Regulation of Cryptocurrency and Blockchain-based Activities: A 2018 Update
For someone who has legal education and studies blockchain, many aspects of its application might seem questionable from the legal point of view. Besides, law enforcement officers usually see the violations of law in everything new, tax authorities — a way of tax evasion, and financial institutions — monetary surrogates. However, the situation is changing, and the governments of different countries develop regulations concerning blockchain-based services, including the legal ones. Here are some examples of these.
Taxation for Crypto Traders
The government of Poland presented a long anticipated bill. The bill clarifies rules for taxation of cryptocurrency trading: crypto traders will no longer be taxed for each online transaction. The new draft law has been published on the website of the State Legislative Center of Poland and is a modification of its earlier adopted version. The Ministry of Finance of Poland announced the introduction of a civil law transaction tax on all cryptographic transactions in April. By its decision, it obliged residents of the country to report their tax returns on all revenues from trading and exchanging cryptocurrencies, such as Bitcoin, Litecoin, and Ether. Given the number of operations that a trader can perform, this tax system seemed completely overwhelming.
However, a month later, after several demonstrations demanding the withdrawal of this rather contrived tax, the authorities in Poland realized that their decision was not applicable to life: a spokesman for the Ministry of Finance said in an interview that the agency had “realized the irrational effect” of this tax. After that, the Ministry of Finance promised to develop “simple and transparent tax rules” for cryptocurrencies. According to the new bill, transactions made by crypto traders on trading platforms will be exempt from tax. Now, income from the sale of goods and services will be taxed in the same way as traditional income. The bill covers both independent traders and large companies.
Court of the Blockchain
The Dubai International Financial Centre (DIFC) and Smart Dubai have entered into a partnership agreement to create the first Court of the Blockchain to unlock the potential of blockchain technology in resolving litigation issues. The press release claimed that the partnership agreement is the first step in shaping the “blockchain justice” in the country and that the use of technology will reduce duplication of documents and contribute to increasing the efficiency of the entire legal system.
In the future, the research will also affect the resolution of disputes in public and private blockchain, and proceedings related to the application of legislation and contractual agreements that were concluded using smart contracts.
In a statement, the joint working group reports that in the near future it will work on a model of smart contracts that will take into account possible exceptions and conditions for a smooth and effective process of resolving disputes in legal proceedings. Amna Al Owais, Chief Executive & Registrar, DIFC Courts, said:
“This taskforce is in line with our guiding principle to deliver courts as a service, powered by technology and extended through cooperation agreements and alliances. By harnessing blockchain technology, Dubai will be firmly positioned at the forefront of legaltech and judicial innovation, setting the standards for countries and judiciaries to follow”.
Aisha bint Butti Bin Bishr, Director General of the Smart Dubai Office (SDO), explains that the blockchain-court project is part of a government plan regarding digitalization of public services. Moreover, in April, Sheikh Mohammed Bin Rashid, vice president and prime minister of the United Arab Emirates and the ruler of Dubai, announced the launch of the “UAE Blockchain Strategy 2021”, which aims for the UAE to become a world leader in technology implementation.
Earlier, in 2017, the DIFC courts and the Dubai Future Foundation already organized a forum to create uniform rules for the remote work of lawsuits. This year, the representatives of the private sector and technology companies will also attend the forum to create vertical working groups to examine in detail the application of technology in legal proceedings.
South Korean Finance Minister Kim Don-Yon confirmed that in 2019, the government will allocate 5 trillion won ($ 4.4 billion) to the Growth through Innovation investment program, in which among the 8 key areas of development, special attention is given to blockchain and AI.
Thus, next year, the country will increase the budget for innovative development by 65%, compared to last year. At the same time, investments in the blockchain, Big data and artificial intelligence will be increased by almost 80%: in 2019, 918 million dollars are planned to be allocated to these areas, compared to 511 million last year. The Minister of Finance noted that the Government’s priorities include:
“1) building a digital platform for big data and AI, along with promoting blockchain technology to secure data transactions and the sharing economy
2) easing data divide
3) setting up a hydrogen fuel cell supply chain
4) developing an education program to meet the demand for qualified workforce needed in the future”.
Besides, in June, the Ministry of Science and Computer Technologies of South Korea presented the development strategy for the blockchain industry in the country, for which the government has already allocated $ 200 million. Therefore is expected that in the near future South Korea may soften its position in relation to blockchain technology.