Today I would like to talk about perhaps not the most popular here, but a very interesting topic - cryptocurrencies. Namely, the countries where it is profitable to work with them, the reasons that led to the growth and gradual improvement of the situation in the cryptocurrency market for large players. Sergey Shanaev, CIS Director at Copper, a platform that provides institutional players with solutions for storing and trading digital assets, shared his vision on this topic.
Bitcoin is showing unusually strong growth. In October, for example, its value jumped immediately by 30%, and it closed November with 40% profit for investors, repeating the achievements of the cryptocurrency of 2016-2017. Now the 2017 record has been completely broken. But the difference from 2017 is that now there should not be a strong fall - really large players have entered the market.
Growth reasons
In October, bitcoin and other cryptocurrencies received unexpected support - a license issued by the New York State Department of Financial Services. It is relevant for several virtual currency units at once - from bitcoin to litecoin. Accordingly, next year PayPal users will be able to pay with cryptocurrency in regular stores.
At the same time, sellers will receive these payments already in the form of their usual money - dollars, yen, francs, etc. The exchange operations will be handled by Paxos, which will be at the heart of the new PayPal model.
In addition to the actual recognition of cryptocurrencies by the PayPal payment service, the positive thing here is that the calculations will be carried out at the exchange rate at the time of the transaction. So the volatility of cryptocurrencies will not play a special role. The infrastructure is gradually being created, which is necessary for institutional players - depositories, clearing systems, settlements, etc.
Another reason is that really big players in the world of finance have entered the market. If earlier these were ordinary users, small and medium-sized companies, and the latter were, rather, an exception. Now, both corporations and the state are seriously engaged in cryptocurrencies.
As for the former, the PayPal example is quite relevant. States have also become more active in terms of working with cryptocurrencies. So, the US Securities and Exchange Commission in the middle of last month announced that it was thinking over the idea of creating exchange-traded investment funds that specialize in assets that are associated with blockchain technologies. Accordingly, this may well lead to the entry of very significant amounts of money into the cryptocurrency market - not even tens of millions, but hundreds of billions or trillions of dollars .
At the same time, one-day projects that were created for the sake of quick earnings are now much smaller than a few years ago. There are more and more projects aimed at developing the industry.
The third reason for the growth is the use of cryptocurrency as a stable store of value. It is clear that no one canceled volatility, but nevertheless, the reliability of ordinary money is gradually falling - the last year has shown this especially clearly. The US dollar, for example, somehow weakly already looks like a safe haven - in the light of the events of this year, institutional players realized that they would have to look for it somewhere else, in other assets.
The fourth reason is the plans of different states to bring their own cryptocurrencies to the market. True, they talked about this before, but now everything is much more serious - in the near future they plan to release a crypto-yuan - China, a crypto-ruble - Russia. Although the digital currencies of states have little in common with cryptocurrencies, it still has an impact on investors and raises the rate of bitcoin and altcoins.
Regions where cryptocurrencies are doing well
If we talk about the situation as a whole, the most institutional investments in this industry are in North America and Western Europe, this statistics is also confirmed by Copper. First of all, because it is in these countries that the sources of traditional financial capital are, plus regulators introduce laws within which participants in the cryptocurrency market can work.
However, in the second half of the year, significant investment inflows are observed from Hong Kong, Singapore and Russia. This is partly the result of a tightened regulatory framework coupled with a weaker US dollar.
The most active countries driving the industry are the USA, Singapore, Hong Kong, Germany and Switzerland. In these countries, regulators stopped fighting cryptocurrencies, recognizing that they have already become a part of our life. These states are now working to ensure that their economies can adapt and benefit from improvements in security, transparency and efficiency.
This is how things stand with the attitude towards cryptocurrencies in these and some other countries.
Germany. The country's government allows cryptocurrency owners to store and use bitcoins for a year without having to pay income tax. True, businesses still have to pay taxes on the profits they make from bitcoins through corporate income taxes.
Singapore.Here, no one pays tax on profits that come from operations with cryptocurrencies. Simply because there is no such tax in the country. The only one is that Singapore-based businesses are subject to income tax if they engage in digital currency trading as their main business.
Portugal. The tax authorities have allowed individuals not to pay capital gains tax or value added tax when buying or selling BTC and other digital assets. Businesses, however, must pay taxes, including VAT and income tax. But be that as it may, Portugal is one of the most digital-currency-friendly countries.
Malaysia.There is no capital gains tax here, just like there is in Singapore. In addition, cryptocurrency transactions that involve cash or other digital assets are not taxed in the country. But if cryptocurrencies are fully legalized and used as legal tender, then the government will levy a tax. What it will be is unknown.
At the moment, the level of regulation of cryptocurrency markets in Asia is not very stable - if the government of any of the countries introduces unfavorable amendments, this can lead to fatal consequences.
What about Russia?Overall, it cannot be called unfavorable for the cryptocurrency industry, but in many ways our country is still lagging behind. On a positive note, amendments were adopted that make it possible to challenge cryptocurrency transactions in court, plus banks and exchanges can store and sell cryptoassets. All this will facilitate the entry of institutional players into the market in Russia as well. When we talk about institutional players, we mean treasuries, pension funds, large hedge funds, private banks, etc.
By the way, these players are not interested in all cryptocurrencies, but only in bitcoins, ether and a few more coins that are included in the top 10 market capitalization. Institutionals are also interested in stablecoins in US dollars - they make it possible to facilitate transactions with cryptocurrencies.
In general, now we can talk about a gradual solution of problems that were previously associated with the entry of large players into the cryptocurrency market. Perhaps, looking at their neighbors, in the near future other countries will develop laws and amendments favorable to virtual assets. Thanks to this, institutions will be able to invest large funds. This will benefit all parties to the process, including the cryptocurrencies themselves - they will add economic efficiency and become "real money"