Foreign experience: how have cryptocurrency bans in other countries affected the coin niche?
This week, Russian crypto-investors were hit by some very negative news: the Bank of Russia announced the possibility of a complete ban on mining and circulation of cryptocurrencies in the country. So far, the Central Bank has not taken any active measures, but it is already a wake-up call for those who fear stricter regulation of digital assets. Unfortunately, a complete ban on crypto is unlikely to be a winning strategy for all parties. To understand this, we need to look at international experience – precedents for restricting the crypto market in other states. We will talk about them in more detail.
It should be noted that this initiative of the Central Bank of Russia does not affect in any way the possibility of storing cryptocurrency for Russian citizens. They will be able to do so - only with the help of foreign infrastructure exclusively. In other words, it will be possible to use foreign crypto-exchanges, but it will be prohibited to use a Russian bank to purchase coins.
What will happen after the full Bitcoin ban?
Firstly, a complete ban on BTC mining in Russia will be a serious blow to the cryptocurrency’s network hash rate. As a reminder, the Russian Federation accounts for approximately 10 percent of the computing power of all the world’s miners. In addition, a ban on cryptocurrency circulation would put an end to the plans of any Russian business to generate additional revenue from cryptotransactions in any way.
Journalists at news outlet Decrypt concede that drastic measures by the Central Bank of Russia are virtually impossible without the permission of President Vladimir Putin. Putin himself has had little public discussion of his position on digital assets in the past. But the current situation in Russia can be compared with other countries.
Russian President Vladimir Putin
So, nine countries have officially banned all crypto transactions: Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, Tunisia and, of course, China. Tough restrictions on digital assets in China were one of the key reasons for the rapid fall of the crypto market last spring.
Apart from China and Nepal, all of the aforementioned countries have predominantly Muslim populations. The position of cryptocurrencies in Muslim law is still not fully defined. Some Muslims consider them “halal”, i.e. allowed within the framework of religion. However, some Muslim organisations consider crypto to be “haram”, a forbidden concept in Islamic law.
Chinese President Xi Jinping
All states where Bitcoin is now completely banned account for about 0.19 per cent of the cryptocurrency's hash rate. Until recently, China was the largest mining hub for the coin, but since the bans, miners have migrated out of the country. The Chinese government's restrictions did deal a serious blow to the hash rate, but the figure still reached a new all-time high afterwards.
There are also 42 countries in the world where restrictions on the crypto market are partial, meaning their companies are not allowed to conduct official crypto transactions or accept cryptocurrency payments from their customers. The list of these countries includes Benin and Burkina Faso. Both fall under the Central Bank of West African States (BCEAO), which does not allow cryptocurrencies in its economic zone.
The same goes for Cameroon and Chad, which are members of the Central African Economic and Monetary Community (CEMAC). True, none of this has prevented Chad and Burkina Faso from ranking fifth and sixth in terms of p2p Bitcoin transactions in Africa as of September 2021.
Closer to Russia, several former Soviet republics – namely Georgia, Moldova, Tajikistan and Turkmenistan – have indirectly banned cryptocurrency. Also on this list can be found Kazakhstan. It occupies an important place in the mining industry, as it accounts for a significant portion of Bitcoin’s hash rate. And yet, even these restrictions do not prevent crypto investors from the aforementioned countries from working with digital assets, albeit not always entirely legally.
Bitcoin hash rate map
In other words, due to its decentralised nature, Bitcoin and altcoins are unlikely to be completely wiped out by a single government. But it could well lose a significant amount of revenue to the budget, because with proper taxation and recognition of digital assets, both crypto-investors and government could benefit.
We believe that the initiative to ban cryptocurrencies is pointless, as it will never be enforced. Users will still be able to use VPNs to access blocked exchanges, use platforms without having to prove their identity and actively trade assets. In addition, there are more than enough decentralised services online to suit everyone's needs. Therefore, in this situation it seems more logical to develop clear and relevant rules to regulate the niche rather than fight against it.
What do you think about it? Share your opinion in our millionaires’ cryptochat. There we will talk about other topics that affect the development of decentralised assets.
Related posts
