fact, for the past two years,
cryptocurrencies’ shares of criminal activities have been falling: in 2019, only 2.1% of the
volume of all cryptocurrency transactions, representing about $21.4 billion worth of transfers,
was criminal. In 2020, that figure reduced to 0.34%, an equivalent of just $10 billion. That is, fiat
currency, not cryptocurrencies, is still the biggest culprit in “illicit financing.” Therefore, it
should be the primary target of anti-money laundering campaigns.
However, despite that the claim that cryptocurrencies are mainly used for illegal activities has
been proven to be demonstrably false, it does not only persist; it also continues to influence
policy-making. In fact, because of it and other reasons, Bitcoin has been effectively banned in
the following countries:

Saudi Arabia
And many more

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I am the Uncut Lab resident cloud computing junkie. I help curate the written content in our Education Corner, providing engaging articles on foundational concepts in cloud computing, data analytics, machine learning, and blockchain technology. Feel free to reach out to me with questions or topics that you would like us to cover. Thanks!

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