Crypto regulations vary from country to country, with some countries being more open to the development of cryptocurrencies than others. The impact of supporting crypto regulation on the global crypto market depends on several factors, including the specific regulatory measures taken and the extent to which countries implement them.
Nonetheless, regulation that supports cryptocurrencies can provide stability and legitimacy to the market. This may attract more institutional investors and traditional financial institutions into the field. Increased investment and adoption could help fuel a crypto bull run.
The source of the bull market
While everyone is eagerly anticipating the next crypto bull run, there is no way for investors or crypto enthusiasts to know when the bull run will begin. But some people believe they do know where it originated.
Back in February, a crypto exchange co-founder claimed that the next crypto bull run would come from the east. This is a reference to the fact that Asian countries have been embracing cryptocurrencies, introducing sensible regulations that could lead to record levels of institutional investment.
According to Chainalysis, Central Asia, South Asia and Oceania (CSAO) is the third largest cryptocurrency market in its 2022 index. Citizens there benefited from $932 billion in cryptocurrency market growth from July 2021 to June 2022.
Here are five countries that could be the driving force behind the next bull market. As well as predictions about when they can pass regulations to support cryptocurrencies and which cryptocurrencies will benefit from it.
United Arab Emirates (UAE)
The first is the United Arab Emirates or UAE. The UAE introduced regulations to support cryptocurrencies in 2018 when it announced its blockchain strategy in 2021. However, it was not until early 2022 that the cryptocurrency industry began to migrate to emirate cities such as Dubai. This comes as the UAE announced it will introduce a federal license for so-called virtual asset service providers, or VASPs. Including cryptocurrency exchanges.
This federal license effectively combined all cryptocurrency licenses created in the country at that time. Over the next few months, headlines abounded about businesses such as international schools accepting crypto payments and government agencies dabbling in the Metaverse and NFTs.
By the end of 2022, the UAE Ministry of Economy has established a virtual headquarters in a custom metaverse. The UAE becomes home to more than 15,000 crypto projects and companies.
Other emirate cities, such as Abu Dhabi, also announced multi-billion dollar cryptocurrency plans earlier this year to join the craze. The UAE Minister of Foreign Trade stated that cryptocurrencies will play an important role in UAE trade. The UAE’s adoption of cryptocurrencies also appears to have caused a stir in other Gulf states, such as Oman, which revealed that it will introduce crypto regulations in the coming months.
Concerns surrounding the 'grey' list
Now, while the UAE has been optimistic about cryptocurrency adoption, one hiccup has stifled the realization of its potential. That's bank access.
According to a UAE cryptocurrency regulatory analyst, pro-cryptocurrency regulation has yet to make UAE banks more willing to open accounts for cryptocurrency customers. This may be because the Financial Action Task Force, or FATF, placed the UAE on its gray list in March. Being on the gray list means it is more difficult to transact with the global banking system.
This is not ideal for crypto projects and companies looking to cater to international customers, which is a big reason why the UAE took steps to remove itself from the FATF list. These efforts include increasing regulation of privacy coins and requiring more information from crypto projects and companies.
These revised crypto regulations should make UAE banks more willing to serve crypto clients and, with any luck, be enough to get the UAE off the gray list.
If either outcome happens, it could finally open the floodgates for crypto capital in the country. The only thing to note is that regulations are a barrier to cryptocurrency investing in the UAE. There remains uncertainty over which cryptocurrencies are permitted under Islamic law. For context, Islam prohibits gambling; it’s safe to say that many cryptocurrency investments are no different than gambling.
This is why it makes sense that the UAE is particularly keen on the Metaverse and NFTs. The digital property aspect of both crypto niches makes them more popular from an Islamic perspective. As such, Metaverse and NFT cryptocurrencies are likely to see the most significant inflows from continued crypto adoption in the UAE
Saudi Arabia
The second country worth watching concerns: Saudi Arabia. In contrast to the UAE, the Saudi government banned banks from processing cryptocurrency-related transactions in 2018. The government also declared cryptocurrency trading illegal, but reportedly imposed no penalties on traders. The lack of penalties may be the reason why a large number of Saudi citizens hold and trade cryptocurrencies.
