Cryptocurrency in countries inside and outside of E.U
Written by Damjan Kozarov
*The first publication of the article is on the page of Balkans in-site (https://balkansinsite.pollsandpolitics.gr/tha-mporesei-to-kryptonomisma-na-antik/)
*The article is a result of the seminar held by the Balkans in-site for the Pelagonia Association
Will cryptocurrency be able to replace fiat money in countries like Greece and North Macedonia?
Technology is the main key to the economic development of countries, regions and cities. Technological progress enables the more efficient production of more and better goods and services, upon which prosperity depends. The business sector is really occupied by technology. Two of the most popular financial topics these days are cryptocurrencies and blockchain technology. There is, however, another side, where technology can negatively affect the economy.
How? Well, digital money affects the global monetary system, has an impact on the demand for fiat money and can cause its value to increase or decrease. Cryptocurrency is slowly replacing the real currency. This seems to be quite easy to happen in the near future in the small countries of the Balkans, such as Greece and North Macedonia, or does it?
A research that was made in Greece in 2017 by the Open University of Cyprus (by Efparaxia D. Zamanis and Ioannis Babatsikos), shows us that in 2017, when there was still capital control by the banking system (limited availability of cash, e.g. withdrawal of money), because of the debt crisis, there was a growing interest in the currency of Bitcoin. Domestic businesses and consumers have begun to look for some new ways so that they can receive goods and services from foreign countries using payment methods such as cryptocurrencies. The growing distrust of the people towards the banking system and the government, caused some of the depositors to exchange their currency (euro) for Bitcoin using the internet, which resulted in a 500% increase in the use of Bitcoin in Greece. After that, a significant percentage of businesses started accepting Bitcoin as a form of payment for certain goods and services. At the moment in the countries of the European Union (EU), such as Greece, there are no specific regulations and laws and the government considers investing in cryptocurrencies to be a big risk. This means that Greece accepts cryptocurrency payment methods for making transactions and more importantly, its citizens can convert, buy and sell cryptocurrency as normal as one can do with fiat money.
The large increase in the use of cryptocurrencies has also brought a host of problems. In most cases cryptocurrencies are used for black market transactions by criminal organisations in order to maintain their anonymity. Thus, cryptocurrency has enabled tax avoidance and evasion. Also, because it is easy for anyone to create their own cryptocurrency, most of them have proven to be unstable and have been used in a “pump and dump” scheme. (pump and dump is a form of securities fraud that involves artificially inflating the price of an owned stock, in this case the fraudster uses misleading information to inflate the price of the new cryptocurrency). Thus, cryptocurrency has also brought a serious risk to a country’s economy, a risk to its monetary policy. As a result, in some countries (most of them which are non-EU countries), such as North Macedonia, laws and regulations related to cryptocurrencies are not yet finished. North Macedonia is a developing country and is one of the many countries that have problems accepting cryptocurrencies. For this reason, citizens are not legally able to own cryptocurrency, or even invest in it. In case any cryptocurrency investment or transaction is made, the government will condemn it as an illegal activity and there will be actions taken. The main reason for banning cryptocurrencies in North Macedonia is the Tax Regulation, which cannot track the income that investors or consumers receive from cryptocurrencies. This means that when they acquire/earn money from the investment, taxation is avoided. Of course, what is noted as positive is that the country is moving towards the process of legalising cryptocurrencies, since the basic legal framework for taxation of cryptocurrencies exists, but needs further work on it.
When it comes to the use of cryptocurrencies between the two countries, there are many interesting facts. Research that was made in 2017 (by students of the University of Macedonia) on the population of Greece shows us that in businesses of many sectors, such as for example in the automotive industry, furniture companies, clothing companies, large educational institutions and IT companies, there is great familiarity with the concept of cryptocurrency and its use. This survey also shows that out of 24 large businesses, 12 were active users of Bitcoin. Government officials have said that, since the implementation of capital controls, the use of electronic transactions such as e-banking has increased significantly, but they show concern when it comes to cryptocurrencies. They admitted that their knowledge on this subject is insufficient. None of them have done cryptocurrency exchange because they don’t know how to complete such a process. Unlike Greece, North Macedonia is among the countries that have taken a strict stance towards the usage of cryptocurrency because, according to the Law on Foreign Exchange, except in specific cases, residents are not allowed to have bank accounts abroad, therefore, investments in cryptocurrencies are also prohibited. Investing in cryptocurrencies within the country is illegal because they represent “foreign” currency in the broadest sense.
Cryptocurrencies are one of the greatest technological achievements and economic innovations of our century. No one expected profits and investments to be made in this way. Crypto has become another threat to the regular currency we use every day, but also a threat to banks around the world. Many countries, including Greece, have already accepted cryptocurrencies and citizens have gained a lot by investing in them. However, there is still a percentage of people who do not accept cryptocurrency because they are not sure that they can benefit from it. People still doubt the stability of cryptocurrency as it is high risk because it can rise or fall sharply every day, every hour and every second and there is no such factor that can control it. Most of the EU countries that are highly developed (in this case Greece) have accepted crypto from the beginning and have established different regulations for them. Other countries that are still developing, such as North Macedonia and Serbia, still rely on the traditional banking system and its financial markets.
But how likely is cryptocurrency to replace real currency in the near future? It can certainly be argued that when it comes to comparing these two countries, we are comparing a country that is in the EU and uses its own EU laws, and a country that is outside the EU and uses its own laws and regulations. Due to the acceptance of cryptocurrency in Greece, which belongs to the EU and uses the EU regulations, there are good chances that cryptocurrency can actually replace regular currency and perhaps make a big change in the technology and economy industry. But when it comes to North Macedonia, a country that uses its own laws and its own monetary policy, there is a significantly small chance that cryptocurrency will replace the regular currency in the near future, if the monetary policy is not changed. But perhaps all this will change, if the regulations and laws will be also changed. Will this development have a positive impact? No one can answer this question because there are always positive and negative sides in everything.
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