Last week, the Sindh High Court in Pakistan held a hearing about digital currency legal status. This could lead to a ban on cryptocurrency trading and penalties for those who trade it. The Central Bank of Russia demanded a ban on crypto trading and mining operations several days later. These two countries could join the growing number of nations that have outlawed digital assets. This includes China, Turkey and Iran, among others.
A report from the Library of Congress (LOC) shows that there are currently nine jurisdictions which have implemented an absolute ban on cryptocurrency and 42 that have an implicit ban. According to the report, a worrying trend has emerged: The number of countries that have banned crypto has increased more than twice since 2018. Here are the countries that banned certain cryptocurrency-related activities or announced their intention to do so in 2021 and early 2022.
Although the Bolivian Central Bank (BCB), issued its first crypto prohibition resolution late in 2020, it wasn’t until January 13, 2022 that the ban became officially ratified. The most recent ban’s language specifically targets “private initiatives related the use and commercialization […] cryptocurrencyassets.”
Investor protection concerns were the reason for the regulator’s decision to make this move. The regulator warned of the “potential losses of the […] holders” as well as the need to protect Bolivians against fraud and scams.
Although cryptocurrency transactions are banned in China’s People’s Republic of China from 2019, it wasn’t until last year that the government began to crack down on cryptocurrency activity. After several warnings about the dangers associated with crypto investments, a ban was placed on cryptocurrency mining. The nation’s banks were also forbidden from facilitating any transactions with digital assets. The crucial statement was made on September 24, when the main state regulators pledged to enforce a ban against all crypto transactions and mining.
Chinese officials used the environment to fight mining. This is an unusual move considering that China contributes as much as 26% to global carbon dioxide emissions. Crypto mining only a small part of this figure.
November 11, 2021 saw the declaration by The National Ulema Council of Indonesia, Indonesia’s highest Islamic scholarly body, that cryptocurrency was haram or prohibited on religious grounds. The MUI’s directives are not legally binding, so they will not stop cryptocurrency trading. It could, however, be a major blow to crypto trading in the largest Muslim country on the planet and impact future government policies.
MUI’s determination is consistent with a common interpretation across jurisdictions that have been influenced by Islamic legal traditions. It considers crypto activity wagering, a concept that could be used to describe almost any capitalist activity.
Jan. 20 saw several non-governmental Islamic organisations in Indonesia support the religious anti-crypto movement, including the Tarjih Council of Muhammadiyah and the Central Executive Tajdid Of Muhammadiyah. They issued a fatwa, a ruling under Islamic law, that confirmed the haram status cryptocurrency. It focuses on the speculative nature and inability of cryptocurrencies to be used as a medium for exchange.
The notice was issued by the Nepal Central Bank (Nepal Rastra Bank NRB), on September 9, 2021. It stated that cryptocurrency trading, mining, and encouraging illegal activities were all illegal under the 2019 national Foreign Exchange Act. NRB also stated that individual users will be held accountable for any violations related to cryptocurrency trading.
Ramu Paudel, executive director of Foreign Exchange Management Department at the NRB, stated that the public was being “swindled” by him.
On February 12, 2021, Nigeria’s Securities and Exchange Commission made a U-turn in its national policy regarding digital assets. This was after a ban by the central banking a week prior. The central bank of the nation ordered all crypto-related accounts to be closed down by commercial banks and warned them that they could face severe penalties if they didn’t comply.
CBN’s explanation of why they are cracking down on price volatility, money laundering and financing terrorism among others is familiar. CBN Governor Godwin Emefiele said that digital currencies were still an interest of the central bank and that various policy options were being considered.
April 20, 2021, the price of Bitcoin (BTC) fell 5% after Turkey’s central bank declared that “cryptocurrencies and other such digital assets” could not legally be used to pay for goods and services. Apr. 20, 2021, Bitcoin’s price fell 5% after Turkey declared that “cryptocurrencies” and “other such digital assets” cannot be legally used to purchase goods or services.
According to the explanation, cryptocurrencies could cause non-recoverable losses to the parties to the transactions and contain elements that could undermine the trust in current methods and instruments used in payments. That was only the beginning. There were many arrests of suspected crypto fraudsters and also a declaration of war by Recep Tayyip Erdoan, Turkish president.
Related: Presidents of Turkey and Salvador meet. Bitcoiners leave disappointed
Erdogan announced in December 2021 that the national cryptocurrency regulation was already being drafted and would be presented to parliament. The president added that the legislation was drafted with the involvement of stakeholders from the cryptocurrency industry. It is not known what the exact nature of this regulatory framework will be.
The Central Bank of Russia presented a January 20, 2022 report that was meant for public discussion and proposed a total ban on cryptocurrency trading over-the-counter (OTC), centralized and peer to-peer exchanges, and a ban of crypto mining. This regulator also suggested that punishments could be imposed for breaking these rules.
CBR described crypto assets as Ponzi schemes in the justification section of the report and listed concerns like volatility and illegal activity financing. But the most important of all the justifications was concern about Russia’s financial sovereignty.
What is the point of all this?
It’s hard to not notice that many countries on this list are some of the most active crypto markets. China doesn’t need an introduction. Nigeria was Africa’s largest source of Bitcoin trading volume. Binance was interested in Indonesia as an expansion target. Turkey also saw an increase in Bitcoin interest despite the falling lira.
It is difficult to ban the technology that has already been widely adopted and embraced once crypto awareness and adoption reach such high levels. It is worth noting that many times, the messaging by authorities around crypto was unclear. Officials publicly expressed their interest in digital assets’ potential even after the ban.
Cointelegraph spoke with Caroline Malcolm, Head of International Policy at Chainalysis Blockchain Data Firm Chainalysis. Malcolm said that although crypto is not allowed for payment purposes, they have been restricted by government authorities in many cases.
Why are governments seeking crypto bans?
While there are many reasons why regulators want to ban certain crypto operations, some patterns of behavior are clear.
Kay Khemani is the managing director of trading platform Spectre.ai. She stressed the importance of political control in countries seeking to ban crypto currencies. Khemani said:
Outright bans are more common in countries where the state has a stronger grip on society. Nations that once banned cryptos might reconsider if they see more prominent and wealthy economies embrace decentralized assets as part of their financial system.
The main concern of the states, which is often hidden behind their stated concerns about the safety of the general population’s finances, is the impact that digital currencies have on sovereign fiat and potential central bank digital currencies (CBDCs), particularly in unstable economies. Cointelegraph was told by Sebastian Markowsky (chief strategy officer at Bitcoin ATM provider Coinsource):
The general trend is that countries with less stable fiat currencies tend to have high adoption rates for crypto. This leads to bans on crypto by governments as they want to keep people investing in fiat In China, however, it is believed that the ban was caused by the widespread rollout of the digital currency CBDC.
Caroline Malcolm said that crypto policy drivers can change over time. It is therefore important to not assume that positions taken by these countries today will remain the same forever.
It is hoped that in at least some cases, the strict limiting of digital assets will end up being a pause regulators will have taken in order to establish a framework for thoughtful, nuanced regulation.