Article by Vi-Fi | Edited by Trewkat and WinVerse | Cover Art by Feems

Since the downfall of FTX, many countries have become far more wary of crypto assets and investments, moving towards heavy-handed regulation or an outright ban as a somewhat knee-jerk response to the centralized exchange’s allegedly fraudulent activities.

In September 2022, the White House released its first-ever framework on crypto regulation in the country. This framework includes guidelines which address the ways in which the financial services industry should develop to make borderless transactions easier. The framework also includes strategies for fighting illicit finance, and creating a new kind of digital dollar (the U.S. CBDC, The United States Central Bank Digital Currency) which could allow for “a payment system that is more efficient, provides a foundation for further technological innovation, facilitates faster cross-border transactions, and is environmentally sustainable.”

However, this is not all there is to the U.S. crypto regulations story. Recently, the U.S. Securities and Exchange Commission (SEC) oversaw its first crackdown on staking, ordering crypto exchange company Kraken to shut down and pay the sum of $30 million USD as a penalty fee to settle charges on the grounds of failing to register the program. Even more recently, in the wake of the failure of Silicon Valley Bank and as U.S. politicians prepare for elections in 2024, Democratic senator Elizabeth Warren has introduced a bill which would see crypto exchanges subject to the same laws as banks. Warren has in fact gone so far as to declare a ‘war on crypto’ in her re-election campaign:

https://twitter.com/WatcherGuru/status/1641447649231646720

While the drama in the U.S. plays out, it’s worth noting it is not the only country with a fraught relationship with crypto; since 2018 the number of countries with laws adverse to digital assets has significantly increased.

A report by the Law Library of Congress states that in 2018, 23 countries had either implicit or absolute bans on cryptocurrencies. The same report includes November 2021 data showing that 51 countries across the globe had bans in place — more than doubling the 2018 count.

The data shows Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia had an absolute ban on crypto, making it illegal or outlawed. A further 42 countries including Nigeria, Bahrain, Ecuador, and Georgia had placed an implicit ban on crypto assets, which means that financial institutions are not permitted to take up crypto companies as clients.

Interestingly, Morocco’s absolute ban had no impact on the popularity of crypto, with data showing that its population holds the most crypto of any North African nation. In response, Morocco’s lawmakers have recently drafted legislation which will lift the ban and introduce a regulatory framework for cryptocurrency.

Algeria’s financial law states that “The purchase, sale, use, and possession of virtual currency are prohibited. A virtual currency is one used by Internet users over the Internet. The absence of physical support such as coins, paper money, or payments by check or credit card characterises it. Any violation of this provision is punishable under the laws and regulations.”

For Bangladesh, according to the country’s money laundering and terrorist financing laws, anyone who breaches the law by transacting in crypto faces up to 12 years of imprisonment.

On September 24, 2021, the People’s Bank of China (PBoC) placed an outright ban on all cryptocurrency transactions in the country, describing them as illegal.

In 2018, Dar al-Ifta, Egypt’s central Islamic lawmaker, issued a religious order categorising commercial trade in bitcoin as haram (which means forbidden by Islamic law), stating that digital assets are threats to national security and central financial systems, and could serve as leeway for terrorists to penetrate and fund their dangerous activities.

In 2017, Iraq’s Central Bank issued a statement proscribing the use of cryptocurrencies, and this law is still in force today. Also, in early 2021, the Ministry of Interior of the Kurdistan regional government issued a similar decree to prevent money transactors from handling cryptocurrencies but despite all efforts to abolish the use of crypto in the country, cryptocurrencies are becoming increasingly popular in Iraq.

In August 2017, The Nepal Rastra Bank prohibited the use of bitcoin. Nepal Telecommunication Authority stressed that using digital products related to crypto activities is banned within the country.