According to a May 2022 survey, approximately 14% of Saudi adults held or traded cryptocurrencies in the past six months. Another 17% are interested in crypto.
Now, the apparent popularity of cryptocurrencies in Saudi Arabia has given rise to the so-called Certified Cryptocurrency product, which started making headlines late last year. Around this time, the Saudi Central Bank announced the hiring of a crypto expert to assist with the country’s crypto policy.
With the emergence of the Saudi Arabian megacity and its possible adoption of cryptocurrencies, Binance has already taken root in the country. This proves that the kingdom is seriously considering pro-cryptocurrency regulations, possibly because it wants to compete with other Gulf states.
Further evidence comes in the form of the surprise announcement earlier this year that the Saudi government had partnered with cryptocurrency project Sandbox for Metaverse development. This highlights the appeal of the Metaverse and the NFT niche to countries with Islamic customs and laws.
Relations with the United States
While it’s too early to say whether Saudi Arabia will adopt crypto like the United Arab Emirates, geopolitics is pushing the oil kingdom in this direction. Some of you may have heard that Saudi Arabia's relationship with the United States is getting weaker, while its relationship with China is getting stronger. Saudi Arabia is reportedly considering pricing some of its oil sales to China in yuan.
This is a big deal because Saudi Arabia is expected to price all of its oil in U.S. dollars. Pricing even some of the oil in yuan would weaken the dollar and unsettle the United States. The Saudi riyal is pegged to the U.S. dollar at an exchange rate of 3.75 Saudi riyals to the U.S. dollar. This has been the case since 1986. If Saudi Arabia does something that displeases the United States, such as selling its oil in a foreign currency, Washington may retaliate by restricting Saudi Arabia's access to dollars.
The Saudi government appears to be well aware of the situation. As a result, the Saudi central bank is weighing the development of a central bank digital currency, or CBDC. A digital Saudi riyal could allow Saudi Arabia to eliminate its currency’s dependence on the U.S. dollar.
Late last year, another Islamic country, Iran, allowed businesses to trade using cryptocurrencies. China recently brokered a peace deal between Saudi Arabia and Iran. Iran may use encryption to trade with Saudi Arabia, making the Saudis more willing to do the same. If Saudi Arabia does start using cryptocurrencies for trade, Gulf states may follow suit. That's because most Gulf countries' currencies are also pegged to the U.S. dollar.
Hong Kong, China
The third jurisdiction is HongKong, which highlights the importance of HongKong’s adoption of cryptocurrencies. This indicates that China will do the same. For reference, China banned cryptocurrencies in 2018 and clamped down on the remainder of the industry in 2021. HongKong was initially viewed as a safe haven for Chinese cryptocurrency companies and projects, but that changed after the administrative takeover of the state following massive protests in 2019 and 2020.
At the end of 2020, HongKong banned retail crypto trading and cracked down on the crypto industry. In early 2022, HongKong started targeting stablecoins because they could disrupt HongKong’s CBDC. The fact that the Hong Kong dollar is pegged to the U.S. dollar suggests that Hong Kong may also be trying to escape U.S. influence through a CBDC.
In mid-2022, HongKong officials noted that some NFTs required additional regulation. This suggests that the region may not be as open to the Metaverse and NFT niche as the UAE and Saudi Arabia. This may have something to do with China's desire to tightly control and maintain social media.
Unlike the People’s Republic of China, officials here are considering legalizing retail cryptocurrency trading and investing by the end of 2022. HongKong has pledged to attract more than 1,000 cryptocurrency companies and projects over the next three years.
HongKong officials have made it clear that they want to limit retail crypto investments to the largest and most liquid cryptocurrencies. This suggests that cryptocurrencies like BTC and ETH may be the biggest beneficiaries when retail crypto trading and investing becomes legal this summer.
Support a cause
Not surprisingly, the Chinese government has signed on to Hong Kong’s encryption plans. This is an understatement as the Bank of China is reportedly trying to provide banking services to cryptocurrency companies and projects in Hong Kong, despite cryptocurrencies being illegal in the mainland. Not only that, banks in Hong Kong have also started offering cryptocurrency to fiat currency conversion services to their customers.
