Given the apparent sensitivity of cryptocurrency markets to regulatory and political developments, it stands to reason that the world’s leaders — and what they think about crypto — will be vitally important in determining the direction the cryptocurrency market will travel in the future. Many leaders have been willing to sit back over the past few months and let crypto develop — more or less — organically, yet it’s becoming apparent that the time for official action is drawing increasingly near, at which point Bitcoin, et al. will either bear the brunt of government ‘crackdowns’ or will benefit from favorable support.
However, teasing out a single, consistent stance on crypto among world leaders is difficult, with many saying conflicting things about Bitcoin, Ethereum and other platforms, and many not openly saying anything at all. But one thing that does emerge, amid all the noise, is that many are enthusiastic about blockchain technology in the abstract, without being enthusiastic about any cryptocurrency that actually exists right now.
This could potentially have unfortunate implications for crypto, if such a position ever translates into concerted action against decentralized platforms to the benefit of more centralised, government-endorsed alternatives. But then again, if the decentralization of community-led cryptocurrencies is as powerful as its exponents claim it is, what world leaders think about crypto might actually be inconsequential in the long term after all.
Donald Trump: ‘keeping an eye’ on Bitcoin
If there’s one leader the world that enjoys being talking about more than any other right now, it’s Donald Trump. However, it would seem that Donald Trump isn’t all that keen on talking about crypto, though it’s possible to deduce his general stance on Bitcoin by looking at what the people around him have said about cryptocurrencies recently. And while their words have been cautious or qualified — for the most part — it would seem that Trump might possibly be the most crypto-sympathetic leader in the Western world right now.
One of the most recent pronouncements from a person close to the 45th President came from Gary Cohn, the 11th Director of the National Economic Council — from January 2017 to April 2018) — and the ex-president of Goldman Sachs. He affirmed his belief that there will one day be a “global cryptocurrency.” Unfortunately for Bitcoin maximalists, Cohn doesn’t think that such a global token will be Bitcoin, since he believes that whatever coin emerges to dominate the future will not be “based on mining costs or cost of electricity or things like that.”
Cohn is, in other words, a member of the ‘blockchain not Bitcoin’ club, and even though he no longer works as Trump’s chief economic adviser, it would seem that other figures within Trump’s circle — as well as Trump himself — are also fellow travellers. In September, Margie Graves, the chief information officer at the US Office of Management and Budget, revealed that the government was looking into use cases for distributed ledger technology, just as other White House officials were urging the adoption of the data standards necessary for blockchain adoption to take hold.
If such enthusiasm for blockchain invited hope for a similar attitude towards cryptocurrencies, such hope was largely stunted during a November 30 press conference. When quizzed on whether “the President [has] been following this at all – Bitcoin specifically,” White House press secretary Sarah Sanders answered:
“I know it’s something that [Trump’s] keeping an eye on.”
Revealingly, such vigilance was being maintained mostly by Homeland Security adviser Tom Bossert, implying that Bitcoin was more a subject of concern for the Trump government than of excitement.
While remarks from Attorney General Jeff Sessions in October would also suggest that the White House regards the cryptocurrencies which exist now as more of a problem than as a solution, recent statements from another one of Trump’s former brains — Steve Bannon — could suggest that the President’s personal view of Bitcoin is more sympathetic. In March, Bannon championedcryptocurrencies as a means of enabling businesses and governments “to get away from the central banks that debase your currency and make slave wages,” and of enabling individuals to reclaim power over their personal data from tech companies — which haven’t exactly been supporters of Trump.
He followed up these comments in June by describing cryptocurrencies as “revolutionary.” While it’s too much of a jump to suggest that Trump completely agrees with the chief strategist — who he fired in August — on this, it’s not too much of a jump to suppose that a president who’s introduced tax cuts and is in favour of smaller government might also be fond of a technology that “takes control back from central authorities.” Still, even if Trump is privately enthused by Bitcoin, it’s difficult to see it translating into new government policy in the short term, at least if the growing tendency of the SEC and CFTC to ease off cryptocurrencies is any kind of indication.