The Qatar Financial Centre Regulatory Authority (QFCRA) announced in December 2020 that virtual asset services are prohibited in all Qatar Financial Centres (QFCs) except those relating to token securities which the QFCRA regulates. There is a particular jurisdiction within the country known as the QFC, which is responsible for its legal, business, tax, and regulatory infrastructure. According to QFC, an exchange service facilitating cryptocurrency transactions is illegal.

In Tunisia, according to this YouTube video, a youth was arrested for possession of a Bitcoin wallet, suspected of money laundering.

In the 42 countries that have an implicit ban on crypto assets, financial institutions are prohibited from handling cryptocurrencies or offering services to crypto businesses or people.

Regardless of the policy approach, the common denominator between governments concerned about crypto assets is the anonymity of transactions between account holders. Some of the highlighted concerns are:

• Ponzi schemes: Crypto Ponzi schemes are fraudulent crypto activities or investments that allow crypto collected from new investors to be paid to the old investors. Some notable examples are Onecoin, GainBitcoin and Forsage. Countries like China, Nepal, Bangladesh, Indonesia, Bolivia, Morocco and North Macedonia banned crypto activities due to cited risk of fraud and illegal outflows of domestic capital.

• Finance for terrorist movements: According to Coindesk, as many as 20% of terror attacks may be financed by crypto, up from 5% a few years ago. Iran’s central bank also cited crypto transactions as an avenue to fund terrorism and money laundering.

• Risk to the current monetary system: Some countries fear that crypto assets will replace their current currencies, thereby making their paper currency obsolete, or forcing central banks to issue their own e-currencies.

Egypt and Qatar banned crypto under a pretense to ensure the security of the financial and banking system in their countries.

According to Investopedia, anti-money laundering (AML) refers to a set of “laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income”. Criminals use money laundering to conceal crimes ranging from minor tax evasion and drug trafficking to public corruption and the financing of terrorist groups.

As the financial industry grew, international capital controls were lifted and it became easier to conduct complex chains of financial transactions. Subsequently, anti-money laundering regulations were passed so that law enforcement officials from around the world, including the Financial Crimes Enforcement Network, the Internal Revenue Service Criminal Investigation Division, and the Federal Bureau of Investigation, can track illicit financial transactions, including cryptocurrency transactions. However, cryptocurrencies are not specifically addressed by these AML laws, and it is important to mention that most of them predate the invention of cryptocurrency by decades.

"Effective anti-money laundering and combating the financing of terrorism regimes are essential to protect the integrity of markets and the global financial framework as they help mitigate the factors that facilitate financial abuse..”

The International Monetary Fund

The Financial Action Task Force (FATF) aims to prevent the global crimes of money laundering and terrorist financing, and they release guidelines to help crypto companies with their compliance processes. The most common form of compliance activity is referred to as ‘Know Your Customer’ requirements, meaning financial institutions must collect and verify personally identifying customer details before providing access to financial services.

Where countries have decided to allow crypto assets, it’s often the result of efforts to ensure that a regulatory framework keeps pace with industry developments. Countries that have placed bans on crypto assets tend to have done so as a reaction to the identified disadvantages of unregulated cryptocurrency activities, but often without adequate consideration for the benefits such as protection from inflation, cost-effective and efficient transactions, robust infrastructure, and easy currency exchanges, amongst others.

https://twitter.com/ryansadams/status/1630309962495803396

Banning crypto is not the best solution. Countries can adopt any of the effective models available today. They can create regulatory frameworks to keep crypto investors safe and still help their economies grow —  a win for all parties involved.

Author Bio

Vi-Fi is a web3 enthusiast, writer and researcher. He is also a UI/UX designer with the passion to design products that meet user's needs.

Editor Bios

Trewkat is a writer and editor at BanklessDAO. She’s interested in learning about crypto and NFTs, with a particular focus on how best to communicate this knowledge to others.

WinVerse is a long-time BanklessDAO contributor. 

Designer Bio

Feems is a DAO governance operator, creative producer, and community instigator.

BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.

This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.

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