Blockchain Report: How Blockchain is approached around the world

A report analysing the attitude adopted by Countries towards Blockchain Technologies

Mr. Steve Muscat Azzopardi | 02 Oct 2018

Blockchain 1

Interest in Distributed Ledger Technologies (DLT) has increased dramatically in the last couple of years; concurrently so have pressures to build up regulation and supervision around their application. The shift in focus on regulation has not come about with the aim to impede on the industry’s development - on the contrary, as space becomes more regulated, investors and innovators alike can rest assured in the face of greater security, transparency, and protection. Chetcuti Cauchi Advocates has, therefore, produced the report titled ‘Blockchain, Crypto and ICOs - A Legal Review of Leading Jurisdictions’, which provides a legal overview of the existing regulations within the Blockchain industry.

 

Blockchain Report 2018 and Supplement to Download: 

 

Jurisdiction Reviews

The report analyses the efforts made by ten principal jurisdictions- Malta, Switzerland, Estonia, Gibraltar, USA, Australia, Japan, Singapore, Russia, and Thailand. The regulations examined cover the application of blockchain technology, cryptocurrency and initial coin offering (ICO), or initial token offering, based on data collected up till August 2018. Therefore, the focus of the report does not fall solely on cryptocurrencies, but rather encompasses other financial and non-financial uses of DLT. An outlook is provided for the 10 countries on the overall legal framework, registration process, general taxation rules, the environment for market participants, and future considerations including any plans for authorities to change or build on existing regulations. A top-level international comparison of regulatory conditions in over 20 counties is also provided to give a more general view spanning over more countries.


The choice of the jurisdictions for the comprehensive country reviews is based on whether the country has a particular legal system in place related to the technology, or whether it is an attractive destination for blockchain or crypto businesses. Countries like Malta, Switzerland, Gibraltar, and Estonia are among the top favourable jurisdictions for innovative start-ups. Malta, for instance, has the most advanced legal framework when it comes to comprehensively regulating the blockchain sphere. Switzerland has established its own virtual currency hub and is essentially a tax haven for crypto investors, while Estonia has fused its e-resident programme with blockchain technology. Russia and Thailand initially took a negative position towards crypto and then, realising the potential of the market, started making steps towards regulating it. On the other hand, Singapore and Australia were among the first countries to start regulating ICOs. Japan was the first country where cryptocurrencies were officially recognised as a form of payment, putting it leaps ahead of most jurisdictions in terms of crypto adoption. The USA has also made notable strides in implementing blockchain through a legal framework, in some states more than others. 

 

 

The Varying type of Blockchain Regulations 


Among the different approaches taken by the ten chosen countries in regulating the market, four regulators – those of Malta, Thailand, Gibraltar and Russia - have issued a specific law concerning blockchain, ICO or cryptocurrencies, whilst the remaining countries issued guidelines on the application of their existing legislation. 

Some countries, such as Australia and Estonia, have amended their anti-money laundering and terrorism financing prevention laws adding specific clauses related to digital (or virtual) currencies. In Australia, for instance, two strides in regulation were already taken in 2018 - one clarifying the legal status of ICOs, establishing a regulatory process to encourage innovation and the development of new financial business models, and the other calling for the registration of all digital currency exchange providers operating in Australia and requiring their compliance with the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) obligations. 

Malta has succeeded in establishing more specific and extensive licensing rules for market participants. Gibraltar has opted to take a lighter approach by providing principle-based regulations, promoting client protection, risk management and secure protocols, and effective financial crime prevention.

In several countries, such as Singapore and USA, regulators have directed efforts to assist innovative start-ups and provide regulatory support by relaxing specific legal and regulatory requirements, and making sure that regulation develops rapidly so as to keep in line with fast-paced innovations in the blockchain sphere. 

Malta’s Comprehensive Approach


One other vital distinguishing factor is that while the usual focus of regulations tends to fall on the application of blockchain in financial services, particularly ICOs and cryptocurrencies, the wider and more inclusive approach is that of ensuring regulation incorporates the whole technology arrangement itself, as Malta has done. With the passing of three legislative bills into law in July 2018, Malta became the first jurisdiction offering a truly comprehensive regulatory environment for blockchain technology. Not only this, but the regulatory framework is also fully compliant with the country’s obligations as an EU member state. Most notably, apart from dealing specifically with virtual financial assets and technology arrangements and services, the laws also established a new authority to oversee the industry of innovative technology – the Malta Digital Innovation Authority (MDIA) - specifically to monitor and ensure high standards as the sector continues to develop. A notable feature is that while the MDIA currently has jurisdiction over blockchain, by virtue of a simple Legal Notice at any time the Authority and relevant law may also cover other innovative technologies that may be added in the future such as AI or virtual reality. This stands in contrast to regulation in the other nine countries, such as that which exists in Thailand, which specifically regulates the trading and offering of cryptocurrencies and digital tokens. 

As the report is issued, several other governments are scrambling to catch up on the progress made by these pioneering countries and it will be interesting to observe how different regulators treat cryptocurrencies and the technology they are built on. In the longer term, broader initiatives such as EU-wide regulation is also a likelihood, although it is expected that the EU may allow different countries to try their own national solution before making any move to regulate the sphere. Nevertheless, any regulatory advancements remain invaluable in assuring greater standardisation, investor and consumer protection, and the healthy development of DLT in the global economy.

 

Our Fintech Practice 

Chetcuti Cauchi Advocates is a leading law firm within the Fintech industry, where Senior Partner Dr Priscilla Mifsud Parker, and Head of Corporate & Fintech, Mr Steve Muscat Azzopardi are actively advising and assisting clients to navigate through the new regulatory regime. Should you be interested in setting up your tech company and attaining recognition from the regulator, launching your ICO under Maltese regulatory framework, setting up a Crypto Exchange or a Crypto Fund, we would be happy to guide you through the regulatory processes.

You may discover more about the different approaches to Blockchain: Download the report from here!

 



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Dr Maria Chetcuti Cauchi

Senior Partner & Founder, Global Property Investment

+356 22056875

Mr Steve Muscat Azzopardi

Senior Manager, Corporate & Fintech