The EU: Blockchain over Bitcoin, despite fanboys
Moving from the U.S. to the EU, it’s perhaps unsurprising to note that a similar favoring of blockchain over Bitcoin is also prevalent. The British, French, German, Dutch and Italiangovernments have all outlined intentions to introduce cryptocurrency regulation, and a common theme in their suspicion of crypto trading concerns its security and money-laundering implications.
In December, the U.K. government revealed that it wanted to introduce legislation that would make it illegal for cryptocurrency exchanges to permit users to trade anonymously and without confirming their identities. The Economic Secretary to the Treasury, Stephen Barclay said:
“We are working to address concerns about the use of cryptocurrencies by negotiating to bring virtual currency exchange platforms and some wallet providers within anti-money laundering and counter-terrorist financing regulation.”
Similarly, French finance minister Bruno Le Maire announced in January that France and Germany would launch a joint push at the G20 summit in March to introduce cryptocurrency regulation, with such coordinated action on their respective parts indicating approval for crypto-control at the very highest level (i.e. at the level of German Chancellor Angela Merkel and French President Emmanuel Macron). That said, as cautious of cryptocurrencies as EU and G20 leaders were — and still are — no specific action was agreed upon at the March summit in Argentina. Despite the 20 finance ministers in attendance sharing fears that crypto could be used for laundering, avoiding taxes or even financing terrorism, too few of them believed that cryptocurrencies were big enough to pose a threat to financial stability. Hence, they resolved to delay formulating any specific recommendations until the next G20 meeting in July.
It’s unlikely that these recommendations will be especially favourable, but it’s worth pointing out that the European environment wasn’t always so hostile toward Bitcoin and the like. Back in July 2015, then-Prime Minister David Cameron chose the London-based digital asset company Blockchain to join the U.K. trade delegation to Southeast Asia, indicating the British government’s positive stance towards cryptocurrencies — in particular — rather than just distributed ledgers — in general. His number two in command at the time, Chancellor of the Exchequer George Osborne, had also announced in March of the same year there would be £10 million of funding for research into the opportunities provided by digital currencies.
Interestingly, ex-chancellor Osborne was such a Bitcoin fanboy that he was photographed withdrawing the currency in August 2014, and it would seem that certain people still in key positions of power are also personal advocates of cryptocurrencies. Emmanuel Macron was photographed holding a Ledger Blue wallet in March 2016, while he was the finance minister under François Hollande. He also proposed legislation that same month that would have used blockchain tech to turn bonds on the French bond market into a kind of crypto-asset.
However, these indications of support for Bitcoin all emerged before last year’s big speculative boom in cryptocurrencies, which ultimately resulted in finance ministers from Spain to the Netherlands warning of the risks of trading in crypto. Since then, the likes of current British prime minister Theresa May and Emmanuel Macron have talked about cryptocurrencies only in the context of regulating or ‘watching’ them. At the World Economic Forum in January, Macron said in a speech:
“I’m in favour of the IMF [International Monetary Fund] having the mandate to police the entire global financial system, of which whole areas escape regulation. Such as Bitcoin, cryptocurrencies or shadow-banking.”
There are, however, a few notable exceptions to the EU’s hardening stance. In February 2017, Malta’s prime minister Joseph Muscat declared in a speech in Brussels that Europe should become “the Bitcoin continent”:
“The rise of cryptocurrencies can be slowed but cannot be stopped. Some financial institutions are painstakingly accepting the fact that the system at the back of such transactions is much more efficient and transparent than the classical ones.”
Since then, even though the EU has, in general, grown warier of crypto, Malta has only become more welcoming, with Binance and OKEx both establishing presences in the country in June and April of this year, respectively. And Malta isn’t the only small, crypto-friendly EU nation at the moment, since Lithuania has taken concerted steps this year to create positive frameworks and guidelines for the cryptocurrency industry. So too has fellow-Baltic nation Estonia, although its plans to establish its own national cryptocurrency were frozen after criticism from the European Central Bank.
