Earlier, in the article “The Legal Status of the ICO,” we already talked about how the legal sphere for ICO projects is still undefined, and what the differences are between innovative and conservative jurisdictions. We also mentioned specific features of different countries. Now we want to continue this scrupulous topic and discuss what would be the most favorable environment for cryptocurrency and blockchain to startups develop and thrive.

The general capitalization of digital currencies is still nothing compared to the real sector of the economy, but the cryptocurrency industry is already experiencing an increased amount of attention, not only from the general public, which can only approve or disapprove of it as a phenomenon, but also from various state regulators, who can affect its course of development in one way or the other. Let’s discuss the current role of regulators and think about what actions they should take in order to not interfere with this young and promising niche of the economy.

The general capitalization of cryptocurrencies over the last year https://coinmarketcap.com/

As you can see from the graph, the capitalization of the cryptocurrency is steadily growing. Still, let’s try to figure out what is contributing to it — or, regardless of what it is happening — look into the trends regarding digital currencies in different countries.

Current Trends in the World

Some countries and governments are very conservative about new technologies, while others have more liberal and progressive approaches. Before we talk about a perfect nurturing environment for cryptocurrencies and blockchain companies in a hypothetical sense, let’s first take a look at what is happening in the industry right now, and how different governments manifest themselves in relation to the crypto-economy. We will try not to repeat ourselves and provide new examples not mentioned in the previous article.

On January 30, the government of South Korea banned anonymous cryptocurrency trading. This policy, according to the Prime Minister, is aimed at combating money laundering. According to it, the exchanges are required to disclose users’ real names and bank accounts when dealing with cryptocurrency. This measure not only hit the industry locally, but also seriously affected the global cryptocurrency market in general.

On Tuesday, February 6, the Coinpia exchange suspended fiat deposits and trading operations for its users, stating that it could not comply with the new regulations. This is a vivid example of how excessively rigid and not very thought-through actions of regulators can become a real blow to the development of even such large and established companies as Coinpia.

However, under no circumstances should the role of cryptocurrency and the blockchain community be underestimated, for it is extremely loyal to the promising projects and is ready to defend its interests even in a difficult struggle with state regulators as one. After just a few days after the Coinpia exchange suspended its work, a petition against strict regulation and a complete ban on cryptocurrencies on the website of the Presidential Administration of South Korea collected 200,000 signatures, which obliges the government to react to it.

The Minister of the Office for Government Policy Coordination of Korea said that there are different opinions in the government: from an outright ban on trading in cryptocurrency to establishing regulatory institutions. Most likely, the ban is not final, and the state policy towards cryptocurrency will change in the near future.

This is a very significant event that makes clear two things. The first one: the desire of only the government to ban cryptocurrency is simply not enough, as long as it stumbles upon public protest and discontent. The second one: governments are not monolithic structures with one clearly articulated opinion regarding cryptocurrencies and every government can combine both advocates of conservatism and progressive-minded politicians who are ready to make efforts for the development of the industry.

New Positive Examples

Below are some recent examples of loyal and positive approaches of some governments to the regulation of cryptocurrencies and ICO-projects.

Although the general trend today in many Asian countries is to prohibit or confine cryptocurrency circulation, the Prime Minister of Singapore has recently reassured the public that, since the government of the city-state does not consider digital currency to be a threat to the economy, it will not be banned in the course of the industry regulation.

The Arizona Senate is considering a number of recently introduced bills, which will enable citizens to pay taxes in bitcoins, and will provide the digital gold with the long-awaited status of real currency. The case of the one particular state is extremely important, because, if successful, it will significantly strengthen the positions of cryptocurrency and will make many officials in the world’s largest economy, the USA, change their attitude towards it.

Gibraltar is currently preparing legislative and normative bases for regulating ICO projects. The Minister of Trade of the country said that the bill will be considered in the second quarter of 2018, and its approval will protect organizers as well as ordinary participants of token sales.

Venezuela has embarked upon an even more radical path — they have already announced token sale of their national cryptocurrency, and the exchange rate will depend on oil prices. All these examples indicate that even despite the bans of cryptocurrency exchanges in China and Korea, the world is witnessing more and more positive sentiments and progressive decisions with regard to digital assets.

This infographic perfectly reflects the current situation http://thomsonreuters.com/

Does the Industry Need Rules and Regulators?

On Monday, 19 February, S & P Global Ratings agency issued an up-to-date report on the topic “The future of banking: cryptocurrencies need rules to change the game.” The report states that the world financial sector might change under the influence of the cryptocurrency market. There is one crucial stipulation in the report — S & P agency experts believe that digital currencies are being developed, but for now the influence of the crypto-economy on the traditional economy should not be overestimated: unless properly regulated, cryptocurrency will not substitute usual money.

Indeed, if we consider cryptocurrencies as a means of payment and not speculative assets, certain regulation and transparent and clear rules of the game are required in most world countries to provide the circulation, promotion and understanding of the cryptocurrencies for the general public.

The European officials are cautious about the problem. We are not expecting the strictest prohibitions, but the European Parliament representatives warn the public on regular basis about possible risks caused by cryptocurrency investments. A corresponding message of the European Securities Committee to its investors was published on its official website. However, at the same time the officials cooperate with blockchain-startups on key aspects and do not put spokes in their wheels.

Market players, especially big companies, understand the need for some regulation very well. The seven biggest cryptocurrency companies came together as the first of its kind CryptoUK association, in early February, in order to provide self-regulation of the industry and coordinated interaction with the government.

Coinbase, eToro, CryptoCompare, CEX.io, BlockEx, Coinshares and CommerceBlock joined the association. Coinbase CEO said that self-regulation and interaction with the government is an important and useful aspect of the work. Without due attention to this aspect, maintaining the growth rates of the industry is impossible.

What Does Favorable Environment Look Like?

The main principle of State regulation which is proposed to the world governments by the crypto-economics representatives is to do no harm. The cryptocurrency industry is original and comprehensive enough to be able to penetrate into people’s lives without substantial assistance from the regulators.

However, this policy is not enough to help blockchain to soar to new heights and ensure the wide distribution of cryptocurrencies. The blockchain and cryptocurrency industry today is the industry of pioneers and discoverers because many solutions are hidden in plain sight. The governments should give their developers opportunities to implement their solutions. As soon as they realize this fact, the jurisdictions will propose more attractive working conditions creating a competition and stimulating startups development.

However, creating structures, associations and regulators are also not enough because much depends on the technology being accepted by people. For the further development of blockchain it is important that people stop associating the name of the technology solely with cryptocurrencies. Of course, the cryptocurrency industry is the most evident example of blockchain use, but it is not the only sphere for its usage. As soon as the governments and general public realize this fact, the blockchain will actively penetrate various spheres of our life.