Opinion: Asia should learn about cryptocurrency regulation from Europe

Photo credit: artmagination / 123RF Stock Photo.

In the post-financial crisis era, it’s clear which countries are the most determined to avoid a repeat of 2008. This can be seen in the flexibility of new financial regulations.

The Europe and the US are using regulations to help tech companies improve financial processes like sending money, taking out loans, and transacting online. But other countries can’t boast such progress.

Asia is slipping behind the West in the adoption of useful financial technology like blockchain and cryptocurrency. Some Asian countries have even seen it as a threat rather than a solution.

Europe puts its chips on cryptocurrency

The European Economic Area (EEA) is a prime example of cryptocurrency adoption, especially in larger constituent nations like the UK, Germany, and the Netherlands. Eastern Europe is also a large participant in blockchain startups.

The region’s ecosystem is fragile, as it has several geographical interests in the picture. Not keeping these interests aligned can be dire (as we saw in the Brexit debacle). It’s no surprise then that the region has embraced blockchain and cryptocurrencies to promote transnational financial cooperation, spur innovation, and boost economic strength.

Two regulatory improvements have helped fintech (and blockchain) to flourish in the EU:

1. PSD2: A specific set of laws that help make payments more inclusive for all banks and countries in the monetary union.
2. MiFID2: This directive prevents collusions to suppress competitive and transparent tools like blockchain.

Both directives help establish a clear path for fintech innovations, break down country borders, and allow blockchain to grow.

Countries like Germany, which labeled bitcoin as a legal “unit of account” as early as 2013, are using these laws to support blockchain and remove obstacles in the way of innovative companies.

Capitalize on cryptocurrencies

Europe is largely defined by its hardline regulation of traditional banking infrastructure and its low-touch relationship with fintech solutions. The Netherlands and France are two examples of this. Both countries chose largely not to recognize cryptocurrencies like bitcoin, leaving them unregulated and unsupervised. By letting the infrastructure grow naturally and taxing cryptocurrency transactions as capital gains, they legitimized people’s investment choices without losing their stake.

Take French asset management firm Tobam, for example. Earlier this month, it introduced the first mutual fund to track bitcoin investments. Although the mutual fund will initially only be available via private placements, Europe’s move toward treating cryptocurrencies as actual investable products means that it will maintain its edge in the burgeoning global cryptocurrency ecosystem.

This laissez-faire attitude has contributed much to the cryptocurrency industry in Europe and helps countries maintain their interests without damaging their reputation or profits.

Asia should take note.

Grasping at straws

Taking a page from Europe’s book