The Bitcoin boom has generated not only a digital currency revolution. Companies around the world have explored the potential of blockchain technology in a number of different areas, including automobiles, telephones and a multitude of disruptive alternatives in the banking, government and maritime sectors.
In addition, it's not just the small startups that are trying to push blockchain innovation, but rather big conglomerates like Amazon, Alibaba and Microsoft. However, these companies are still trying to negotiate an ever-expanding regulatory framework that is growing at different levels in different states.
Many different companies began to be born within the cryptocurrency ecosystem, usually associated with an ICO capital increase, which left many regulators wondering how to control this form of collection of capital decentralized and financed by the crowd.
From the SEC to the severe collapse of the Chinese government over ICOs in Malta and Switzerland that compete to be the first destination for fintech and blockchain, several nations have taken widely differing views on how to regulate, block or support blockchain startups.
So, due to the global nature of blockchain products, there is no need to worry about a regional client, but it is important that blockchain projects examine legislation, the atmosphere and the community approach, taxes. and a myriad of other factors in different countries to see what it will be at
The different approaches adopted by governments and regulators have created what has sometimes been called the "paradise of cryptocurrency", while nations try to attract fintech and blockchain projects on their banks in hopes of using a potential financial revolution to improve their programs.
Many of these paradises are created in the smaller nations. Places such as Switzerland, Malta and Bermuda are actively adapting and creating legislation to accommodate blockchain projects.
On the flipside, there are countries that are trying to discourage and frighten out as many blockchain projects as possible, and have been successful in many cases. One of the most notable examples is China, where the prohibition of ICO and access to trade has forced these startups and digital currency exchanges to go elsewhere.
For example, one of the world's largest exchanges, Huobi, which was forced to leave China in September last year due to legislative changes. Since then, the exchange has sought to open offices in a number of other different places, such as Australia, the United States, Singapore, South Korea, the United Kingdom and others.
While not all these countries are actively supporting cryptocurrencies, they are at least tolerant and are trying to establish their own rules to make it easier for companies to follow legislation.
Importance of a regulatory framework
While regulations are often frowned upon by those who have spent some time in the blockchain space, they are a necessary part of the evolution of technology. Some companies have gone from having free reinvention – building their own company without restrictions – only for the legislative power to recover.
However, some companies appreciate the creation of their blockchain company in a space that is regulated and has easily defined borders
One of the first countries to start building a regulatory framework for blockchain projects – and a cryptographic framework – was Switzerland.
Switzerland – Crypto Valley
The United States may have Silicon Valley, but Switzerland wants to have version 2.0 – Crypto Valley – in the small town of Zug. However, even before Zug began to turn his attention to cryptocurrency, Switzerland was working to become a fintech sandbox.
In July of last year, Switzerland developed options for companies that accumulated about $ 1 million in third-party funds to test their innovative financial technology ideas without the usual regulation surrounding finance and digital currency .
They also said that bank licenses would be revalued to allow these companies to earn less than $ 1 million to obtain licenses to deposit and allow crowdfunding donations to be withdrawn for a period of 60 days rather than the previous seven days.
In the year that Switzerland began to simplify life for blockchain and fintech companies, there was a boom in these innovative projects.
Stephen Meyer, a legal professional and research doctorate Candidate in Blockchain & Law who lives in Zurich, Switzerland, has seen both the advantages and disadvantages of launching a blockchain project in the small European nation:
Switzerland has a very clear regulatory situation based on the Swiss financial authority FINMA & # 39; s ICO Guidance of February 2018. Furthermore, one of the main advantages is the possibility of receiving an individual pre-regulation by FINMA. cryptographers can describe their project, send it to FINMA and usually receive a clear declaration on the applicability of the regulatory provisions within 4 to 8 weeks.
"Instead of creating new legislation related to the blockchain, which – like any new legislation – leads to uncertainty about specific application, Switzerland applies the existing regulatory framework, but with a flexible and principle-based approach pi. "
The ICOs are nothing new in Switzerland, since they saw the Ethenum Token Generation Event in 2014
" FINMA and the tax authorities have many years of experience with encryption projects since the launch of Ethereum TGE in 2014. In the meantime, they managed a considerable number of ICOs and more and more other cryptographic projects such as exchanges and funds. Therefore, as a cryptographic team, you do not have to explain blockchain technology to these authorities, and they are usually up-to-date, "said Meyer
Valentin Botteron, a Swiss lawyer currently visiting scholar at the Columbia Law School in New York, completing a doctorate research in antitrust as well as blockchain research and legal issues related to the smart contract.It has had equally positive things to say about the approach of Switzerland:
"Switzerland has a very technological approach to regulating the fintech companies , Ico and cryptocurrency. The government has already stated several times that it aims to make Switzerland a favorable place for the rules for blockchain companies. Switzerland hosts several blockchain companies and associations that support sound regulation of technology.
