As any emerging industry, the cryptocurrency as a whole is experiencing lots of uncertainty surrounding regulation and legality, while the act of mining bitcoin – receiving fractional tokens for participating in the blockchain – falls under even more regulations worldwide.
In particular in China, there have been recent crackdowns on mining practices, including the termination and expulsion from the Communist Party for two school principals.
Let’s take a look at some mining regulations in different countries around the world.
Most of the countries inside the EU have favorable regulations when it comes to bitcoin mining. Recently, European Commissioner for Digital Economy and Society released an official statement that crypto mining operations were perfectly legal in the EU. stated Gabriel.
European Commission Vice President Andrus Ansip also stated that he wants Europe to be a leader in digital innovation, specifically in terms of developing blockchain technology solutions. Plans for a regulatory framework that includes crowdfunding and blockchain standards have already been announced by the commision.
In the Netherlands, a court ruling back in March found that bitcoin had the ‘properties of wealth,’ and validated a claim by a complainant seeking the 0.591 BTC he had mined as a part of a previous agreement. The judgement is seen as a big step forward toward legitimizing the currency, and especially the practice of mining.
Having already banned cryptocurrency exchanges, and ICOs – China remains one of the most hostile markets for mining bitcoin. Officials cite excessive electricity usage and risk of financial fraud and money laundering. They have not explicitly banned mining, but are attempting to squeeze mining operations by withdrawing tax deductions and tightening regulations of electricity consumption, land use and tax collection. These government interventions have contributed to recent price swings, since China accounts for almost 70% of bitcoin-related global computing capacity.
In 2014, Canada’s Parliament passed Bill C-31 — the world’s first national law on cryptocurrencies. This put Canada among the most progressive countries with respect to crypto regulation. That said, the law is not currently being enforced, since it would require all cryptocurrency companies to register with FINTRAC. Canadian officials are looking into updating laws to reflect the current industry.
However, even in a country that many consider a mining haven, Quebec is considering a complete halt of new mining operations. An influx of Chinese mining operators, creating an increased demand for electricity, has taxed infrastructure in the French-Canadian province. Quebec boasts some of the lowest power rates in North America, cool climates (which helps drive down computer cooling costs), and political stability. Still, Quebec halted cryptocurrency mining for 90 days back in June, to give legislators time to “think about adopting a rule to better formulate construction permits for these types of businesses in our territory,” says Robert Desmarais, Director General of Quebec’s Municipal Regional Council.
There’s been no official regulation of cryptocurrency mining operations at the federal level, although the SEC has been working to categorize ICO’s as securities. This could have a potential impact on the market if no mechanism is placed to register these securities with the commission.
Individual U.S. states and cities have gotten more involved in cryptocurrency regulation themselves. Plattsburgh, NY was the first city in the United States to clamp down on mining operations after local residents complained the activity was causing their electricity prices to jump. No new applications for commercial cryptocurrency mining are being considered for at least 18 months in the town of 20,000, where power stations on the St. Lawrence River generate some of the lowest-priced electricity anywhere.
The world’s third largest economy is also the largest cryptocurrency market, boasting around 61% of the world’s trading volume. Japan has slowly introduced regulatory solutions to protect investors and reduce fraud. Much like in the U.S., Japan has been looking at regulating ICOs. A recent government-commissioned study proposed new guidelines to legalize and regulate token sales but with stricter rules and more oversight. Still, for now, Japan remains a cryptocurrency mining haven.
Crypto mining is perfectly legal here, but Bitcoin trading is strictly regulated. Iceland is one of the few countries that forbids trading operations in Bitcoin. According to the Icelandic Central Bank, “it is prohibited to engage in foreign exchange trading with the electronic currency bitcoin, according to the Icelandic Foreign Exchange Act.” Despite that distinction, Iceland has a national cryptocurrency called Auroracoin, and is a popular mining location due to abundant geothermal energy and favorable climate. The excess demand on the power infrastructure is taking its toll, causing the country to be on the brink of running out of power generation capacity.
India’s central bank (RBI) has ordered the institutions it regulates to stop working with companies that offer cryptocurrency services. As the bank stated, “entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [cryptocurrencies].” Lending institutions have been ordered to close accounts of companies dealing in cryptocurrencies. Cryptocurrency-related businesses are taking the hint, and moving out of India in search of a more favorable regulatory climate.
Much like the overall cryptocurrency market, regulations for mining bitcoin vary widely around the world and can be extremely volatile. Inexpensive electricity rates and cold climates tend to draw mining companies, which tends to put a strain on local infrastructure. This ebb and flow means that what might be a great location today will not be tomorrow.
Regardless, there are many countries, especially within the EU, that are very open to the cryptocurrency industry and are not in any hurry to place restrictions. The relatively high cost of electricity and real estate may not be attractive to miners, but the regulations are.