East Asia: Crackdowns amid a crypto revolution
Moving away from the Western world, an even more restrictive stance towards cryptocurrencies and crypto trading is noticeable in China. Back in September 2017, the Chinese government banned not only ICOs, but also crypto exchanges from operating in the Asian nation — a prohibition that was strengthened in February with the banning of foreign exchanges. All of this persists despite the March re-election of President Xi Jinping, who is reportedly “one of the largest advocates of free trade China has seen in quite some time.”
While Xi, seemingly, isn’t enough of a free-trade advocate to permit decentralised currencies from being circulated in China, he is yet another big fan of blockchain technology. In May, he hailed blockchain as part of a “technological revolution” reshaping the world.
“The new generation of information technology represented by artificial intelligence, quantum information, mobile communication, [the] internet of things, and blockchain is accelerating breakthroughs in its range of applications.”
His support — along with the Chinese government’s — for blockchain technology would explain why China led the rest of the globe in the number of registered blockchain patents last year, and it has a very good chance of reclaiming this title in 2018, given April’s announcement of some $1.6 billion in extra government funding for blockchain projects. It will, however, be followed not-too-distantly by South Korea, where the government has a similar preference for blockchain over Bitcoin. In February, its finance minister Kim Dong-yeon spoke of the revolutionary potential of distributed ledgers. During a meeting at the People’s Bank of China, he said:
“Blockchain technology is an important technological breakthrough to fuel the fourth industrial revolution and, as such, the ministry will take a cautious approach in regulating the cryptocurrency market. For negative use cases of cryptocurrencies, the ministry will impose strict regulations.”
South Korea has indeed taken a hardline when it comes to “negative use cases of cryptocurrencies,” despite the widespread fervor for crypto trading among the general South Korean population. In November, Prime Minister Lee Nak-yeon went so far as saying:
“There are cases in which young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds […] This can lead to serious distortion or social pathological phenomena, if left unaddressed.”
Such strong rhetoric went hand-in-hand with the regulatory steps the South Korean government took — and threatened to take — in the preceding and succeeding months, which included a September ICO ban and a January ban on anonymous crypto trading. However, it has stopped short of banning trading altogether, with President Moon Jae-in also announcing in January that, at least in the short term, there wouldn’t be a complete ban.
This confirmation of a ‘no ban’ is indicative of the kind of u-turns governments have made — and continue to make — regarding cryptocurrencies. This is most evident with Japanese prime minister Shinzo Abe who, in March 2014 — one month after Mt. Gox’s infamous collapse — released a document announcing the government’s position that Bitcoin was not a currency. He said, as part of a decision that prohibited Japanese banks from offering Bitcoin accounts and also banned the brokerage of Bitcoin:
“Bitcoin are neither Japanese nor foreign currencies and its trading is different from deals stated by Japan’s bank act as well as financial instruments and exchange act.”
However, as the nascent crypto industry recovered from Mt. Gox, and as Japan became the second-largest crypto market in the world, Abe’s — and the Japanese government’s — position gradually softened. In May 2016, it finally recognised cryptocurrencies as money, a move which enabled local banks to handle them and allowed crypto exchanges to operate within a regulated framework. Since then, the nation’s trailblazing approach to officially recognize cryptocurrencies has converged to a degree with the regulatory focus of most Western nations, although in Japan’s case the regulation leans more towards the supportive, nurturing end of the spectrum.
Putin: Will he or won’t he?
Circling back towards Europe, president of Russia Vladimir Putin has a stance on crypto that’s more or less as ambiguous as Donald Trump’s. Yet, in Putin’s case, this ambiguity comes not from an unwillingness to talk about cryptocurrencies and blockchain, but from its opposite. Back in July 2017, at a G20 summit, he made what could be considered his first comment on crypto technology:
“The global economy’s transition to a new industrial order is underpinned by the development of digital technology. We believe that the G20 could take on a leading role in shaping international regulations in this area.”