"Parliament is well aware of the phenomenon and urges the government not to lose the opportunity to be among the first countries to attract actors linked to the blockchain.The political stability of Switzerland makes it an ideal place for the development of Businesses in general In addition to economic actors, several scholars conduct research into economics and law on blockchain in Swiss universities. "
Looking at what Switzerland is doing, and then observing how other nations are trying to replicate and advance, c & # 39 it is this feeling of competition. As Botteron says, the Swiss parliament is pushing the government to be the leader in the growth of blockchain
The biggest competition for Switzerland in terms of attracting blockchain society is probably the small Mediterranean island of Malta.
A look at the cryptocurrency titles that surround Malta shows impressive growth for blockchain and fintech on the island. The biggest avenger was probably when Binance, the world's largest cryptocurrency swap, decided to open an office in Malta because of regulatory pressure in Japan.
However, since then, there has been a remarkable level of growth for ICO and blockchain projects.
The Maltese government has filed a legal structure for distributed ledger technology (DLT) since 12 March, which included three crypto-positive invoices. These include: Malta Digital Innovation Authority Act (MDIA), Technological Agreements Agreement and Innovative Services Act (ITAS) and the Virtual Currency Law (VC).
The result of these positive legislative acts has aroused great interest in Malta as the main destination for blockchain and ICO.
Other exchanges – including OKEx – were transferred there, as well as the Polish BitBay exchange. Positive regulations for virtual currencies are clearly accepted with gratitude, but even smaller blockchain projects are being cashed.
Jonathan Galea, a graduate lawyer in Malta, president of Bitmalta and managing director of Blockchain Advisory, spoke to Cointelegraph about what makes Malta different from other countries
"What sets Malta apart from the rest of the other jurisdictions when it comes to of blockchain and cryptocurrency – in simple terms – is the fact that the government, the opposition and all the regulators are pulling together the same rope, looking for a unique vision: make Malta one of the leading countries in space, coupled with the ease of accessibility of top officials in relevant positions who are there to promote and help businesses rather than hinder them, makes Malta an attractive destination for all blockchain-related issues.
"Of course, not one can not mention the regulatory framework that was conceived in less than two years, following various consultations with several important stakeholders in the cryptographic sphere – both locally and internationally. The creation of the first ad-hoc and complete structure in the world, which deals with the legal, technical and financial aspects of blockchain and crypto-related activities, guarantees absolute legal certainty and peace of mind to those wishing to operate within a & # 39, a fully regulated ecosystem – which, at the same time, promotes rather than limiting business growth. "
Cryptoindex is a blockchain project that benefited from the Maltese regulatory position, as CEO VJ Angelo explains why it is important to get the right financial regulations in this space.
" For a company like ours " , Angelo said to Cointelegraph, "We chose Malta as the headquarters for the headquarters because it became an early incubator for the crypto industry and, as a result, looked at its long-term impacts long before most other regions .
Financial Assets Act in June of this year and creation of the most suitable for the classification of various cryptocurrencies and tokens, the Malta Financial Services Authority took the lead in Europe. Much of the law has been mapped to MiFID II, which means that European regulations have been carefully considered in their new laws. Although it does not completely resolve the concerns of a different approach by other regulators in Europe and beyond, the use of the existing regulation mitigates some of the risk.
"The Maltese approach has been very much promoting all opportunities for growth and development in the encrypted market, while putting the protections to cover ICO participants and ensuring a drastic reduction in the stories of frauds and scams that have prevented many new adopters from encrypting. "
While both Malta and Switzerland are struggling to make the environment more open and inviting for blockchain projects, there are other nations that realize the potential of technology, but have strict laws that govern finance and money, as well as securities.
Freedom, freedom and titles in the United States
The United States is a major player in the cryptocurrency and blockchain ecosystems, with most of the ICO projects of the last 18 months originating from the United States. United States – 16% of all global ICOs.
However, the United States is fighting a major battle with the ICOs thanks to the definition of the Exchange Securities Commission of what a new virtual currency can be classified.
The SEC, however, found that, in an important previous decision, the decentralized organization tokens (DAO) issued in 2016 were titles. This essentially focused most of the ICO projects as titles and put them under the control of the regulator.
But this does not mean that the United States is closed to ICOs and blockchain projects, rather there are some more difficult circuits to overcome – especially with the division of state and federal law.
Jack Keating, a New York attorney and a former regulator at the Financial Industry Regulatory Authority (FINRA), spoke to Cointelegraph about the challenges that ICOs and blockchain projects face in the United States. , and in particular in the State of New York.
