Nepal has emphasized the need to develop a legal framework for monitoring Bitcoin and other ‘informal channeling of funds’ during recent budget and tax announcements, joining a number of communist societies that are seeking to control the use of bitcoin.
Nepal Hosts One of the World’s Six Communist Governments, Alongside China, Laos, Cuba, Vietnam, and North Korea
Nepal has recently announced its desire to devise a legal framework through which to monitor the informal channeling of funds through bitcoin and electronic currency transfers. The government also expressed its plan to implement an electronic payment system through the banking channel for the settlement of tax liabilities – hinting that it may seek to develop a national cryptocurrency similar to the ‘masterchain’ national cryptocurrency recently developed by Russia, or Singapore’s recent experiments with issuing Singaporean Dollars via distributed ledger.
The announcement that Nepal is seeking to regulate bitcoin comes in spite of the Nepalese bitcoin economy being amongst the least developed in the world, with no private exchanges offering trade between bitcoin and the Nepalese Rupee, and less than 20% of citizens connected to the internet. Although Nepal currently has not legally classified bitcoin, local papers are said to have reported that the Nepalese Central Bank has forbidden all transactions in cryptocurrency.
Nepal hosts one of the world’s six communist governments, joined by China, Laos, Cuba, Vietnam, and North Korea – all of whom exercise strict capital controls within their borders. As such, it is unsurprising that many of these governments have sought to restrict and stifle the development of bitcoin within their borders, with the developed cities of China comprising the sole exception.
China’s relationship with bitcoin has been well documented, with the threat of Chinese regulation causing numerous shake-downs in bitcoin’s price in recent years. China recently cracked down on high margin trading ratios permitted on bitcoin exchanges, describing such as having a manipulative effect upon the markets. Although China is moving toward a permissive regulatory framework pertaining to bitcoin trading and exchange operation, recent reports have alleged that Chinese officials are forcefully shutting bitcoin mines in Sichuan – where cheap hydropower has lured investment from mining operators. These reports suggest that China will likely seek to limit the adoption of bitcoin throughout the many underdeveloped, loosely governed provinces outside of China’s center, especially mining, as bitcoin could facilitate the development of a myriad of informal economies outside of Beijing’s central control.
The Communist Nations of the World Are Unlikely to Pave an Easy Road Toward Bitcoin Adoption
In other communist nations, bitcoin adoption has been hampered by poor internet access. In Laos, less than 20% of citizens have access to the internet. There are no native bitcoin exchanges, and with Laos considered one of the hardest countries in the world to start a business in, it is very unlikely that this will change soon. There are only a handful of local cash vendors on localbitcoins, suggesting that Laos’ few bitcoin merchants are operating underground.
Vietnam was amongst the first countries to introduce stifling regulation with regards to bitcoin, banning businesses from owning or transacting in bitcoin in 2014. Despite the laws, some bitcoin companies have been able to operate as an exchange or remittance business, through facilitating bitcoin trade as opposed to transacting in the virtual currency.
Cuba saw its first officially reported bitcoin transaction between Cuba and the US took place in 2015, which was conducted by Cuban bitcoin advocacy group, BitcoinCuba. Although Cuba has started to see some basic public wi-fi networks, only 30% of Cubans are approximated to have internet access.
Outside of the new public hotspots and state-run cyber cafes, most Cubans are forced to pay to $2 USD for 1 hour of internet, despite an average Cuban salary of approximately $20 per month – leaving very few citizens able to afford the luxury of researching cryptocurrency online. With Cuba already struggling to maintain its two-currency system, it is very unlikely that Cuba’s government will encourage the use of bitcoin amongst the minority who are connected to the internet.
With the internet nearly exclusively used as an instrument of the state, North Korea has been able to shield itself from the globalizing effects of cryptocurrency. Recent reports have suggested that the North Korean state has been actively engaged with bitcoin, as North Korea is alleged to have stolen approximately $88,000 USD each month South Korean bitcoin exchanges from 2013 to 2015. The recent Wannacry ransomware attacks have seen speculations of involvement on the part of the shadowy Lazarus group – of whom Kapersky Lab claims to have found evidence suggesting ties with North Korean servers.
With Nepal’s government moving toward bitcoin regulations, it is apparent that the communist nations of the world are unlikely to pave an easy road toward bitcoin adoption. Although bitcoin’s fluidity is astounding, basic problems of poor internet access, inefficient and corrupt bureaucratic structures, and tightly-controlled underdeveloped economic structures may pose a significant barrier to bitcoin’s growth within the developing communist world.
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