Published On: October 8, 2022 07:36 AM NPT By: Bimal Pratap Shah
Instead of getting influenced by the political ideology fit for the 18th century, Nepal should legalize crypto, come up with innovation-friendly crypto policies/ laws, and create a special digital economic zone for Bitcoin and other blockchain innovations to create business and employment opportunities in the country. Nepal cannot ban cryptos forever because the IMF has already called on financial regulators around the world to come together to develop a “global regulatory framework” for crypto assets.
At a time when the British Pound crashed to its record low against the United States dollar, I came across a thought-provoking quote about bitcoin from former US Vice President and Nobel Peace Prize winner Al Gore that read, “I think the fact that within the Bitcoin universe an algorithm replaces the functions of the government is actually pretty cool. I am a big fan of Bitcoin.” It was challenging to verify if the Nobel Laureate said those words, nonetheless, the quote exemplifies why Bitcoin is a rethink. Many forward-looking countries around the world have already regulated cryptocurrency (crypto) to attract talent and businesses of the new remote first economy while backward-looking authoritarian governments are still adamant about restricting cryptos. The International Monetary Fund (IMF) is worried that the fragmented national-level crypto regulation will ultimately concentrate talents and businesses in crypto-friendly jurisdictions, and the countries currently banning cryptos will be the ultimate losers in the crypto economy.
Last September, the Biden administration released a framework outlining the regulation of digital assets including cryptos and other items of value existing only in digital form. Progressive US states and cities are already competing for crypto-friendly status. Miami city’s mayor Francis Suarez has bet his political career on crypto and still collects his salary in bitcoin. The mayor has taken a series of progressive steps to make Miami a leading crypto hub. He also believes in allowing citizens to pay taxes with crypto and also pay government employees in bitcoin as part of efforts to improve crypto adoption in the city. Borrowing from Suarez’s vision, Colorado recently became the first US state to accept bitcoin for tax payments with a PayPal account. Crypto adoption will likely grow exponentially in the coming days because a growing number of pro-crypto politicians are getting elected in the government’s highest positions around the world including in Africa.
Nigeria, Africa’s largest economy, tops the chart in bitcoin trading. One-third of Africa’s crypto owners are Nigerians which equals roughly 22 million people. Despite losing more than 65 percent of its value since its peak in November of 2021, bitcoin’s popularity has not waned in Nigeria. Even with the ban, crypto adoption grew exponentially in Nigeria mainly because people are always scanning for options to store their money in digital assets because the fiat cash is constantly devaluating due to financial instability and rising inflation. The very fact that a large number of merchants already accept the decentralized asset as a mode of payment in Nigeria has also contributed to the growing adoption of Bitcoin. The West African country has initiated a process to create a special economic zone (SEZ) for Bitcoin to harness the benefit of the crypto economy. Since many Nigerians consider bitcoin to be good money, it seems the Nigerian government is slowly opening up to explore Bitcoin’s economic potential.
According to the Austrian School of Economics, “Money is not the root of all evil. Bad money is. Good money makes it possible to reveal real prices, prevent inflation, and the costs associated with it.” The greatest proponents of this branch of economics were two Austrian economists - Ludwig von Mises and Nobel Laureate Frederic A Hayek. They explained clearly why good money cannot come out of thin air and that trying to plan money centrally leads to complications. They were against centrally planning the economy, but believed some sort of planning was necessary. The Austrian School of Economics recently got a boost after the conception of Bitcoin. Bitcoin can be a difficult concept to digest especially because we have been indoctrinated to believe money must be controlled by some central authority authorized by the government. Bitcoin elegantly solves two main problems of fiat currency. First, Bitcoin has no central authority. Second, Bitcoin’s supply is limited and known in advance. This is not to say that central banks are not important. The central banks have played an important role in developed countries with functional governments. However, in an extremely corrupt country like Nigeria where central banks have not been doing a good job controlling hyperinflation, people will likely convert their national currency to Bitcoin or other stronger fiat currencies like the US dollar.
