Governments and regulations have been the sword of Damocles hanging over cryptocurrency’s head since its beginning in 2009.
Cryptocurrency concerns governments because they fear losing control of money, which has been under their monopoly and was secured by law for centuries. On the contrary, cryptocurrency marketplaces are global; they are not limited by any physical location or borders. In that sense, it easily bypasses the current financial regulations unless blocked by a government.
In that sense, the spirit of cryptocurrency is anti-government. But governments will always want to control any form of money and take their share.
Many governments have so far taken measures to prohibit cryptocurrencies by banning cryptocurrency mining operations and cryptocurrency exchange businesses under their jurisdiction.
Additional grounds for the cryptocurrency bans of governments include energy consumption of Bitcoin, which is claimed to drive up energy prices and greenhouse fuel emissions, and nefarious transactions and money laundering processed with cryptos.
Due to the above factors, the market has always been very fearful of regulations. Regulations caused a lot of price crashes for cryptocurrencies in the past and jeopardized their adoption.
China is the Leader in Crypto Bans
China is the first country in the world that has ever enforced laws against cryptocurrencies. In fact, the country has held a restrictive relationship with its domestic cryptocurrency industry ever since this new asset class became popular.
China is important for cryptocurrency because it constitutes around one-third of the total number of cryptocurrency users in the world (100 million out of around 300 million). Due to that, negative developments in this country are well likely to jeopardize the future growth and adoption of the global crypto industry.
In addition to the highest number of individual adoption, China also used to be the world’s largest Bitcoin miner until the arrival of the recent mining bans, constituting more than 65% of the world’s total Bitcoin mining power. Plus, it was home to the largest, global cryptocurrency exchanges. All of this forefront infrastructure has resulted in a large number of early cryptocurrency millionaires coming out of China.
Below you may find a short chronology of China’s different bans on cryptocurrency:
In December 2013, Chinese officials prohibited banks from processing transactions that involve Bitcoin and other cryptocurrencies. Since China was by far the largest crypto market, this announcement caused the price of Bitcoin to crash by over 30% . And to make things worse, BTC China, the country’s largest Bitcoin exchange back then, announced two days later that it had stopped accepting Chinese Yuan deposits. Cryptocurrency investing and trading were still legal though.
About 4 years later, in September 2017, the Chinese central bank forced cryptocurrency exchanges based in China to cease operations by the end of the year. Although some of the largest, global cryptocurrency exchanges of today were originally established in China, like Binance and OKEx, this development pushed them to move offshore.
In 2021, the Chinese government this time restricted both cryptocurrency trading and mining activities. First, in May 2021, the government banned banks and payment companies from providing remittance services related to any cryptocurrency trading.
In June 2021, regulators decided to shut down cryptocurrency mining centers in a number of states, all of which used to be major Bitcoin mining hubs in the world, due to their gigantic energy consumption to mine Bitcoin.
Finally, in September 2021, the government hit the final nail on the coffin by declaring all cryptocurrency transactions illegal (both crypto-to-fiat and crypto-to-crypto) and by banning all cryptocurrency exchanges doing business in mainland China.
A number of governments eventually followed China’s footsteps as a response to the ever-growing interest in cryptocurrencies around the world. The prohibition of cryptocurrencies in other countries mainly happened during the 2018/19 bear market of cryptocurrency. These prohibitions range from how Bitcoin can be used to heavy penalties for anyone making crypto transactions.
Crypto Bans in Other Countries
India, the second largest country in the world in terms of population, is becoming increasingly against cryptocurrencies. On November 23, 2021, the Indian government announced its plan to introduce a new bill, which would establish a new central bank-backed digital currency and ban all cryptocurrencies.
The Indian government has also considered outlawing the possession, mining, trading, and transferring of cryptocurrency assets before.
Although it is not illegal to hold cryptocurrency in Bangladesh, It is unlawful to trade them. If anyone is caught buying or selling cryptocurrency, they can be charged with up to multiple years of prison.
Bolivia is an early mover in terms of cryptocurrency bans, in fact, the 2nd after China. The Central Bank of Bolivia banned all decentralized cryptocurrencies back in 2014, which includes Bitcoin.
Ecuador implemented an outright ban on decentralized currencies, also in 2014. In a vote in the National Assembly, the government prohibited all forms of “electronic money” that is not controlled by the state. At the same time, prohibiting coins is not controlled by the state.
Nigeria is the largest crypto market in Africa, and it imposed a ban in February 2021, which prohibits banks and other financial service companies from providing cryptocurrency services. In addition, the law threatens to close bank accounts of individuals and businesses who transfer funds in and out of cryptocurrency exchanges.
The collapse of the Turkish lira has pushed a large population of people in Turkey to invest in cryptocurrencies in an effort to protect the value of their holdings. This has in return, made Turkey the largest cryptocurrency market in Europe while it ranks among the top 10 markets globally. Governments are known to step in wherever there is money, and the Turkish government is no exception, so cryptocurrencies are now on the regulatory agenda in Turkey.
The Central Bank of the Republic of Turkey issued a regulation in April 2021, which banned the use of cryptocurrencies, including Bitcoin, to pay for goods and for the settlement of commercial transactions. Turkish President, Recep Tayyip Erdoğan, additionally issued a decree, which made cryptocurrency exchanges accountable for a list of anti-money laundering and terrorism-financing rules.