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The crypto market geography 2023

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Cryptocurrency is a new financial instrument, and right now authorities are doing their best to create norms for its regulation. In this article, we will find out where digital assets are legalized and where they are banned, as well as explore the specifics of the regulator's approach to crypto in various jurisdictions.

Why is geography so important

The first cryptocurrency Bitcoin was released in 2008. Soon other digital assets similar to BTC flooded the market. As a new financial instrument gained popularity, regulators needed to develop legal guidelines for it. Different regulators used their own approaches to solve the problem.

Authorities in some countries have frequently changed their minds about digital assets. In 2016, China was literally a crypto capital, but due to some reasons in the fall of 2017 the local government claimed ICOs illegal. Bitcoin immediately reacted with a crash:

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Then there were a couple of years without any pressure, during which China cemented its status as the capital of mining. But the situation changed again in May 2021 when the local authorities introduced some mining restrictions. As a result, many members of the crypto community had to relocate. A huge part of them picked the USA, so it became the new capital of mining. Bitcoin reacted to the changes with a new price drop:

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The cryptocurrency market's evolution depending on the Chinese regulators actions is shown on the chart below, which illustrates bitcoin's hashrate (measure of the computational power used in mining) geography changes:

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It is reasonable to believe that the health of the crypto market largely depends on the authorities' approach to industry regulation. The most important countries in this case are those where the majority of crypto members reside, such as the United States and China. That is why their local authorities' decisions are always under observation.

Regulatority features

In some countries, a cryptocurrency's legal status does not imply that it can be used with the same rights as fiat (national currency). The rules can be extremely different. For example, both the United States and Australia have technically legalized cryptocurrencies, which means that their use is not restricted in either jurisdiction. But:

๐Ÿ‡ฆ๐Ÿ‡บ  In Australia digital assets are considered a commodity, so the local governments apply the same rules to crypto. 

๐Ÿ‡บ๐Ÿ‡ธ  In the United States, regulators have not reached an agreement on the legal status of cryptocurrencies yet. The head of the Securities and Exchange Commission (SEC) Gary Gensler considers bitcoin a commodity. Other cryptocurrencies, including the second-largest coin Ethereum, are considered securities (documents that give owners property and monetary rights, including the right to receive income). 

To determine an asset's status, watchdogs are using the Howey test. It contains questions, the answers to which allow them to understand whether the investor expects to profit from the actions of the issuer. If the result is positive, the asset is recognized as a security. According to the SEC, cryptocurrencies that are run on the Proof-of-Stake (PoS) algorithm and use staking (holding an asset in order to maintain the network) can be considered securities. That is why the SEC believes that Bitcoin is a commodity, while the PoS coins including stablecoins are surrounded by doubts.

Restrictions on cryptocurrencies can also be formal. For example, despite the pressure, even after the miner raid in May 2021, China remains one of the largest mining centers (take a look at the BTC hashrate geography in the first part of the article).

Reading the crypto legalization map

Now that we know all the specifics, let's move on to the main question. In order to determine the crypto geography, we will use the CoinDance map, which contains information about the status of bitcoin in various countries.

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The map shows 6 ways of considering crypto in different countries (as we discussed, the approaches are quite nominal):

๐Ÿ‘ Legal โ€“ you can use crypto;

๐Ÿง Alegal โ€“ technically itโ€™s legal, since there are no restrictions in the law;

๐Ÿ‘ฎโ€โ™‚๏ธ Restricted โ€“ crypto is partly allowed to use;

๐Ÿ™…โ€โ™‚๏ธ Illegal โ€“ it is forbidden to use cryptocurrencies;

๐Ÿคทโ€โ™€๏ธ Unknown โ€“ the status of cryptocurrency in the country is not defined.

To make it easier, here are some examples:

๐Ÿ‘ Countries that have legalized cryptocurrency: United States, Canada, Australia, Russia, Italy, India.

๐Ÿคทโ€โ™€๏ธ  Countries where the cryptocurrency does not have a certain status: Mali, Niger, Namibia, Myanmar, Turkmenistan, Honduras.

๐Ÿ™…โ€โ™‚๏ธ  All countries that have banned crypto: Pakistan, Bangladesh, Vietnam, Algeria, Bolivia, Afghanistan, Macedonia. 

What conclusions can we make:

๐Ÿ”—  Developing countries usually legalize crypto.

๐Ÿ”—  Africa has the least activity in terms of developing legal standards for digital assets.

๐Ÿ”—  A minority of regulators resort to banning cryptocurrencies.

Bitcoin is not banned in 132 of 257 countries. In most of these countries, you can buy cryptocurrency from a bank card fast and easy with local fiat using the itez service. The exchanger has a Lithuanian authority license, so the purchase will be absolutely transparent.

The legality map does not quite fit in with the data on the geography of crypto users. For example, according to triple-a.io map (below), Africa overtakes South America in terms of the number of crypto users, while CoinDance's map (above) shows that Africa is an outsider in matters of digital asset regulation. The absolute leader in the number of crypto owners is Asia. Australia has the tiniest crypto community.

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The mining centers' location data is also contrasted with the regulatory map. This is what the bitcoin hashrate distribution looks like, according to chainbulletin:

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China, despite the restrictions, remains one of the largest bitcoin mining centers. The trend is spreading to all of Asia, which remains the leader in terms of the number of cryptocurrency users. Its dense population in comparison to other parts of the world most likely plays a role in the statistics.

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So what ๐Ÿ˜ฎ

There is not a single country with a fully developed regulatory framework for cryptocurrencies. Authorities all around the world are still improving it. Itโ€™s not surprising since the cryptocurrency market is young and constantly evolving, and regulators simply do not have time to adjust.

The rules you should follow while operating with crypto may differ according to jurisdiction. In general, there is a trend in legalization of cryptocurrencies. There are very few countries whose authorities have introduced a complete ban on digital assets.

History shows that regulators' attitudes towards digital assets can change over time. Therefore, we can assume that in a couple of years, the map of cryptocurrency legalization will look completely different, and then we will return to this issue.

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This material is not an investment recommendation. The financial and other transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about conducting any operations with cryptocurrency and / or tokens.

Maria Kachura
Maria Kachura

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