Crypto analysts predict Nigeria will be at the forefront of global crypto adoption by the year 2030 for mainly two reasons. First, the ban did not stop the Nigerian people from illegally trading crypto. Nigerian people have traded crypto worth 1.4 billion US dollars since the ban. Second, the Nigeria Export Processing Zones Authority (NEPZA) is now planning to create the first economic free zone for Bitcoin and other cryptos to attract talent and foreign direct investment (FDI). NEPZA is in discussion with Binance, the leading crypto exchange, and Talent City, a firm specializing in building an SEZ, to create a flourishing virtual zone to take advantage of a new trillion-dollar digital economy. Nigeria’s Bitcoin SEZ will most likely emulate the Dubai Virtual Free Zone that has successfully attracted talent, businesses, and FDI in the crypto sector.
Dubai is aiming to become the crypto capital of the world. Earlier this year, Dubai’s ruler Sheik Mohammed Bin Rashid announced the enactment of the country’s first law governing crypto titled “Dubai Virtual Asset Regulation law” and also the formation of an independent regulator, the “Dubai Virtual Asset Regulatory Authority (VARA)” to develop the emirate as a regional and global destination for the crypto market players. VARA is responsible for the development of the virtual asset business environment in terms of regulation, licensing, and governance. The number of businesses accepting Bitcoin is also growing significantly in Dubai. Big names like Emirates Airlines and luxury resort Palazzo Versace Dubai have also announced their plans to accept payment in Bitcoin. It seems the government’s rapid maneuvers designed to harness the benefits of the crypto revolution are working well because the oil-rich emirate has already attracted a total venture capital investment of 30 billion US dollars in crypto and blockchain start-ups.
Surprisingly, India has become a hostile country for cryptos with discouraging taxation policies and seemingly complex treatment of digital assets. As a result, an increasing number of India-based crypto entrepreneurs have already relocated their businesses to crypto-friendly jurisdictions like Dubai and Singapore. The extremely talented people who could have helped take the Indian crypto industry to new levels are leaving the country due to the lack of positive support from the government.
The number of crypto talents and businesses moving to Dubai will likely increase because Singapore is considering tightening crypto trading by retail investors after Terraform Labs, the Singapore-registered company’s algorithmic stablecoin TerraUSD and its sister token Luna collapsed in May of 2022. TerraUSD is not a true stablecoin because it was not backed by cash or other traditional assets but derived its supposed stability from algorithms that linked its value to Luna. Dubai’s authorities also need to be vigilant because several dangerous scam cartels and rackets including Bank Bene Merenti, YEM Foundation, and YEM coin are already trying to establish bases in Dubai. As a result, crypto scams have increased in Dubai. And, to respond to these challenges, Dubai Police, in 2021, created the Digital Assets Crime Section. The police are also working with crypto trading platforms to educate investors and traders about crypto fraud.
Dubai’s visionary ruler, Sheik Mohammed Bin Rashid, is to be credited for the city’s quick success in establishing itself as the crypto hub. The world needs more leaders like him as politicians in most parts of the world including Nepal are too busy prescribing political theater better than soap operas on prime-time television. They cannot think beyond the next election, and thus are not able to put forward a superior long-term vision to develop their respective countries. Furthermore, extreme political polarization has led to gridlock in many democracies. As a result, young people are having difficulty finding their ideological home in a political party. Also, there is a deficit of politicians who understand how much the credit-based monetary system has corrupted government institutions. However, on the brighter side, an increasing number of pro-crypto politicians are getting elected in progressive parts of the world. This trend will likely be a game changer for the crypto sector.