Arthur Hayes, the former CEO of crypto derivatives giant BitMEX, believes that the next crypto bull market may begin when China re-enters the market, and Hong Kong can play a vital role in this process. However, there are some caveats. Hong Kong officials seem to be averse to everything but crypto investing. Non-CBDC stablecoins will be banned and DeFi will be restricted.
Singapore
All of the above provides clues as to the fourth jurisdiction to watch, Singapore. Right now, Singapore seems to have a love-hate relationship with cryptocurrencies. The city-state has rejected hundreds of crypto licenses, banned crypto-related advertising and even shut down crypto ATMs early last year. However, on the other hand, KPMG found that crypto investments in the small country grew more than 13 times in 2021.
Bank of Singapore began expanding services to retail investors in early 2022, and several large crypto companies, including Circle and Coinbase, obtained crypto licenses. Additionally, Singaporean companies have been exploring crypto payments and the government is exploring tokenizing assets on smart contract cryptocurrencies. However, in between these bullish headlines, there is no shortage of blows to the crypto industry. Most of the crackdown follows the collapse of Singapore-based crypto hedge fund Three Arrows Capital (3AC). Given that the failure was likely caused by the implosion of Terra’s UST, stablecoins were one of the crypto niches targeted by Singaporean regulators. They also floated the idea of restricting retail investors’ participation in cryptocurrencies, but seemingly opted to introduce it for everyone Revised Cryptocurrency Regulations.
The regulator is committed to streamlining the screening process for crypto projects and companies seeking to secure bank accounts in the country. Needless to say, bank access is the biggest issue facing the crypto industry, so this move could be very optimistic.
hiccups from the past
Now, cryptocurrencies may encounter two problems in Singapore. The first is that when FTX went bankrupt, the country suffered a direct financial loss. That's because Singapore-based wealth fund Temasek lost about $275 million when the exchange collapsed. This has made Singapore generally skeptical of cryptocurrency trading, causing problems for Binance and other companies.
Singapore, on the other hand, has been working closely with the Federal Reserve on a CBDC. This suggests that the country is more geopolitically aligned with the United States and is not trying to use CBDC to evade U.S. influence, as other countries appear to be doing. This could explain why Singaporean authorities censored Binance rather than FTX, and why the country continues to waver between accepting and rejecting cryptocurrencies.
For those who still don’t know, Binance has recently faced intense scrutiny from U.S. regulators, as has the rest of the cryptocurrency industry. This means that Singapore’s impact on the cryptocurrency market may go both ways. This could be positive if the country decides to compete with its neighbors on crypto regulations, but very harmful if the country chooses to follow in the footsteps of the United States.
France
The last country to watch is the wild card: France. At first glance, France is becoming the most crypto-friendly country in Europe outside of Switzerland, and possibly the most crypto-friendly country in the West.
There has been an avalanche of pro-Krepteau news in France since President Emmanuel Macron's re-election last April. First, Binance obtained digital asset registration in the country last May. This is a big deal as Binance faces intense scrutiny elsewhere in Europe. Last September, one of France’s largest banks began offering crypto custody services to institutional investors, before acquiring the same digital asset registration as Binance to offer more crypto services.
That's because Bank of America is starting to face scrutiny for doing so. Earlier this year, Binance partnered with a French company to test crypto payments in the country.
French regulators also announced that they will reform and introduce better crypto regulations. This is noteworthy as the European Union is developing its cryptocurrency rules, with France being the frontrunner. In addition, USDC stablecoin issuer Circle chose France as the location for its European headquarters.
Cross-regional
Considering Circle understands local crypto regulations and has the wherewithal to set up anywhere, choosing France confirms that the country is highly pro-crypto. France's stance appears to be an extension of EU sentiment and the continent's efforts to keep its economy growing in the face of dire obstacles.
But France is again facing pressure from other EU countries. This could even lead to penalties if it goes down this path of supporting cryptocurrencies.
Still, if France continues to go against the grain, it could inspire other countries to do the same, and not just in Europe. French is one of the most widely spoken languages in the world. What's more, many African and Middle Eastern countries are actively trying to move away from the dollar. These countries could easily follow France's lead.