Although the cryptocurrency industry exploded in 2021 in terms of market performance, the industry that is just entering its teenage years did not have such a great run when it comes to regulatory acceptance. Even with Bitcoin becoming a legal tender in El Salvador, data from Library of Congress (LoC) revealed that the total number of jurisdictions with an absolute ban or severe restrictions on crypto has more than doubled over the past three years.
The Library of Congress report reveals that as of November 2021, nine jurisdictions have applied an absolute ban on cryptocurrencies and 42 have applied an implicit ban. This is up from eight and 15 respectively in 2018 when the report was first published.
The nine jurisdictions with an absolute ban include Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China.
What you should know
- The LOC is the research library for the United States Senate, which acts as the national library for the country. In the context of the LOC report, an absolute ban means any “transactions with or holding cryptocurrency is a criminal act”, whereas an implicit ban prohibits cryptocurrency exchanges, banks, and other financial institutions from “dealing in cryptocurrencies or offering services to individuals/businesses dealing in cryptocurrencies.”
- The report revealed that as of November 2021, 103 jurisdictions have attempted to regulate cryptocurrencies in terms of the issuance of tax laws, anti-money laundering and combatting the funding of terrorism (AML/CFT) laws, or both. This represents a 212.12% increase from 2018, where only 33 jurisdictions were found to have regulated cryptocurrencies. These jurisdictions include the European Union Member States, with the exception of Bulgaria.
- The increase in jurisdictions banning or regulating cryptocurrency over the past three years is showing no signs of slowing down as several governments are currently reviewing their options. A Swedish financial watchdog and the Swedish Environmental Protection Agency called for a ban on Proof of Work (PoW) mining in November due to the power demands and environmental costs of keeping networks running. However, this was met with harsh criticism from Paris-based Melanion Capital, which called the claims against mining “completely misinformed.”
- Sweden’s EU neighbour, Estonia, is set on implementing AML/CFT rules in February. These new rules are expected to change the definition of what a virtual asset service provider (VASP) is and apply an implicit ban on decentralized finance (DeFi) and Bitcoin (BTC).
With these factors to consider coupled with the fact that many countries are starting to introduce their own central bank digital currencies, it is expected that in 2022, more countries will move to ban cryptocurrencies in one shape or form.