This week, information was circulated about the legal status of cryptocurrencies and cryptoactive technology in two Asian countries, where governments have been characterized by a restrictive and rejecting stance towards the sector: India and China.
How is the situation in India and China?
In India, the media echo the complaints of citizens, because banks have decided to close the accounts of customers who operate with cryptoactive. This is a measure taken from the restrictions imposed on the sector by the Reserve Bank of that country since 2018.
In China, a new regulation will enter into force next February, with the purpose of imposing self-censorship of messages published on content platforms based on blockchain technology. The regulations are in addition to others that the government has been dictating, although it stands out for addressing the platforms whose development, until now, had been more privileged than the cryptocurrencies by the authorities.
The governments of India and China have stood out for maintaining this position opposed to cryptocurrencies, and the restrictive measures they have taken are usually reviewed by the media, but they are not the only ones that oppose the ecosystem, as other governments also state its rejection and externalize it through measures, decrees and prohibitions of all kinds, even against the wishes of the citizens of their countries. These extreme positions of prohibition are in contrast with those of governments that are more crypto-friendly and even with those with ambivalent positions.
In general, the reasons for the prohibitions go from the ignorance on the way in which this new technology works, until the fear of what its development can represent for the regulated and centralized financial systems. This goes through arguments that argue in favor of an alleged protectionism of national currencies, which in some cases derives in proposals for the creation of digital currencies issued by central banks or backed by the State, with characteristics of cryptoactive.
It also influences the rejection, the activity of some bad actors, who are always present in all financial activity, who have led to erroneously many strangers associate cryptocurrencies with money laundering, terrorism and scams.
Bitcoin is totally illegal in this country and its government is one of the most “hostile” to the cryptocurrency. The Bank of Bangladesh issued its first warning against the use of Bitcoin in 2014, which included precautions to carry out transactions in any “artificial currency”, since this could involve unauthorized actions, established in the Currency Regulation Act of 1947 and in the Money Laundering Prevention Act of 2012.
In this way, the government entity expressly disapproved of any cryptocurrency transaction, stating that these cryptocurrencies were not legal tender issued by any country and that they do not depend on, or are approved by, a central payment system, and therefore considered that people could be harmed financially.
From this decision, the use of any cryptocurrency could carry a penalty of up to 12 years in prison. However, despite the restrictions, the use of cryptocurrencies remains popular among Bangladeshi citizens, prompting officials from the Financial Intelligence Unit and the police computer crime unit to start conducting investigations in 2018. This fact has unleashed a kind of persecution against the bitcoiners of that country.
In April 2018, the Central Bank of Iran officially banned the use of cryptocurrencies in financial transactions, as a measure to prevent money laundering and terrorism. The prohibition covers “all the monetary and financial centers of the country”, including banks, financial institutions and exchange houses.
Despite the ban, Iranian citizens go to bitcoin as a way to protect themselves from the inflation that plagues the country. Therefore, Iran stands out for having one of the highest volumes of P2P trade, which increased even after the measure was announced.
In parallel, like Venezuela and Russia, the Iranian authorities are planning to create a national cryptoactive, as part of a strategy designed to save their economy and circumvent international sanctions.
The project, in its technical aspect, began to be revealed in August 2018, when the Computer Services Corporation (ISC) announced that the platform would be supported by the national currency, the rial, and has been designed based on Hyperledger technology. Fabric. The authority also pointed out that “the Iranian cryptocurrency is developed under a private block chain infrastructure and can not be mined (…), the issuer is (the) Central Bank of Iran and the volume of issue will depend on the decision of the Bank”.
This plan contrasts with the prohibitive measure of trade with cryptoactives issued at the beginning of last year, so it has been taken as an indication that the government’s interest in the cryptoactive only responds to the desire to avoid US sanctions.
In February 2018 the Central Bank of Thailand asked the country’s banks not to engage in transactions related to cryptocurrencies in order to avoid possible problems arising from the lack of regulation.
With this measure, the official entity banned the investment or commercialization with cryptoactive, including the creation of purchase and sale platforms and the offer of exchange houses related to cryptocurrencies. He also vetoed his purchase by customers, using their credit cards, and prohibited banks from giving advice of any kind to carry out investment and marketing activities for digital tokens.
Following this measure, the government began to talk about regulation and at the end of March 2018 the State Council of Thailand approved a draft law to regulate transactions with cryptocurrencies. This project aims to combat tax evasion, money laundering and crime financing while protecting investors from fraud and fraud with these financial instruments.
But the new plan handles ideas that contradict the February ban and, according to the statements of Finance Minister Apisak Tantivorawong, will try not to be restrictive with transactions and the holding of Initial Currency Offers (ICO). To do this, the government financial authorities work on the creation of a general registry for private transactions and exchange houses.
The apparent contradiction was then clarified by the permanent secretary of finance, Somchai Sujjapongse, who affirmed that these regulations do not seek to promote the adoption of cryptocurrencies, but the implementation of blockchain technology, which is usually accepted by many of the countries that reject to cryptoactives, as is also the case in China.
The Central Bank of Thailand is another of the state agencies that has plans for the issuance of a national cryptocurrency, a project with which it seeks to facilitate inter-bank arrangements throughout the region and which will be housed in Corda, the blockchain of the R3 consortium, for its centralized emission.
In October 2017, the Vietnamese government updated a 2012 decree on non-monetary payments, whereby cryptoactives acquired illegal status as a means of payment throughout the Asian country.
On that date, the State Bank of Vietnam published on its official website that, in accordance with the provisions of the law, it concluded that bitcoin and other similar cryptocurrencies can not be qualified as a legal means of payment, so the issuance, supply, use of bitcoin and other similar cryptoactives were totally prohibited.
To make this decision, the Vietnamese government took into account several initiatives that were being carried out in the country and that were presented as alleged cryptocurrencies. Among them included OneCoin, which forged a permit allegedly issued by the Ministry of Planning and Investment, along with a Ponzi scheme that worked under the name of Bitcoin Community Bank, which collapsed, leading to the ruin of almost 2 thousand people.
Since 2014, the government had alerted the public about the fraudulent operations that can be carried out using bitcoin, and stressed that the cryptocurrencies had no legal validity.
It is the first Latin American country (together with Ecuador) to prohibit commercialization with bitcoin and other cryptocurrencies, based on a communiqué issued in 2014 by the Central Bank of Bolivia (BCB), through which it promulgates a resolution that prohibits “use” of currencies not issued or regulated by states, countries or economic zones and of electronic payment orders in currencies and monetary denominations, not authorized by the BCB within the scope of the national payment system “.
In this way, for the Bolivian government, cryptocurrencies are not considered as legal currencies, as they are not backed or issued by any central entity or government.
Among the motivations for the decree is the performance of several pyramid schemes that began operating in the country and that were presented as projects with cryptocurrencies. Among the best known is the case of a company that identified itself as Bitcoin Cash, and another group that was called Pay Diamond. These schemes led to the deprivation of freedom of several people who took advantage of the ignorance of investors, to recruit people, raise funds and then embezzle the money.
The denunciations for these scams caused the Central Bank of Bolivia to ratify, in another communication issued in April 2018, the prohibition on the use of virtual currencies. Despite the restriction, Bolivian citizens operate with decentralized platforms, and even public and private companies indirectly validate transactions with cryptocurrencies.
Also published on Medium.