While such a statement could indicate a desire to regulate cryptocurrencies in a way that enhances their potential for creating “a new industrial order,” other statements from Putin and the Russian government have only muddied the waters. In August 2017, deputy prime minister Igor Shuvalov elaborated on plans to introduce a state-controlled cryptocurrency, the ‘CryptoRuble,’ which would be the only digital currency legally tradable in the country. “I am a supporter of a CryptoRuble coming into being,” he told
a Russian news network. “We can’t keep cryptocurrencies under lock and key any longer – the phenomenon will keep advancing […] It should, however, advance in a way that does not harm our national economy, but rather strengthens it.”
Next, there were reports that Russia would introduce a regulatory framework that would legalise Bitcoin and other cryptocurrencies. In September, Russian finance minister Anton Siluanov told the Moscow Financial Forum, “the state understands indeed that cryptocurrencies are real. There is no sense in banning them, there is a need to regulate them.” As encouraging as this may have been, Putin himself contradicted this statement in October by calling for Bitcoin and other cryptocurrencies to be outlawed. Their prohibition was necessary, according to the president, because they present dangerous “opportunities to launder funds acquired through criminal activities, tax evasion, even terrorism financing, as well as the spread of fraud schemes.”
His words were reinforced later that month when he officially confirmed plans for the much ballyhooed CryptoRuble, but were then weakened — yet again — when a December meeting saw the government disagree on whether these plans should ever be realized, with Alexey Moiseev (Deputy Minister of Finance) and Olga Skorobogatova (Deputy Governor of Russia’s Central Bank) both claiming that a state-controlled cryptocurrency was unnecessary. Then. apparently, it was on again, only to be off again when Putin announced in March that cryptocurrency regulation — officially making crypto trading legal — would become law by July 1 of this year.
So Putin’s attitude towards cryptocurrencies and their (legal) status in Russia is now finally clear, right? Wrong: in June, he answered a number of questions on crypto, and even though he appeared to rule out the possibility of there ever being a state-backed CryptoRuble, he didn’t offer much else that would suggest the government is about to start creating a nurturing environment for cryptocurrencies. He said during a live Q&A session:
“The relationship of the Central Bank of the Russian Federation to cryptocurrency [is that] it considers cryptocurrency neither a means of payment nor a store of value. Cryptocurrency is not backed by anything. One should treat it cautiously, carefully.”
Even though Putin has spoken approvingly of blockchain technology, it therefore remains to be seen just what kind of support he and his government will be offering cryptocurrencies in the future.
Latin America: Restriction and state-backed cryptocurrencies
A similarly mixed picture also emerges from Latin America, where the use of cryptocurrencies has been relatively widespread, but where governments haven’t always been willing to provide a legal framework that would encourage further adoption. This was particularly evident in Venezuela: an inflation crisis affecting its national currency (the bolivar) saw people turn to Bitcoin en masse in 2017 as an alternative means of payment, despite the fact that the government was imprisoning miners of the cryptocurrency.
However, this quickly changed in December, when the government of Nicolas Maduro announced that it would issue its own oil-backed state cryptocurrency, the Petro. According to Maduro, the Petro would enable Venezuela to “[a]dvance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.” And it was with this decision that his government’s stance on cryptocurrencies more generally softened, with crypto mining being made legal in January. While Maduro didn’t offer comment on this u-turn himself, his ‘cryptocurrency superintendent’ Carlos Vargas had the following to say:
“It is an activity that is now perfectly legal […] We have had meetings with the Supreme Court so that people who have been victims of seizures and arrests in previous years will have charges dismissed.”
Unfortunately, this change of heart hasn’t really translated into purposeful action to promote the use of all cryptocurrencies, since aside from the launch of a free course focused on the trading and mining of said currencies, Maduro’s government has been focused almost exclusively on promoting the Petro. In January, he urged the Bolivarian Alliance for the Peoples of Our America (ALBA) to join the country in using the national cryptocurrency:
“I put it on the table, brother governments of the ALBA, the proposal of the cryptocurrency of the Petro, so that we can take it on as one of the projects of integration of the 21st century in a bold way.”
