This is the final part of a three-part series covering the regulatory landscape for cryptos in 2019 and thinking about the prospects for 2020. The first two parts covered the “Insiders” of Europe, North America and the Pacific Rim, and “Outsider” nations such as China, Russia and India. This piece covers the prospects for the “Experimenters”: countries that have made efforts to foster innovation and welcome crypto projects to their shores.

The Experimenters and their different paths into the crypto space

 The Swiss were the first to discover the power of neutrality in the embattled Europe of the 19th century, maintaining a secure, private and nondiscriminatory banking system that granted the mountainous nation centuries of sustained affluence. This has continued into the crypto era, with strong and well-funded projects flooding into the Swiss “Crypto Valley.” Switzerland accomplished this without drafting rules or legislation catering specifically to crypto. Instead, the Swiss have applied their existing regime — already designed with privacy, security and autonomy in mind — favorably to the projects that move onshore and avoid international scrutiny or skepticism about a new set of rules designed for crypto projects.

This approach evolved in 2019, when the Swiss legislature published a draft bill including three crypto-friendly initiatives. First, it includes a “digital rights” initiative that will facilitate the granting of legal rights in digital assets, giving a legal reality to acts occurring digitally and on blockchains, as well as pave the way for a security token ecosystem. Second, it proscribes bankruptcy rules related to cryptocurrencies (an oft-neglected but interesting and important legal issue largely unresolved for cryptocurrencies). Lastly, it anticipates a licensing regime for distributed ledger technology projects that will include auditing and monitoring from Switzerland’s Financial Market Supervisory Authority, the local financial regulator. Left unresolved, however, is the way Anti-Money Laundering rules will be applied to crypto businesses domiciled in Switzerland, and whether and how it will respond to the Travel Rule requirements. I expect the Swiss will parallel Japan’s approach, honoring the spirit (if not entirely the letter) of the high expectations of transaction monitoring across the many blockchains in the world.

Related: Is Crypto Summer Back in Switzerland?

In many ways, Singapore follows in the footsteps of the Swiss. Like Switzerland, Singapore also used its prior regime to facilitate the growth of the space, and only announced its adoption of a clear licensing regime for crypto in November, which is scheduled to be enacted in the near future. Also, like Switzerland’s Crypto Valley contingent, Singapore’s financial regulator, the Monetary Authority of Singapore, works closely with the Association of Cryptocurrency Enterprises and Startups (or, the oddly satisfying acronym ACCESS) to synthesize its Anti-Money Laundering and Know Your Customer rules with the goal of maintaining its status as a regional industry hub. I expect Singapore to follow a similar middle-ground approach to that of Japan and Switzerland regarding the Travel Rule.

On the other side of the globe, Bermuda passed two bills in 2018 that separately regulated initial exchange offerings and crypto businesses such as exchanges. Although laudable and forward-looking, these extremely ambitious legislative initiatives assume vast regulatory capabilities for an island of 65,000 people, albeit an island that happens to be a global reinsurance hub. It remains uncertain whether the small island can effectively monitor an entire industry in the same way that the Swiss, Japanese and Singaporeans appear poised to.

Perhaps as a result of its complex legislation, only four firms have done digital asset issuances in Bermuda (and of note, only two companies have obtained digital business licenses there). That said, Circle’s move to the island stands as a feather in Bermuda’s cap, bringing in the now-spun-off and Tron-affiliated Poloniex exchange, as well as the Coinbase–Circle partnership behind the USDC stablecoin.

Malta, the other small island to launch major crypto legislation, but in 2018, has had a more tumultuous experience. Rather than pull in Circle, Malta quickly landed Binance and OKEx. But despite having a less cumbersome legislative regime, Malta has two major obstacles that Bermuda lacks: First, it is an online gambling hub rather than a reinsurance hub, and second, it is a European Union member-state rather than a sleepy autonomous island nation. When Bermuda passed its legislation, the world yawned. When Malta passed its legislation, we saw articles titled “Why the EU is furious with Malta,” telling a story of scandal and money laundering. Even Boomers weren’t spared, as America’s Sunday evening news program “60 Minutes” gave harrowing coverage of the European island that once hosted the Knights Templar and had fallen prey to financial criminality and crypto-debauchery.

The pressure from multilaterals (IMF, World Bank, etc.) and the EU on Malta — which, as a tax and online gambling haven, is hardly unwarranted — came to a head in 2019. In January, the IMF, after warning the Marshall Islands not to launch their own digital currency a year prior, announced that Malta’s metamorphasis into “Blockchain Island” created “significant risks of money laundering and terrorism financing.”

