Key Insights:
Restrictions imposed on crypto markets have hurt crypto innovation worldwide.
High taxes in India and the US have disrupted new interest, thereby stifling innovation.
The ban on crypto in Russia could soon strangulate developers who are now forced to turn towards black markets.
In China, the effects of the 2017 crypto ban have now resulted in a lukewarm ETF market.
The US has the largest crypto market in the world. The ETF market cap alone has crossed $72 billion purely on the basis of strong demand (data as of 14th of May 2024). Yet, for reasons best known to themselves, the US government has left no stone unturned to kill the crypto economy within the country.
Starting with the two-year mining ban in New York, the local authorities have so far imposed the most strongest anti-crypto policies inside the US. Although the electricity used in crypto mining in the US largely comes from renewable sources, yet the two-year mining ban was imposed by the Department of Financial Services in the state.
For the uninitiated, crypto mining (or proof of work) is by far the most effective safeguard against hacks and exploits that could take place in a blockchain. This is the same technology that has kept Bitcoin safe and running despite every odd.
There has been reports on a proposal to hike tax on electricity that is being supplied to crypto miners. The proposal contains a hike of as much as 30% and would make it economically unviable to mine crypto especially Bitcoin which has now halved its mining rewards to 3.125 BTC per block.
The tax brought up by the Biden administration is named the Digital Asset Mining Energy Tax (DAME).
India has imposed a 30% income tax on crypto since April 2022. The tax has been one of the highest taxes levied on anything in the country. What makes things even worse is the fact that profits and losses in the crypto income cannot be traded off with each other.
For example, if someone makes a $100 profit and a $100 loss on any crypto activity, the law says that a $30 tax has still to be paid.
Though focused mostly at crypto traders, this law hurts innovators like NFT developers who work with an entrepreneurial streak. Several NFT sellers, entrepreneurs, and developers had to shut down operations just because the taxes made the NFT business uneconomical. This also is a major reason why Indian crypto markets are mostly limited to just cryptocurrency buying and selling.
The increased amount of taxes has led to a decreased adoption of NFT token standards like ERC 1155 and ERC 6551 which now have fallen into oblivion despite superior features and functionality.
In an attempt to catch the falling Rube, the Russian government had put a blanket ban on cryptocurrencies in the country. Russian parliamentarian and Chairman of Committee on Financial Affairs, Anatoly Aksakov had informed that crypto had been increasingly used in the country for transactions and had undermined the position of the Ruble.
However, crypto mining has been granted an exception because it generates valuable Bitcoins that are used as a supplement for the lack of sufficient foreign exchange in the country.
What the government fails to understand is that the ban has also impacted Russian developers who were reliant on cryptocurrencies such as Ethereum, Tron, BNB, Solana and several others for developmental activities.
Further, a reduced supply would also give rise to black markets which breeds financial crime inside it. Also, as several companies pay developers and employees in stablecoins, they would be forced to either give up the job or turn to the black market to redeem their paychecks.
The 2017 crypto ban in China has finally started to show its long-term effects. On 30 April 2024, Chinese markets saw the first launch of a spot Bitcoin ETF in Hong Kong.
However, the fear of 2017's crypto purge pulled investors from investing in the ETFs. Despite an overall bullishness globally due to Bitcoin halving, Hong Kong spot Bitcoin and Ethereum ETFs barely made a dent in the industry.
On their first day, they received a lukewarm welcome of just $112 million (all ETFs combined) as compared to $4.6 billion of inflows on the first day of the US spot Bitcoin ETFs (11th of Jan, 2024).
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.