As for other countries in Central and South America, it’s interesting to note that the more neoliberal among them take a stance towards crypto that’s comparable to those taken in the U.S. and the EU. In Brazil, numerous blockchain pilots have been launched by banks, businesses and the government since at least 2016. Yet the nation’s influential figures have, in general, spoken dismissively of Bitcoin and other cryptocurrencies. In October, the president of Brazil’s central bank, Ilan Goldfajn, likened Bitcoin to a pyramid scheme:
“The Bitcoin is a financial asset with no ballast that people buy because they believe it will appreciate. That is a typical bubble or pyramid [scheme].”
While Rodrigo Maia, the President of the Chamber of Deputies, has spoken about the potential for cryptocurrencies to reduce tax evasion, neither he nor President Michel Temer have built upon such support by proposing favorable policies. And in the vacuum created by their silence, other Brazilian politicians — such as Expedito Netto — have sought to ban Bitcoin outright.
In Mexico, regulation has been passed that will effectively restrict the trade of cryptocurrencies and introduce government oversight over their use. In Argentina, however, the approach to digital currencies is — and has been — more generous, possibly because President Mauricio Macri appears to be privately interested in Bitcoin, at least judging by his organizational role in the First Bitcoin Forum in 2015 — and by at least one past Facebook post referring to ‘interesting’ discussions on bitcoin with entrepreneur Richard Branson. And while he’s spoken little about cryptocurrencies since then, the willingness of Argentinian banks, for example, to use Bitcoin for cross-border payments would indicate that the environment he’s fostering is a friendly one.
Interest insofar as crypto can reinforce power
Crypto is at a crossroads. After enjoying an almost fantastical Christmas period that saw Bitcoin shoot up by as much as 154% in a single month (in the four weeks leading to Dec. 17), cryptocurrencies have been struggling to find a secure plateau ever since. Regulatory setbacks, damaging hacks, and fraud investigations have been knocking one currency or another since the beginning of the year, with the total market cap of all coins standing at roughly 35% of what it was at its Jan. 7 peak — which equalled almost $830 billion).
This turbulence is why the world’s leaders are so important for crypto right now, since their views and the regulatory policies they impose will have a strong influence on how digital currencies perform in the coming months and years. And amid the marked variation in opinions on crypto among world leaders, one basic principle emerges: national governments want to ensure that decentralized cryptocurrencies don’t undermine their sovereignty over the nations they govern, while — at the same time — they want to harness whatever’s convenient about crypto in order to increase economic efficiency and strengthen their respective positions.
This is visible in the eagerness of such EU leaders as Emmanuel Macron and Theresa May to curb the anonymous trading of cryptocurrencies, so as to maintain their jurisdiction over the flow of money. It’s visible in the desire of leaders such as Nicolas Maduro — and possibly Vladimir Putin — to launch state-controlled cryptocurrencies, so as to evade international sanctions and to shore up struggling economies. And it’s visible in the excitement that most leaders have for blockchain technology, which would take what’s most congenial about cryptocurrencies — their ‘trustless immutability’ — and apply them in an efficiency-enhancing way to various fields economic and institutional areas.
However, while most world leaders seem interested only in exploiting the features of blockchain tech that would reinforce their power, there’s little doubt that many of them are privately fascinated by crypto, which may end up benefiting from favourable legislation as a result. From Emmanuel Macron holding his own Ledger Blue wallet to Mauricio Macri organization of Bitcoin conferences in Buenos Aires, there’s little doubt that cryptocurrencies and their promise of decentralized financial systems have certainly captured the imagination of many a president or prime minister. It would just seem that — for the moment, at least — the world’s leaders are busier trying to adapt crypto to their own needs, rather than the other way around.