Cryptocurrencies are digital representations of value that have no status as legal tender and are administer ed using distributed ledger technology, running on a network of independent, peer-to-peer computers. Governments around the world are taking different approaches to cryptocurrencies. The interest and debate surrounding cryptocurrencies has led some central banks to examine whether the technology underpinning cryptocurrencies could be leveraged to create digital versions of state-created currencies, which would have legal status in their jurisdiction of issue. In November 2018, the U.S. Department of the Treasury announced it is developing a report on cryptocurrency regulation, including a legislative framework for the 116 th Congress to consider in 2019. As Congress considers issues related to digital currencies, including whether to regulate further the cryptocurrency industry, the approaches taken by other governments and international bodies may be of interest. As cryptocurrencies have proliferated, they have taken on more forms. Others are far more skeptical. Government Approaches to Cryptocurrencies

Cryptocurrencies span borders and are international in nature, but governments around the world have responded differently to the proliferation of cryptocurrencies. Approach 1: Develop a Crytpocurrency Hub

Some governments are actively seeking to become cryptocurrency hubs by attracting and developing cryptocurrency industries in their countries. Approach 2: Restrict Cryptocurrencies

Some governments have banned the use of cryptocurrencies or specific activities associated with cryptocurrencies. As yet, one country, Venezuela, which is mired in a serious economic crisis, has issued a digital fiat currency, and there are serious questions about the new currency's success. A few small countries are in the process of launching digital fiat currencies. Some countries, including China and Sweden, are researching the costs and benefits of these currencies, and Iran and Russia are considering them as a way to evade U.S. sanctions. Many central banks in major economies, including in the United States and the Eurozone, have ruled out issuing a digital fiat currency at this time. Approach 3: Refrain from Creating a Digital Fiat Currency

Several central banks in advanced economies, including the U.S. Federal Reserve , the European Central Bank (ECB), the Bank of England , the Reserve Bank of Australia , the Bank of Israel, and the Reserve Bank of New Zealand , have argued against the benefits of digital fiat currencies and/or announced that they do not intend to adopt a digital fiat currency at this time. Many international organizations and forums are examining the potential implications of digital currencies and, in some cases, are starting to make policy recommendations. They have examined a range of issues, including
the utility of digital currencies for improving the international payments systems; the possible threats digital currencies may or may not pose to international financial stability; the divergence of national-level cryptocurrency regulations and whether international regulatory coordination is desirable; how cryptocurrencies should be treated in bank prudential regulation; and how to adapt international recommendations to combat money laundering and terrorist financing to cryptocurrencies. How do U.S. current regulations and the Treasury's proposed framework, when released, compare to other countries' regulations? Some governments are actively recruiting cryptocurrency companies and developing cryptocurrency industries. Should the United States follow suit, or risk losing market share in the industry? Alternatively, some governments are tightly restricting, or even banning, cryptocurrency activities to protect consumers. In the United States, do consumers have adequate protections in terms of cryptocurrencies? Has the Federal Reserve adequately assessed the potential benefits and costs of developing a digital U.S. dollar relying on distributed ledger technology? How does the U.S. position on this issue compare to other countries' calculations? Many international organizations and forums are working on various aspects of digital currencies. What digital currency policies are being advocated by the Trump Administration at various international organizations? How do international recommendations and standards fit with U.S. regulations?
Since Bitcoin was introduced a decade ago, about 2,100 cryptocurrencies have been developed. Cryptocurrencies are digital representations of value that have no status as legal tender and are administered using distributed ledger technology, running on a network of independent, peer-to-peer computers. Cryptocurrencies are controversial. Some think they will revolutionize the international payments system for the better; others are skeptical of the business model, calling it a scam. The interest and debate surrounding cryptocurrencies has led some central banks to examine whether the technology underpinning cryptocurrencies could be used to create digital versions of fiat currencies, which would have legal status in their jurisdiction of issue.
Governments around the world are taking different approaches to cryptocurrencies and digital fiat currencies, an area of increasing focus for international organizations and forums underpinning the global economy. As Congress considers issues related to digital currencies, including whether to regulate further the cryptocurrency industry, the approaches taken by other governments and international bodies may be of interest.
National Approaches to Cryptocurrencies
Cryptocurrencies span borders and are international in nature, but governments around the world have responded differently to the proliferation of cryptocurrencies. Three types of responses have generally taken shape. First, some governments, such as Malta, Singapore, and Switzerland, are active cryptocurrency hubs; they have been attracting and developing cryptocurrency industries in their countries. Second, some governments, such as China, India, and South Korea, have banned the use of cryptocurrencies or specific activities associated with cryptocurrencies. Third, some governments, including many European countries and the United States, are seeking balance between financial innovation and risk-management through regulation of cryptocurrencies.
National Approaches to Digital Fiat Currencies
To date, one country, Venezuela, which is mired in a serious economic crisis, has issued a digital fiat currency, and there are serious questions about the new currency's success and operational viability. A few small countries are in the process of launching digital fiat currencies. Some countries, including China and Sweden, are researching the costs and benefits of these currencies, and Iran and Russia are considering them as a way to evade U.S. sanctions. Many central banks in major economies, including in the United States and the Eurozone, have argued against issuing a digital fiat currency at this time.
International Bodies' Engagement on Digital Currencies
Many international organizations and forums are examining the implications of cryptocurrencies and, in some cases, are starting to make policy recommendations. They have examined a range of issues, including the utility of digital currencies for improving the international payments systems, the possible threats digital currencies may or may not pose to international financial stability, the divergence of national-level cryptocurrency regulations and whether international regulatory coordination is desirable, how cryptocurrencies should be treated in bank prudential regulation, and how to adapt international recommendations to combat money laundering and terrorist financing in light of cryptocurrencies.
Possible Questions for Congress
In November 2018, the Department of the Treasury announced it is developing a report on cryptocurrency regulation, including a legislative framework for Congress to consider in 2019. How do U.S. current regulations, and the proposed regulations when they are released, compare to other countries' regulations? Some governments are actively developing cryptocurrency industries. Should the United States follow suit, or risk losing market share in the industry? Alternatively, some governments are tightly restricting, or even banning, cryptocurrency activities to protect consumers. In the United States, do consumers have adequate protections in terms of cryptocurrencies? Has the Federal Reserve adequately assessed the potential benefits and costs of developing a digital U.S. dollar relying on distributed ledger technology? How does the U.S. position on digital fiat currencies compare to other countries' calculations? What are the potential future impacts on the role of the dollar as a reserve currency? What types of digital currency policies is the Trump Administration advocating at various international organizations? How do international recommendations and standards fit with U.S. regulations?