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Current State of Crypto Regulation in the Commonwealth

Current State of Crypto Regulation in the Commonwealth

An update on cryptocurrency adoption and regulation in commonwealth countries.

The Commonwealth, also known as the Commonwealth of Nations, is an intergovernmental organization of 56 member countries, most of which are former territories of the British Empire. As former colonies transitioned to independence, the British government established the Commonwealth in 1931 to retain global influence and promote cohesion between former colonial lands.

The Commonwealth promotes democracy and human rights, funds economic development, and reinforces cultural ties between members. It also facilitates cooperation among member states in various areas, including trade, governance, and development. The map of the commonwealth countries shows the ongoing breadth of influence of colonial Britain.

Cryptocurrency Adoption in Commonwealth Countries
Source: Political Geography Now

Alongside trade and governance, monetary policy is a critical aspect of governance that has evolved over time in the Commonwealth.

Origins of Commonwealth Monetary Policy

Historically, many Commonwealth countries have had close ties to the British pound and followed a fixed exchange rate system. However, in the 1970s and 1980s, several countries began to adopt floating exchange rates and pursued independent monetary policies. This shift allowed these nations to respond better to their specific economic conditions and fostered greater financial autonomy.

Commonwealth Cryptocurrency Adoption Trends

Cryptocurrency adoption has been growing steadily across the Commonwealth in recent years.
According to Chainalysis’ 2022 Global Cryptocurrency Adoption Index, five out of the top 20 countries are Commonwealth countries representing leading regional and global leaders in crypto adoption, notably India, the UK, Nigeria, Kenya, and Pakistan. Other Commonwealth members who are regional leaders in Crypto adoption include Canada, Australia, and South Africa.

Adoption trends vary across the region, with some countries leading the way and others still in the early stages of exploration. Member countries are interested in cryptocurrency for different reasons. People in developing nations are more likely to use crypto for its intended use – as an alternative to centralized and often exclusionary financial systems.

Investors purchasing crypto for speculative reasons are the primary driving force for adoption in the Commonwealth’s more developed countries. Commonwealth countries like the UK, Australia, and Canada have vibrant crypto communities, a growing number of crypto exchanges as well as increasing regulatory controls.

Cryptocurrency Regulation in the Commonwealth

Because the Commonwealth is an association of independent nations, the entity itself doesn’t have the mandate to regulate cryptocurrency for its members. As an organization, the Commonwealth has been following digital currency trends since at least 2015. It published a Fintech Tool Kit in 2020 and held their first Fintech summit in September of 2022, although content from that summit is no longer available on the website.

Cryptocurrency regulation in the Commonwealth is a shared responsibility among different agencies within each member country. Primary considerations for international cooperation include fighting terrorism and cross-border crime such as anti-money laundering (AML), know your customer (KYC), and tax evasion.

Government agencies often collaborate with international organizations and other Commonwealth countries to develop regulatory frameworks that balance innovation and consumer protection.

For example, the Financial Conduct Authority (FCA) is the main regulatory body overseeing cryptocurrencies in the United Kingdom. It has implemented strict AML and KYC requirements for crypto businesses and actively monitors the industry to prevent fraud.

Other Commonwealth countries are also developing a regulatory framework for cryptocurrencies. One notable example is the Bahamas. Building on its history as a tax haven for the wealthy, the government introduced the Digital Assets and Registered Exchanges Bill in 2019 to regulate the issuance and trading of cryptocurrencies. The Bahamas was also one of the first countries to launch its central bank digital currency (CBDC), the Sand Dollar, in 2020.

In 2021, FTX moved its registration and operations from Hong Kong to the Bahamas. In December 2022, Sam Bankman-Fried agreed to be extradited from his home in the Bahamas to the United States in the wake of FTX’s high-profile collapse. In response to criticism related to the FTX incident, the Bahamas’ government proposed tighter crypto regulations to protect investors and its international reputation.

Other smaller island nations in the Caribbean and the Pacific are also adopting and regulating cryptocurrencies to expand financial inclusion and reduce the costs of cross-border remittances.

Moving Ahead

International cooperation is playing a crucial role in shaping the future of cryptocurrency regulation in the Commonwealth. Collaboration among member countries and engagement with global regulatory bodies can help address emerging challenges like money laundering, terrorist financing, and market manipulation.

As global crypto adoption continues to increase, countries will likely place a greater focus on investor protection and consumer education. Regulators will likely implement stricter requirements for crypto businesses, including licensing and ongoing compliance obligations.

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This material has been prepared for informational purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.

Kala Philo