As digital currencies and the blockchain technology that underpins them become more mainstream, governments worldwide are faced with an increasingly pressing need to regulate them. While China and South Korea have cracked down on ICOs and cryptocurrency exchanges, some nations in the European Economic Area (EEA) are emerging as some of the world’s most progressive in embracing this burgeoning technology. Still, a general lack of guidance and clear legal standards will prove to be a roadblock as startup companies in the space try to develop further.
Often, smaller territories are able to effect rapid change much quicker due to independent control over legislation, relative to larger territories. This is somewhat advantageous to the promotion and establishment of crypto and blockchain within their legal jurisdictions. For example, through the laws of Switzerland’s federal states, called Cantons, there is an increased agility when making amendments or providing legal transparency that may not exist at the national level, or that of larger states in other countries.
This progressive stance in Switzerland has caused many innovative projects to headquarter there. Switzerland has become so accepting of ICOs that the city of Zug has dubbed itself “Crypto Valley” and built a core group of anchor tenants in the space. The Crypto Valley Association, a non-profit dedicated to the research and development in the industry, has started to develop an ICO Code of Conduct in response to China’s recent ban of token crowdsales. Such standards would establish a clear set of recommendations for companies that plan to conduct ICOs and provide clear and flexible direction regarding their legality.
That’s not the only game in the global commons for decentralized technology. Singapore has maintained a more welcoming regulatory environment in the Asia region for cryptocurrency innovation and trading, and clearer recent guidelines for crowdsales. Some countries such as Estonia have expressed interest in minting a national cryptocurrency to be used both for commerce and identity cases within their own borders. Should this ever materialize, it would rank as one of the most significant milestones within cryptocurrency and blockchain to occur thus far.
Economists of Finland’s central bank recently authored a paper outlining some of the distinguishing characteristics of bitcoin that make its protocol unique. While bitcoin holds a monopoly over the market share of cryptocurrency trade volume, it does not behave in ways that a traditional monopoly would. They argue that due to its decentralized infrastructure, there is in fact no need for a government to regulate bitcoin at all. In comparison to the views expressed by other European nations, this is a very interesting stance.
Some countries clearly feel that the blockchain space is too new and underdeveloped around which to craft detailed regulations, or they do not yet have enough insight to make such decisions. Despite this, blockchain has become more of a mainstream technology than expected, with applications in fields from education to voting to supply chain. Deloitte has reported than more than 90 central banks around the world have engaged in discussion about the potential applications of blockchain technology, and that 80% of these banks expect to embark on digital ledger projects by the end of the year. The International Monetary Fund has also expressed optimism about the future of blockchain and cryptocurrencies. Their interest in exploring this technology surely means that regulations in their respective jurisdictions will soon follow.
The interest expressed from EEA countries in regulating blockchain is promising to the future of blockchain startups in this region. It will prove difficult, however, to gather consensus around an industry with technology that is not yet widely applied. These nations must remain flexible within their current policies in order to be able to adapt in the long term, and those that do will reap incredible economic rewards.