Today governments and the business community are taking steps to further legitimize cryptocurrency. This could have a major impact on the price of bitcoin and help drive further adoption.
Why Bitcoin Legislation Will Be Key to Adoption
Anybody with experience trading bitcoin will remember the challenges that banks would often pose. Many banks blocked the accounts of those looking to trade in cryptocurrencies and the likes of Jamie Dimon would happily pontificate about how little they cared about bitcoin.
This naturally frustrated many crypto enthusiasts, who saw it as an attempt to hamper adoption. Of particular concern was the possibility that governments might make bitcoin illegal. As it turned out, the truth was more complicated.
Banks and governments need to be able to identify who is using a cryptocurrency in order to ensure Know Your Customer (KYC) regulations are followed and taxes are paid. The simple fact is that if bitcoin is to become mainstream, banks and governments will need to embrace it. Thankfully, in contrast to Dimon's prediction, this process appears to be underway.
Bitcoin-Friendly Legislation Drives Adoption
Many governments have taken steps towards legalizing, or at least positively regulating, the cryptocurrency industry. For example, the Swiss government has taken steps to encourage blockchain startups in order to boost crypto-powered businesses.
In terms of trading, there have also been positive steps in Vietnam towards adoption with the recent announcement by Bvnex that users can buy bitcoin directly using Vietnam dong (VNDT).
Crypto-friendly regulations have helped to drive a number of interesting initiatives around the globe that could have a positive impact on the price of BTC. More and more cities have seen bitcoin ATMs pop up, offering an easy way to exchange fiat for bitcoin.
Additionally, companies once hostile to the idea of cryptocurrency, such as JPMorgan, are now embracing the technology.
Regional laws are also sparking innovation. For example, Wyoming’s SPDI (special purpose depository institution) law has paved the way for the 2021 launch of Avanti Bank, a 100% reserve bank which is well-positioned to attract institutional investors. Wyoming’s crypto-friendly laws are also attracting interest and investment from across the U.S.
Meanwhile Fidelity Investments reports that a growing number of institutional investors believe that part of their portfolios should be allocated to cryptocurrencies, with bitcoin and ethereum being the most popular.
This will help normalize the cryptocurrency, and in turn drive liquidity into the crypto market. But this doesn’t mean that it’s going to be smooth sailing.
Not Every Nation Is Embracing Bitcoin
Despite positive movements around the globe, there are still a number of challenges on the horizon that could negatively affect the price of bitcoin. In particular, there have been troubling signs in Russia and India.
Since 2018 the Russian government has been seeking new ways to control bitcoin, defining it as property and not legal tender. These efforts appear to have intensified as it has become clear that government opposition has been able to use bitcoin to raise funds, much to the Kremlin’s ire.
So far this doesn’t seem to have dampened Russian appetites for cryptocurrency but this could change if the government’s legislation on “Digital Financial Assets” comes into force.
India’s situation is even worse. Despite a supreme court ruling in 2018 that quashed a previous attempt to ban cryptocurrency, the government appears to be making another attempt.
No law has been proposed yet but the Indian crypto sector harbors fears that a concerted move by the government against the sector could stifle their fledgling industry.
The Tide Is Turning in Bitcoin’s Favor
Despite the moves by Russia and India, it appears that the tide of public opinion is beginning to turn. Governments are expected to enact crypto-friendly, or at least crypto-neutral, legislation over the next decade. This will help to speed up adoption and will undoubtedly provide positive news for investors betting on bitcoin in the long term.