Comprised of Brazil, Russia, India, China, and South Africa, world leaders from emerging economies gathered this Thursday in Johannesburg, South Africa to attend the 2018 BRICS summit.
An association of emerging national economies, BRICS member-nations meet annually at summits and collectively represent over 3.1 billion people. Each summit sees member-states co-operatively discuss mutual development and themes from emerging market spaces – and as such, the Fourth Industrial Revolution (or Industry 4.0) weighed highly on this year’s agenda.
Industry 4.0 itself is a loose term denoting automative trends defined by the Internet of Things, cloud and cognitive computing, and cyber-physical stems. More broadly, the term has also recently enjoyed connotations with blockchain technology – which has been thought to be the genesis of faster, more trustworthy, reliable, and low-cost settlements and transactions.
Speaking at the summit, South Africa’s President Cyril Ramaphosa urged BRICS countries to develop new policies to deal with the fourth industrial revolution – saying “by working together, I am certain that we will be able to confront the challenges and seize the opportunities that this new of development presents.”
While Ramaphosa has previously issued his optimism on the creation of unilateral – and potentially digital – currencies, not all of the BRICS nations have been aligned to the idea of supporting cryptocurrencies, or much less developing national digital currencies.
In April this year, the Brazilian Association of Cryptocurrencies and Blockchain launched in São Paulo with the view of fostering the growth and adoption of digital currencies while in dialogue with local governement.
Despite the organization’s founding, the Brazilian Central Bank has previously played a cautious role in raising concerns around a potential ‘Bitcoin bubble’.
The Association of Cryptocurrencies and Blockchain has largely lobbied for the rapid drafting and adoption of sufficient legislation to accelerate the use of cryptocurrencies within the region.
Brazil’s Securities and Exchange Commission previously banned registered investment funds from investing in cryptocurrencies – though, interestingly, the Commission has allowed Brazilians to take indirect ownership of cryptocurrencies by investing in funds that themselves had stakes in funds that were invested in cryptocurrencies.
Presently, the Commission has a working group to develop new regulations fro crypto-assets, while the Brazilian education system has benefitted from the first Master’s degree in Cryptofinance offered by Fundação Getúlio Vargas.
While Russian government and President Vladimir Putin himself has remained skeptical of cryptocurrencies in general, the Russian Central Bank has both mulled the creation of a state-backed digital currency.
Recently, two of Russia’s largest banks – Alfa-Bank and Sberbank – have trialed cryptocurrencies within regulatory sandboxes
At the time, Anton Rakhmanov – the man responsible for managing the development of the product offer of the Alfa-Bank’s “Private Wealth Management” division – elaborated on his opinion that virtual currencies will be included sooner or later in the global economy and it would be unwise to ignore them.
In May this year, a Russian arbitration court of appeals recognized cryptocurrency as a property with value – while earlier in March President Putin confirmed that cryptocurrencies would ultimately be regulated under the Digital Assets Regulation Bill.
Perhaps the most stony-faced BRICS member, India’s Reserve Bank moved to cull support for both persons or businesses that deal in cryptocurrencies in April this year.
Previously, India’s Finance Ministry had limited the functionality of cryptocurrency exchange accounts after criticizing Bitcoin and cryptocurrencies for having a ‘lack of basic utility’.
In a move that would later prompt outcry from local cryptocurrency communities, the Reserve Bank wrote that “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time.”
Ultimately, a petition against the Reserve Bank’s decision was brought to bear – over 18,000 signatures, directed to the Reserve Bank as well as the Prime Minister of India, called for a for a cryptocurrency-friendly framework and identifies the ‘hypocrisy’ of the Reserve Bank’s bid for its own digital currency.
The Reserve Bank has not, however, outright dismissed the idea of a national cryptocurrency. Elaborating on its interest in digital currencies and their underlying foundation, the Reserve Bank has noted its interest in the “rapid changes in the landscape of the payments industry along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money.”
More recently, a new legal report revealed that Indian lawmakers have mulled legalizing the country’s sports betting industry, and would be prepared to accept cryptocurrencies as legal payment methods.
While China shocked cryptocurrency markets in 2017 with a spot decision to ban several international cryptocurrency and ICO websites behind the so-called ‘Great Firewall’, the nation has instead seemingly committed its efforts to developing a number of technical improvements to blockchain technology itself.
In March this year, a new report from the head of China’s Banknote Blockchain Research Center claimed that the development of a state digital currency is underway.
The Banknote Blockchain Research Center is a subsidiary of the People’s Bank of China through both the China Banknote Credit Card Industry Development and the China Banknote Printing and Minting Corporation.
Previously, People’s Bank governor Zhou Xiaochuan claimed that the development of a state-backed digital currency is “inevitable”.
In the mean-time, the Blockchain Research Institute division at the China Electronic Information Industry Development has continued to release evaluations of leading cryptocurrencies – with June’s report outlining that EOS is the most convincing cryptocurrency network.
Among technical improvements, Chinese researchers have further gathered to develop blockchain-as-a-service (BaaS) platforms, as well as new blockchain scaling solutions.
South Africa’s President Cyril Rampahosa set tongues wagging earlier this year with the proposition for a single and potentially digital African currency, South African efforts have largely focused on launching new FinTech programs for blockchain technology as well as clarifying legal stances.
In February, the South African Reserve Bank announced a new FinTech programme which will seek to evaluate assess the impact – and potential regulatory requirements – of newer financial technologies such as cryptocurrencies.
According to the Reserve Bank, the programme will launch with three objectives; the first will see the review of private cryptocurrencies, which will, in turn, inform ‘an appropriate policy framework and regulatory regime’.
Secondly, the Reserve Bank aims to investigate the ‘applicability’ of innovation facilitators such as hubs and accelerators, and finally aims to facilitate ‘Project Khoka’ – a new initiative which will experiment with distributed ledger technologies.
In April, the South African Revenue Service outlined that it will continue to apply “normal” income tax rules to cryptocurrencies where taxpayers will need to declare their according gains or losses as part of their taxable income.