There is new speculation that more nations may ban bitcoins, following bans on certain bitcoin activity in China and South Korea. Most recently, Russia has apparently backed away from a ban, but is likely to step up regulations on cryptocurrencies.

The bans could impact the bitcoin business as enthusiasts wait to see what additional regulations and bans may follow.

Joshua Ashley Klayman, an attorney at Morrison & Foerster, told Legaltech News that there had been limited concern that Russia could ban token sales, and “there may be a generalized anxiety regarding whether additional jurisdictions may follow China's and South Korea's leads.”

She explained that bans by China and South Korea “are likely to, and may already have begun to, change the landscape for token issuers, token purchasers and token exchanges.”

For example, the elimination of some jurisdictions, which were popular “token destinations” for providing capital for token sales and token trading opportunities, now means that other locations could “attract more token sale and exchange businesses, and benefit from increased business,” Klayman said.

“My understanding is that the recent news about Chinese and South Korean bans have not been bans specifically targeting the cryptocurrency bitcoin, but, rather, relate to bans by those jurisdictions of the launching of initial token sales—sometimes called initial coin sales, ICOs, token generation events, TGEs, etc.—of digital tokens generally, as well as bans on exchanges that permit the trading of digital tokens,” she said.

On the other hand, if jurisdictions, such as China, were to ban bitcoin mining, it could have a “significant effect” on the bitcoin market and on the ability and time required to mine blocks, given that approximately 80 percent of bitcoin mining is concentrated in China, according to Klayman, citing estimates. Moreover, recent increased token sales in Japan may be in response to the Chinese and South Korean bans, according to news reports cited by Klayman.

Similarly, other locations, such as Gibraltar and Isle of Man, have indicated “their desire to attract distributed ledger technology—including token sales and cryptocurrency exchanges—and that becoming a destination for such technology may provide such jurisdictions a potentially significant economic upside,” Klayman said.

In addition, the South Korean and Chinese bans may cause fraudsters and scammers to rethink before launching fraudulent token sales, she said.

“Increased regulatory attention to token sales across the world—and the related possibilities of investigations of past token sales and requirement to return to token purchasers the proceeds of certain token sales—may encourage token issuers, cryptocurrency exchanges and others to be more cautious and to strive to comply with applicable legal frameworks,” Klayman speculated. “Also, the media attention regarding token sale risks may make token purchasers more wary consumers of, or investors in, digital tokens, which could lead to more responsible token issuers benefitting and fewer investments being made in fraudulent token sales.”

Some locations have long considered bitcoin use illegal, such as Bolivia and Ecuador, Klayman noted. Certain other jurisdictions may also have more limited bans, such as a ban on financial institutions and their employees undertaking in-house bitcoin transactions, while simultaneously being less restrictive regarding the ability of private citizens to use or hold bitcoin.

The majority of countries that have provided official guidance regarding token sales or cryptocurrency exchanges, including the U.S., Canada, Singapore, Hong Kong, Gibraltar, Australia and Switzerland, have indicated a desire to regulate token sales, rather than institute an outright ban, Klayman said.

“It cannot be ruled out that other jurisdictions could ban digital tokens or token sales, but the broader trend seems to be for jurisdictions to acknowledge that token sales and cryptocurrency exchanges are a new form of capital raising—but that they are not somehow exempt from compliance with existing regulatory frameworks and laws, including securities and investor protection laws,” she said.