It appears the local banking community got the memo, as Maltese banks reportedly refused to bank the local crypto firms. As the year progressed, leaked money laundering innuendo regarding the Maltese prime minister’s inner circle materialized, causing him to announce in November 2019 that he would step down.

The future of the Blockchain Island remains uncertain, with OKEx and Binance appearing to stay put and the next Maltese general election in 2022. However, some companies, namely Bittrex International, left to Liechtenstein in 2019, which, for its part, has more closely followed the earlier Swiss wait-and-see approach.

But it isn’t just Malta bucking the EU; France, Portugal and Germany all experimented with crypto in 2019. I know, these latter countries would likely fall under my “Insider” definition, but bear with me. Since 2008, European banks have paid billions in money laundering fines to the New York Department of Financial Services in order to maintain their New York branches and dollar-clearing privileges, while U.S. megabanks have not. While the U.S. grew strong after the recession, European Banks — and the European monetary system in general — have lagged far behind. I wonder if these recent crypto–regulatory moves from nationally elected European legislatures suggest that the Insider club may be winnowing.

Now to France. Despite the FATF Travel Rule coming from the OECD headquarters in Paris, the French appear to be engaging in a form of regulatory Jiu Jitsu, at least regarding the tax implications. In 2019, the nation announced zero taxes on crypto-to-crypto transactions, taking the fangs out of the Travel Rule’s mandatory identity disclosure. After all, if all of your trades are tax-free, you are a lot less concerned about failing to net and report gains and losses — a common gripe of crypto traders and a likely culprit for the market’s aversion to KYC requirements. Couple this with France’s announcement of its intent to launch its own CBDC in 2020, and you can see a regime where the compliance rules are used to elevate incumbent money service businesses and prohibit newcomers and outsiders looking to create crypto-to-fiat portals.

Portugal has clarified and solidified its position this year that the buying and selling of crypto are exempted from capital gains taxes or value-added tax. Similar to France, this move allows for compliance with strict KYC rules without scaring away non-money-launderers who can’t keep their transaction history straight enough to track the capital gains of their sporadic but benign crypto trading habits.

Related: Portugal Could Be a Tax Haven — Not Only for Crypto Traders

Germany — perhaps after watching Binance get founded in 2017 and eclipse the profits of its largest bank, formerly the largest in the world, a few months later — is finally unleashing its banking sector into the crypto game. It is difficult to understate the significance of Germany’s 2019 decision to allow for the custody and sale of digital assets by German banks. The outlook for Germany’s crypto market is certainly quite bullish in 2020.

Last but not least, Iran has signaled its intention to legalize crypto mining in 2019, amusingly via a licensing regime under its Chamber of Commerce, Industries, Mines and Agriculture. The Iranian government is even offering discounted energy to attract more miners. However, this is unlikely due to the Ayatollah getting bitten by the crypto bug, since, in a policy I hereby dub “enforced hodling,” Tehran has also banned settlement in cryptocurrencies. Rather, this is likely a response to crippling international sanctions led by the U.S. as well as mounting economic and political turmoil.

Iran’s strategy is less aptly “Experimenter” and more something akin to an “Ultra-Outsider” status as a result of being subject to economic sanctions. We have also seen Venezuela launch its (alleged) oil-backed crypto coin, Petro, while simultaneously suppressing use of crypto that hasten its hyperinflation but allowing the licensed mining of cryptos (again, “enforced hodling”).

We have seen a similar pattern in “Uber-Outsider” North Korea as well, with state crypto mining efforts (designed to evade sanctions) contrasting against the complete lack of economic freedom for its citizens.

Related: North Korea Wants Its Own National Crypto, CBDC Fever Spreads in Asia

In my view, 2019 has demonstrated that crypto is gaining traction and that governments are all taking its development very seriously. What makes this all so interesting is how their various interests and fears lead them to patterns of behavior that are becoming increasingly predictable. Despite this, I find myself constantly surprised by the many different directions these countries take, and not only what it says about the future of crypto but about the future of geopolitics in general. My only prediction in 2020 is that the boldest moves toward crypto adoption have probably not yet occurred, and I expect that players we have not seen discussed in this series will play a major role next year. Don’t forget, there are an awful lot of countries out there.

This is part one of a three-part series on global crypto regulation, read part two – here, and part three – here.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Zachary Kelman is the managing partner of (Kelman PLLC), a boutique law practice based in New York specializing in matters related to cryptocurrency and blockchain technology. The firm handles both litigation and corporate matters, including advising on compliance with international standards for data and financial services. Zachary has advised governmental bodies and central banks around the world on the application of local and international laws to digital assets and their many uses.