While cryptocurrency remains a topic of debate across many parts of the world, various countries are embracing the blockchain technology behind it. Fears of criminal activity, terrorist financing, money laundering and tax evasion are very real as is the need for a mechanism to protect investors from losing their savings in ICO scams.
However, getting the regulatory balance right is not an easy task. With the USA and Japan beginning to clamp down on cryptocurrency exchanges and ICOs, it’s not surprising that blockchain companies are looking for more welcoming pastures.
After all, it’s not only in Silicon Valley or Tokyo that innovation can bloom. So while most jurisdictions are scrambling to get existing laws up to date, or create brand new ones, here are three countries already leading the way.
With some of the biggest names in blockchain coming out of Canada, most notably Joe Lubin, and Don Tapscott, Canada is leading the charge when it comes to blockchain tech. The mining landscape up north is getting huge, with Toronto-based Hut 8 now claiming to be the largest publicly-traded digital currency mining company in the world.
In terms of regulation, Canada’s doing things the right way. The Ontario Securities Commission (OSC) announced their plans to be innovative on regulation in 2018. Similarly, the Bank of Canada began exploring the possibility of creating their own digital currency at the end of 2017 and as early as 2014, their Bill C-31 recommended that all digital currency companies register with regulatory authority FINTRAC.
Canadian cryptocurrency exchanges like Coinsquare are also taking an interesting approach towards crypto-regulation as well, by working only within their borders.
CEO Cole Diamond mentioned that
“We believe that a platform built in Canada should service Canada, and review the potential changes in domestic regulation before advancing to other geographies.”
Rather than serve customers around the world, Coinsquare is only available to Canadians and Canadian financial institutions. They are fully compliant with FINTRAC regulations and soon aim to expand through a new partnership model across the globe.
This means that they will only work with exchanges that are also fully compliant within their own jurisdictions. Through the establishment of a “closed-loop” system, customers can be sure of trading with regulated cryptocurrency exchanges and that their chosen platform won’t end up shutting down for non-compliance.
Referred to by many as the blockchain nation, Eastern Europe has always been a hotbed of programming talent. So it makes sense that blockchain should be widely adopted here. Estonia is also the first country to have suffered a nationwide cyber attack a little over a decade ago.
The nation that brought Skype to the world found themselves in dire need of improving the security and safety of their citizens’ data. So the government set about transforming Estonia’s digital infrastructure to become the most advanced digital nation in the world.
Practically all Estonian public services are digitized and accessed through the secure digital identities of every citizen and resident. In fact, through e-governance, 99 percent of all services are available 24/7 online. The technology is based on advanced encryption, like that of the blockchain, and includes 2-factor authentication.
Furthermore, all data in Estonia is decentralized and secure. Estonia would also have been a pioneer country in launching their own cryptocurrency, the estcoin. But being part of the EU, were unable to move the initiative forward.
A well-known tax haven popular with expats, Malta is fast becoming known as the “blockchain island.” When powerhouse cryptocurrency exchange Binance announced its move there earlier this year, after looming threats of regulation from Japan, Hong Kong, and China, Binance put Malta put on the map.
“Binance’s decision is a vote of confidence in Malta’s government and legality,” said Silvio Schembri, Junior Minister for Financial Services, Digital Economy & Innovation. But Binance’s move to Malta is just one of the many highlights in this small country’s ambitious plans. Malta is looking to lead the world on blockchain regulation as well.
In their February paper Malta – A leader in DLT Regulation, the country’s finance ministry detailed their intentions to become a premier blockchain destination, welcoming companies within the space by offering them a host of attractive incentives. Binance moved to Malta principally so that they could offer fiat-to-cryptocurrency deposits and withdrawals, something that was impossible to achieve in many other locations.
Beyond the Binance relocation and innovative regulation, it’s thought that other implementations, such as an Ethereum Peg Zone, could see the explosion of a new type of decentralized exchange based on the 0x protocol. This would allow for cross Blockchain value exchanges.
While the rest of the world gets bogged down in privacy debates, regulation battles, and cryptocurrency bans, other countries are busy building on innovation. And they’re using the slow start of others to their advantage.
As blockchain technology takes off, it will be interesting to see which countries embrace it and which are left behind. But for now, any government looking for inspiration would do well to turn to these three nations weaving blockchain into their core.