How Legislature Is Impacting Blockchain and Crypto

Crypto assets have been rising in popularity over the past few weeks, and this explosive growth has brought about increased attention in this space.

Due to the fact that people’s finances are intimately tied to crypto, there are regulations in place that shape the way these technologies can affect a country’s citizenry. These regulations cover the entire breadth of crypto technology, from the blockchain to the crypto exchanges that people frequently use.

One of crypto’s main characteristics is its decentralised nature. This means that the crypto holders have full reign over how they send, receive, and transact crypto. 

With this freedom, there’s also an inherent risk to crypto holders—as there are a lot of fraudulent actors that can target unsuspecting crypto holders, get ahold of their crypto assets, and run away without a trace.

Given the risky nature of crypto and blockchain technology, as well as its financial value, several world governments have built laws and regulations to help protect consumers and promote economic stability in the region.

If you want to know the impact of these regulations on the crypto space, read on. We’ll deep dive into the ways legislature from various countries is impacting crypto, blockchain, and the enthusiasts within the space.

Let’s jump right into it.

• Consumer Protection

One major impact of legislative efforts from governments around the world is the enhancement of consumer protection. 

Ultimately, the government serves the people, and they’re motivated to implement safeguards to ensure that everyone is safe and protected from external threats and malicious actors.

In some cases, consumer protection measures are also targeted against crypto exchanges, as one security threat or malicious actor can wipe away thousands of people’s crypto holdings all at once. 

In countries like Australia, governments shield investors from scammers and fraudsters in multiple ways. 

And while finding individual fraudsters is a tough ask, there are laws in place that can punish wrongdoers if they’re caught in the act. For instance, there’s the Anti-Money Laundering and Counter-Terrorism Financing Act that ensures that platforms are operating within the strict boundaries of the law.

Furthermore, the Australian Securities and Investments Commission (ASIC) has required crypto exchange platform operators to have an Australian market license called the Australian Financial Services Licence (AFSL) to operate within the country.

There’s also the National Anti-Scam Centre that helps Australians report scam sources to the right government official. The government also makes further proposed legislation for digital asset providers to have stricter licensing measures for better transparency for the benefit of the consumers. 

These regulations ensure that consumers will be protected when utilising platforms that they’re supposed to trust, helping promote the safety of the flourishing crypto market space.

• Taxation Policies

Another impactful force of crypto legislation around the world is taxation. 

The Australian Taxation Office (ATO), for instance, views cryptocurrency as a form of property that is subjected to capital gains tax (CGT). This means that any profit gained from a crypto trade must be declared and properly filed to the government.

Tax obligations aren’t limited to profit gains from trades. They also extend to activities like earning cryptocurrency through staking or mining. It also accounts for profits made from selling NFTs and conducting DeFi activities. 

Typically, the relevant government taxation office gets ahold of an exchange’s crypto trades and matches it with their own books. If there’s a lapse, they may contact the party and request them to pay their taxes voluntarily. And if there are further delays, they may implement stronger means of seizing the tax.

In any case, each country has different levels of tax imposition to their citizens—and in the crypto space, this is no different. But by abiding by a strict tax policy, the people can get their fair share of crypto while still helping contribute to a greater and safer crypto and blockchain policy in turn. 

• Improves Widespread Adoption

Not too long ago, many people thought of crypto as an overly technical and niche offering. Its use case didn't resonate with the common people, leaving its market potential stagnant for a long time.

However, key crypto valuations, such as the current Bitcoin price, have gained tremendous growth through the years. And with each passing cycle, more prospecting investors get drawn into the scene.

With new investors entering the scene, and with a solid crypto base of people constantly depositing money, the government had been incentivised to shape transactions made using crypto to protect and help facilitate safe trades with various consumers.

A good chunk of these legislations have benefited the scene. For instance, governments have pushed forth laws to protect consumers from unlicensed operators. Some frameworks have also been set to simplify and encourage business-to-consumer (B2C) transactions with cryptocurrency.

With these laws, more businesses are expanding their payment gateway options and looking to capitalise on the rising crypto trend. 

This is evident in the proliferation of various industries tapping into crypto as an alternative payment method, which is most explicitly seen in real estate and the medical field. 

• Laws Reducing Carbon Footprint

In countries like the United States, there are taxation laws in place that require crypto miners to pay 30% of the electricity cost of mining.

This is a good thing for the environment—as cryptocurrency mining and transactions account for a sizable amount of worldwide electrical consumption. In fact, the entire breadth of crypto activities like mining and transacting from one account to another can consume as much energy as countries.

Given the fact that climate change is becoming a more pressing issue as time passes, finding ways to reduce carbon footprints is becoming more of a priority for many developing countries.

Crypto-regulating laws and taxations are in place to track and control crypto users and miner's energy consumption.

For instance, the US's Crypto-Asset Environmental Transparency Act of 2023 enforced crypto mining establishments to report the GHG emissions of their Bitcoin mining operations—granted that more than five megawatts of energy is used.