What happens when the world’s third biggest economy suddenly legalises crypto? We’re about to find out
The last two weeks have seen a concerted effort by countries around the world to legitimise crypto.
And while it’s true that various countries are always changing their policies towards crypto, it’s rare to get such a wave of news in such a short space of time. And even rarer for all that news to be pro crypto.
Is it all just a coincidence, or is there something more going on?
That’s what we’re going to look at today.
France, Germany, India and South Korea all legalise crypto within the space of eight days
It started in France on the 26th of February.
As Blockonomi reported:
“In a ruling issued back in February 2020, the Commercial Court of Nanterre declared Bitcoin to be a fungible intangible asset, no different from fiat, hence, a currency. The court’s decision forms the first legal basis for the classification of cryptos as currency in France.”
The ruling came about after a court case concerning Bitcoin loans.
Back in 2014, an English investment house had secured a 1,000 BTC loan from a French crypto exchange.
A few years later, Bitcoin hard forked and created Bitcoin Cash. So everyone who held Bitcoin received an equal quantity of Bitcoin Cash.
The exchange thought the investment house should give it the 1,000 Bitcoin Cash it had just received. The investment house disagreed. And so they went to court.
Fast forward to today and the verdict is in… the investment house gets to keep its Bitcoin Cash and Bitcoin is legally recognised as money.
Hubert de Vauplane, a lawyer quoted by French financial newspaper, Les Echos had this to say on the significance of the ruling:
“The scope of this decision is considerable because it allows bitcoin to be treated like money or other financial instruments. It will therefore facilitate bitcoin transactions, such as lending or repo transactions, which are growing, and thus favor the liquidity of the cryptocurrency market.”
Five days later, Germany went one better
On the 2nd of March, Germany’s Federal Financial Supervisory Authority (BaFin) issued a press release.
The press release states that cryptos are financial instruments, which have the following characteristics:
- Digital representations of value
- Not issued or guaranteed by any central bank or public body
- Don’t have the legal status of currency or money
- Can be used by individuals or legal entities as a means of exchange or payment
- Serve investment purposes
- Can be transmitted, stored and traded electronically.
So, Germany doesn’t recognise cryptos as currency, but it does recognise them as “financial instruments”, which makes it much less risky to build crypto-focused businesses in Germany.
And it also clearly legalises crypto being used as a method of payment.
Then India overturned its longstanding ban on cryptocurrencies
You may remember back in 2018 India outlawed “any service in relation to virtual currencies”, at pain of prison.
The original ban was imposed by the Reserve Bank of India (RBI), which clearly feared crypto would undermine its authority.
Two years on and India’s Supreme Court has overruled the RBI, calling the ban “unconstitutional”[i].
“This is the first step towards embracing cryptocurrency in India, which has the potential of becoming one of the largest crypto markets.” Ashish Singhal, chief executive of the CoinSwitch exchange, told CoinDesk after the court’s ruling.
And while this news may seem of little consequence to those living in Europe or the US, it’s certainly not.
As the above quote suggests, India could easily become one of the biggest crypto markets in the world.
This is a country with a population of 1.3 billion, second only to China, and growing at a much faster rate.
And it’s also the world’s third biggest economy:
However, the RBI isn’t going down without a fight. It has already stated it is going to fight the court’s decision and try to get its ridiculous ban reinstated.
But if the Supreme Court’s decision holds and India gets behind crypto, it could create more demand than we’ve ever seen.
In fact, this could arguably be the most compelling crypto news… ever.
Until now India has been completely excluded from any kind of crypto participation, and now all at once, the world’s third biggest economy is allowed to join the game.
It’s going to be fun to see how it all plays out.
And as if that wasn’t enough, South Korea has just regulated crypto
If you’ve been into crypto for a while, you might remember just how much demand in South Korea can move crypto markets.
But over the last couple of years, crypto’s legality in South Korea has been difficult to define.
That changed this week when South Korean authorities decided to issue some regulatory clarity.
From the block crypto on the 5th of March:
“The South Korean National Assembly passed an amendment today that will officially bring cryptocurrencies under South Korea’s legal system.
“The amendment, as written, alters the Act on Reporting and Use of Specific Financial Information to account for cryptocurrency business activity. It was drafted based on the Financial Action Task Force (FATF) rules around cryptocurrency that were released last summer…
“South Korea is one of the biggest cryptocurrency trading hubs in Asia, with over 70 exchanges in the country. Up until now, this market largely operated in the legal grey area, and lawmakers had only issued recommended guidelines rather than specific laws. The amended law is expected to provide clarity and a greater degree of legality that the cryptocurrency market in South Korea lacked.”
So in the space of eight days, we’ve had India reverse its crypto ban, South Korea legitimise crypto and Germany and France recognise crypto as a legal financial instrument.
It’s certainly been a big week in crypto.
But then, it always is.
Thanks for reading.
PS As I said at the beginning of this article, this could all
be a coincidence. Or, it might have something to do with all the Central Bank
Digital Currency projects planned for this year. For more on that, and why it
will be so significant, check out my piece on it here: Central
Bank Digital Currencies are set to shake up the financial world in 2020.
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