Central Banks Across the Globe Continue Attempts to Stymie Growth of Digital Assets
While many central banks around the world have taken an accommodating approach towards digital assets like Bitcoin, there remain a select few which appear to be dead-set on restricting their usage. The following are a few examples of this, and recent actions taken surrounding the regulation of digital assets.
The Bank of Korea (BoK)
South Korea has long been a prominent player in the digital assets sector. As such, the Bank of Korea has needed to take a more active approach than most. Reports coming from the nation now indicate that the BoK is looking to increase its powers around digital assets even further – the ability to track cryptocurrency related banking activity.
“We plan to utilize our legal authority over requesting document submittal from financial institutions to monitor the volume of cryptocurrency transactions made through bank accounts.”
The move, which if given the green light, will come in to effect in a few short months. This would align with the current deadline for virtual asset service providers to register – another initiative meant to regulate service providers dealing with assets like Bitcoin.
While each of these moves is clearly structured around the idea anti-money laundering, the monitoring of bank accounts does raise questions regarding privacy rights – an issue which will no doubt be taken in to consideration prior to the potential approval of the proposal.
Central Bank of Iran (CBI)
Bitcoin mining is currently under great scrutiny. Detractors note the energy consumption associated with the process as a major issue, while pundits note that its environmental impact is insignificant compared to gold – the asset most commonly compared to BTC. While this war on environmental impact is being raised, there are other nations such as Iran which seek to manipulate mining for its own needs. This was most recently on display when the Central Bank of Iran announced that any BTC mined outside of its borders was banned from use.
While the rationality behind this decision isn’t 100% clear, it is believed that the move is an attempt to profit from a growing outflow of capital as the nations FIAT struggles. Fatemeh Fannizadah, a Switzerland based lawyer specializing in blockchain, stated, “Crypto is already regulated in Iran…this just means that Iran wants to export Iranian produced coins more aggressively, encourage mining, and counter capital flight in the face of a depreciating Rial.”
With decentralized exchanges growing in popularity, tumbler services, and various other means of obfuscating BTC origins, it should be interesting to see how the CBI intends on enforcing this new restriction.
Reserve Bank of India (RBI)
For years now a battle has been waged in India between its central bank and the digital assets sector. While the RBI may have seen a past attempt to stymie the sectors growth thwarted by the nation's Supreme Court, it appears to be taking a new approach towards this goal. The RBI is now approaching banks, and not so subtly encouraging ties be cut with companies involved in digital assets.
Speaking with Reuters, an unnamed representative of a bank which had been contacted indicated the RBI is concerned about money-laundering.
“The regulator has been unofficially asking us why are we dealing in such a business when it is ultra-speculative. A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering.”
At the end of the day, there has been so much back-and-forth and speculation regarding the regulation of digital assets in India, that no one truly knows what will happen. It could be days, or years, before official comprehensive framework surrounding the regulation of digital assets is actually implemented. For the time being, it would appear as though the RBI is taking on the task of squashing the sector in a manner it sees fit.