"The biggest problem with the ICOs is that many of these have been made in clear violation of US securities laws, regardless of whether the issuers are unaware or independent of the potential consequences of issuing unregistered securities without a & # 39 exemption from registration in Section 5. Many ICO issuers have ignored the requirements of collecting capital in the United States
"[For] ICOs that comply with the SEC rules and US securities laws, the investment is often limited to accredited investors. This goes against one of the fundamental principles of many blockcoin and Bitcoin evangelists, that this technology can democratize wealth. Unfortunately, when investments are limited to accredited investors, the rich get richer and the non-millionaires are left on the sidelines. "
There is a path for ICOs to function in a popular ICO country, but the regulatory circles go against the core values that the crypto community holds in store.
" Another challenge is banking solutions for cryptographic companies. Similarly to how marijuana companies are overshadowed by most financial institutions, many US banks have a policy of not opening accounts for encrypted businesses. Since a bank account offers so many basic services for managing a company, the opening of a current account can be extremely difficult. Recently, the Metropolitan Commercial Bank professed its leadership in space. However, they are subjected to heavy controls by US regulators, which contest their sustainability. "
Keating concluded that it may not be the most welcoming place for blockchain, but the United States seems willing to promote technology and, because of hunger, it's worth it.
" I think c & # 39; it is very support for encryption and Ico coming from the government. It is hard to say whether they value value or are willing to promote technology. The lack of an absolute ban is encouraging. It's worth it. The United States has the best investor base and the best courts in the world. "
The UK definition of an ICO token
With artists such as Switzerland and Malta defining clear and understandable definitions for crypts The ICOs and the blockchain, the United States and the United Kingdom have much more ambiguous regulations on the different aspects of the ecosystem, as they continue to decide how much or little they need to intervene
Romal Almazo, the cryptocurrency lead and chief consultant of CAPCO – a global business and technology consulting firm in the United Kingdom – explained to Cointelegraph how the law around cryptocurrencies and ICOs in Great Britain works
"In the United Kingdom, FCA [Financial Conduct Authority] still does not consider cryptocurrencies as a currency or commodity under MiFID II. However, they admit that some companies will be regulated where they offer products or services that are subject to existing financial regulations, e.g. Bitcoin futures. Where companies offer ICO tokens, they also admit that some companies could issue regulated security. In order for a token to be regulated as a security under the US Securities Act of 1933, a company should look at the "Howey's Test" and the "US Person's Test."
"Looking ahead, there are still huge problems in agreeing which cryptographic resources are and how they behave. Is it an equity, a commodity, a currency, a good of utility, or some kind of hybrid? Until this taxonomy becomes clearer and universally shared – which is unlikely in the short term – competitive advantages will emerge between states and jurisdictions. For example, we are already seeing Malta <...> lead the pack by offering guidelines and regulations. They want to create an island of innovation blockchain. The United Kingdom still looks promising, but we are still seeing most of the ICOs in the UK plant through Malta, Gibraltar, Liechtenstein or Switzerland. "
Younger Budding Nations
Others – like Bermuda, Estonia and Liechtenstein – are doing their best to snatch some encrypted authority with their friendly regulations.
Bermuda recently – on 2 July – proposed plans to make changes to the banking law in order to establish a new class of banks offering services to local fintech and blockchain organizations.
Estonia is one of the countries that has been trying to welcome blockchain for some time. The government even went so far as to digitize its services using blockchain technology.This appreciation of the blockchain's potential made it easier for startups to create their own innovative projects.
John Smirnov, CEO of Block-chain.com, explained how Estonia's reputation for a digitized and far-sighted country made it easy to register in Tallinn, the capital of the country.
"Timing was crucial also for us when we made a decision [of] on which the country must start our company. Estonian law is very user-friendly for blockchain projects that are keeping all activities in cryptocurrency. This is why we are registered in Tallinn. It took about a week to complete the company registration process.
"With most regulators formulating some form of commentary or direction for the present looking at the future of cryptography, few are adopting laws.The cryptography market is in the middle of an important transition SEC enthusiasts have made radical statements – conquering the entire market in a difficult position, as far as the United States is concerned, others merely state that they do not currently regulate cryptography, but will soon publish something, such as FCA of the United Kingdom. "
Still space to choose and choose
It is clear that there is certainly no global standard, which allows companies to choose and choose the most suitable places for them.
The G20 could try to collect data on cryptocurrencies in order to potentially propose a united force for the regulations, but it seems that it still has a long way to go – and it is not even guaranteed that everyone will agree.
However, what is clear is that there are countries that are trying to make Blockchain prosper. Some islands, like Malta and Bermuda, are changing their legislation to make their country more attractive to fintech companies, and other European nations, such as Switzerland and Estonia, believe they have the right laws to protect themselves from negatives of the crypto, encouraging growth in any case.
The United Kingdom and the United States have adapted their rules to include cryptocurrency in permanent legislation, and while at the moment it seems quite stringent, it is a functioning system. In the end, there is no place that offers total freedom for blockchain projects, but along the spectrum there are many options for innovation.