Governments for example China, have tried banning cryptocurrencies or Crypto related activities like mining or payment/financing of cryptos.
The effect of such regulations have proven to be temporary. Crypto prices recovered and the mining of cryptos shifted to other countries.
Different countries have different attitudes towards cryptos. Some ban outright, some want it well regulated and some encourage it.
Singapore which is an established financial centre is open to cryptos but does not want any irregularities to upset its status as a financial centre. As such it allows cryptos but try to regulate it tightly.
Abu Dhabi is very open to crypto and so its Dhubai has become a world centre for cryptos.
The different attitudes towards cryptos means that countries that ban cryptos will find that whatever activity in their country just shift to other countries.
A valid reason for a country to curb cryptos is that it is going to launch its own CBDC or Central Bank Digital Currency. In such a situation, the country want to curb competition to its CBDC
I think that what governments will do is to have discriminative taxation of cryptocurrencies. For example:
- its own CBDC is exempted from tax
- CBDC of other countries that it has tax treaties with are subjected to tax that is not too high, say 20%
- other Cryptos are subject to tax that strongly discourage people from buying them, say on 80% of the gains.
In order to pave the way for countries to issue CBDC, the International Monetary Fund (IMF) and European Central Bank (ECB) has been critical of cryptos.
The ECB was about to vote on laws applicable to all the EU countries that would have banned Bitcoin and other Proof of Work (POW) coins. There is opposition to the draft of the law from those who are not in favour of banning POW coins.
In order for the law to be passed quickly so that it can be used to stop Russia from using cryptos to get around sanctions, the clause that would have banned POW coins was removed.
Another legislation that was passed recently in Canada, the Emergencies Act allow the government to freeze crypto wallets related to donations for the Truckers issue.
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