A Review on the Adoption and Regulation of Blockchain by the Leading Global Economies
Blockchain may have started as the supporting technology for Bitcoin and other cryptocurrencies, but it is now being adopted across different industries, including gaming and logistics. This nascent technology is changing how the world interacts by introducing decentralized ecosystems that challenge today’s centralized infrastructures.
While the adoption of the blockchain has been growing in recent years, some countries are taking this area of innovation more seriously than others. This is evident in the blockchain-based innovations being developed across multiple jurisdictions and the implementation of regulatory frameworks to support this upcoming niche.
The next section of this article will highlight five prominent jurisdictions, including Germany, Singapore, U.S, Australia, and the European Union (EU). Each of these jurisdictions has adopted blockchain technology in one way or another. However, there are some disparities in the approach to integrating blockchain technology and regulating the crypto market.
That said, let’s take a deep dive to understand better the current position of blockchain adoption and regulation within the countries mentioned above.
The State of Blockchain Adoption and Regulation
Germany is one of the leading countries in blockchain adoption, having developed a strategy in 2019 that focuses on over 40 individual measures. This EU giant also implemented a specific regulatory framework for crypto assets earlier in 2021. The new regulatory framework defines crypto-assets as financial instruments under a category dubbed ‘KWG’.
As for the blockchain innovations, Germany’s authorities have been supportive with the country taking a lead role in Europe. The country’s digital association Bitkom is among the significant players in this milestone. According to a digital summit held by the German government on May 18, 2021, the country recognizes the potential of blockchain technology, especially in creating digital identities.
Surprisingly, there are already some upcoming decentralized digital identity projects based in Germany. One of them is KILT Protocol, a decentralized protocol that enables businesses and individuals to leverage digital identities to remain in control of their data.
This open-source protocol uses a claim-based model that allows user authentication without providing private information repeatedly. KILT Protocol users only have to provide information once, after which applications can access it while users retain control of the shared data.
Designed by BOTLabs, KILT protocol enjoys the leadership of German tech industry veterans including Ingo Rübe, who is the CEO of BOTLabs. Rübe has previously served as the CTO of Hubert Burda Media and IT Project Director at Axel Springer.
His contributions to the crypto industry include founding the International Association for Trusted Blockchain Applications (INATBA) and leading BOTLabs to join the Decentralized Identity Foundation (DID) and Blockchain for Europe.
Singapore is among the most vibrant financial jurisdictions in Asia, with the country hosting several multinational institutions that offer financial services across the globe. In recent years, Singapore has also been investing heavily in technological advancements, including blockchain innovations. The government of Singapore allocated $12 million in December 2020 to boost blockchain innovation and adoption for commercial purposes.
In addition to this support, Singapore’s monetary authority (MAS) has been keen on the developments in crypto for a while. The MAS introduced a regulatory framework for crypto assets under the Payment Services Act (PSA) that came into effect in January 2020. Furthermore, this central authority is also spearheading a government-back blockchain payment system alias ‘project Ubin’.
On the side of blockchain innovations, Singapore is, without a doubt, fairing pretty well. The country hosts prominent blockchain projects, including the likes of Bluzelle, a decentralized storage network designed for DApp developers and the creator economy. This platform eliminates the need to store data with centralized service providers.
Bluzelle introduces an ecosystem where users can provide space and act as information validators in return for network rewards. The platform’s byzantine-powered and fault-tolerant cluster of blockchains allows DApp and NFT developers to access cheap and decentralized data storage.
With NFTs on the rise, Bluzelle is one of the decentralized platforms where stakeholders of the creator economy can provide their unused resources for data storage. On the other hand, NFT developers can access cost-friendly storage facilities coupled with an opportunity to scale their innovations.
3. United States
Famous for its status as the world’s financial hub, the U.S is also catching up on blockchain trends despite a skeptical approach at the beginning. This can be seen in recent developments, with regulators discussing the possibilities of blockchain adoption and regulatory frameworks for the crypto market.
While there is no specific regulation on cryptocurrencies, stakeholders in the U.S government have taken a securities-oriented approach to implement oversight. However, this is set to change following recent remarks by U.S treasury secretary Janet Yellen that called for crypto regulation. Her sentiments have since been echoed by SEC Chairman Gary Gensler, who recently said that,
“In my view, the legislative priority should centre on crypto trading, lending, and DeFi platforms.”
Nonetheless, some blockchain-focused projects are making a massive difference in the U.S, including for security agencies such as the United States Air Force (USAF). This security agency has partnered with Constellation Network, a blockchain and big data solutions firm in San Francisco.
Constellation is helping the USAF to secure and consolidate data from its multiple databases. Initially, the data collected from various points by the USAF was disconnected and disbursed, making it hard to share information. With Constellation in the picture, the security agency will integrate traditional and future data types within a communicative ecosystem.
The Land Down Under is also making significant strides in the adoption of blockchain technology. Australia’s government released a 52-page roadmap for the blockchain industry in February 2020. The document highlights the potential of blockchain technology and features proposed approaches to designing an industry-specific regulatory framework.
Meanwhile, Australia’s Tax authority (ATO) has been cracking down on crypto tax evaders, with the latest warning calling for over 300,000 cryptocurrency users to file their 2021 taxes. According to ATO assistant commissioner Tim Loh, the taxman is ‘alarmed’ that some crypto users dodge taxes on the assumption that they operate anonymously, which might not be the case,
“While it appears cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions and cryptocurrency online exchanges to follow the money back to the taxpayer,”
Luckily, Australia is home to the leading crypto tax service provider, Crypto Tax Calculator. This crypto tax platform sorts the reporting nightmare for industry natives by providing solutions that cover centralized and decentralized exchanges. Users can easily integrate Crypto Tax Calculator to generate accurate tax reports dating back to 2013.
5. European Union (EU)
The EU has been making headlines within the blockchain and crypto industry since European Central Bank (ECB) president Christine Lagarde hinted at the possibility of a Digital Euro. This project is now in the investigation phase, where the focus is on design and market compatibility. The ECB kicked off with a discussion phase and is currently exploring for the next 24 months.
So far, the ECB has run Digital Euro pilot tests with blockchain networks, including Tezos, a security-focused and scalable blockchain ecosystem. Per the latest update, Tezos is one of the blockchain platforms capable of supporting a Digital Euro, given that it enables interoperability with the existing fiat systems.
ECB’s report on the successful test run also notes that Tezos supports integration with front-end solutions from traditional financial services, including banking and payment applications. While it may take a while before the ECB decides whether to launch a Digital Euro, signs on the wall indicate that this monetary authority is not taking anything to chance.
Looking Into the Horizon
Blockchain technology has earned its rightful place in modern-day businesses and operations. It is not a surprise that interest is building up within the private and public sectors. However, as we have featured, different jurisdictions are taking their approaches in adoption and regulation. This will likely continue in the foreseeable future, although the trend might change as regulators worldwide gradually develop regulatory frameworks. Ideally, it will be easier to synchronize regulation once most jurisdictions develop clear frameworks.Source