Pro-crypto politician and Prime Ministerial candidate Pierre Poilievre won the leadership of Canada’s Conservative Party in a landslide victory in September 2022, securing 68.15 percent of the electoral points. Poilievre has been advocating more financial freedom through decentralized finance, tokens, and smart contracts. He is also an advocate of free money and a critic of Canada’s central bank’s policies. If he is elected as the Prime Minister of Canada in the next election scheduled for October 2025, he has promised to help untangle the web of regulations currently governing cryptos through consultation with provincial authorities.
Countries like South Korea, Colombia, and the United Kingdom (UK) now have pro-crypto politicians at the top position in public office. In March 2022, South Korea elected a pro-crypto politician, Yoon Suk-yeol, as the new president. President Suk-yeol’s win was not surprising given the fact the high-tech peninsula ranks 16th in the world in terms of crypto adoption where 3.79 percent (1.9 million) of the population own digital assets. During the election campaign, Yoon Suk-yeol pledged to overhaul the unreasonable crypto regulations and also crack down on fraudulent cryptos. The crackdown has already started. The Seoul Southern District Prosecutors’ Office has already started an investigation into Terraforms Labs after five Korea-based investors filed criminal complaints against the Terra Labs founders Do Kwon and Daniel Shin on charges of fraud and violations of financial regulations.
The UK could also see friendlier crypto regulations in the coming days with Liz Truss as the new Prime Minister. The Oxford-trained prime minister’s 2018 pro-crypto tweet read, “We should welcome #cryptocurrencies in a way that doesn’t constraint their potential. Liberate free enterprise areas by removing regulations that restrict prosperity.” Boris Johnson’s government was extremely serious about turning the UK into an international crypto hub and the good news is, the new government will continue with the plan. The new Economic Secretary of Treasury, Richard Fuller was recently heard saying “as crypto technologies grow in significance, the new government formed by Liz Truss does not plan to be a spectator as this technology transforms aspects of life, instead seeking ways to achieve global competitive advantage in the UK.”
Colombia also elected a pro-crypto economist as the president in July 2022. For President Gustavo, Bitcoin is “a superior cash technology and Colombia should direct its energy surplus to mine the cryptos in strategic regions, as a way to curb the trade in illicit substances.” In 2017, he tweeted, “Bitcoin removes the issuing power of states and seigniorage of currency from banks. It is a community currency that is based on trust of those who transact with it, as it is based on a blockchain, trust is measured and grows, hence its strength.” The Colombian people are now hoping for a favorable regulatory environment for cryptos to thrive in their country that recently came out of a 50-year-long civil war.
Crypto transactions are still banned in Nepal. The more interesting aspect of the ban is that even Nepali citizens who are permanent residents of other countries are also barred from buying and selling cryptos. This is ridiculous because according to the law, Nepali people who earn money in foreign countries can invest or use the money as they please provided they are not breaking that country’s law. Also, it is highly unlikely that the extremely low-wage laborer’s working in the Gulf region have extra money and time to invest in cryptos. Crypto, most likely, is not the reason for the decrease in the flow of remittances.
Roughly 300,000 Nepali people work in the United Arab Emirates, sending a large chunk of the remittances. It seems the government is now planning to push Nepal’s crypto and blockchain talents to the UAE as well. Therefore, instead of getting influenced by the political ideology fit for the 18th century, Nepal should legalize crypto, come up with innovation-friendly crypto policies/ laws, and create a special digital economic zone for Bitcoin and other blockchain innovations to create business and employment opportunities in the country. Nepal cannot ban cryptos forever because the IMF has already called on financial regulators around the world to come together to develop a “global regulatory framework” for crypto assets. According to the IMF, the crypto boom has given way to fragmented national-level regulation that leads to regulatory arbitrage as “crypto actors migrate to friendliest jurisdiction with the least regulatory rigor- while remaining accessible to anyone with internet access.”
It is perhaps appropriate to end with a quotation by Andreas Antonopoulos as crypto regulation has penetrated the mainstream discourse. Andreas states, “Bitcoin is not unregulated. It is regulated by an algorithm instead of being regulated by government bureaucracies. Un-corrupted.”
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