Cryptocurrencies are spreading across the world at an unprecedented rate, and countries are responding to this by putting in place various laws and regulations to protect traders and investors. Some are friendly to the concept, while others are hostile and are banning cryptos and digital wallets.
The regulation and legislation environments are also continually evolving, making it extremely difficult to keep up with the changes.
We have researched how different nations approach crypto regulation to help you navigate the various legislative positions across the world with ease. Keep reading for detailed information on the status of cryptocurrencies in multiple countries.
Cryptocurrency is legal in the United States, but it is not legal tender in the country. However, the legal approach varies from one state to another.
The Federal laws have a unique definition of crypto. For example, the IRS considers cryptocurrency as property. On the other hand, the Financial Crimes Enforcement Network (FinCEN) regards them as money transmitters.
In other words, the FinCEN assigns cryptocurrencies some monetary value but doesn’t qualify them as legal tender. Besides, it requires proceeds from crypto to be taxed.
Cryptocurrency exchanges in the United States also face a similar fate. They are legal, but the regulatory policies governing them differ depending on the state. The Securities and Exchange Commission (SEC) intends to apply securities laws for digital exchanges and wallets. The Commodities Futures Trading Commission (CFTC) says they consider Bitcoin a commodity, allowing the derivatives to trade publicly.
The new US Treasury Secretary has indicated that the government intends to enact strict policies during President Biden’s reign to regulate the cryptocurrency sector.
All European countries consider cryptocurrency legal. Nonetheless, the regulatory rules vary from state to state. For example, some member states do not tax the proceeds of these assets. Others impose a capital gains tax of as high as 50%.
The European Union relies on the laws governing traditional trading and investment to take care of cryptocurrency trades, exchanges, and investments.
Digital exchanges are also legal in European countries. However, as per the existing financial laws, they should register with the local monetary authority. The EU’s Fifth Anti-Money Laundering Directive (5AMLD) requires exchanges to abide by the anti-money laundering regulations. Moreover, according to the Court of Justice of the European Union’s 2015 ruling, exchanges of traditional currency for crypto are exempt from VAT.
The EU’s Sixth Anti-Money Laundering Directive (6AMLD) took effect in December 2020. This gives member states more power to reduce the risks that cryptocurrency pose.
The UK has crafted their cryptocurrency regulations due to Brexit. Even though they consider the exchanges legal, crypto is not legal tender in the United Kingdom. The law considers Bitcoin as an exchange token. Its potential taxability depends mainly on the parties and activities involved. Nevertheless, losses or gains on crypto are subject to capital gains tax.
Moreover, the law requires crypto exchanges to register with the Financial Conduct Authority (FCA). Since 2020, FCA has been supervising how cryptocurrency businesses manage issues parting to terrorist financing and money laundering. Some exchanges can apply for e-licenses.
The European Union and the UK still have a long way to go. Post-Brexit events may have a significant impact on UK’s financial laws.
The EU is already contemplating adopting new laws to deal with private digital currency risks. The European Central Bank is also considering issuing its digital currency.
China is one of the Asian countries with controversial cryptocurrency laws. Digital exchanges and cryptocurrencies are illegal in the country.
The People’s Bank of China banned these transactions in 2013. It went further to ban initial coin offerings and domestic crypto exchanges in 2017.
Despite the blanket bans, workarounds using foreign websites and exchanges is possible in China.
Government officials have endorsed blockchain technology. China’s central bank has also been working on introducing its digital currency. Besides, according to the Institute of International Finance, China supports the full implementation of a global regulatory framework from cryptos.
Despite these efforts, however, cryptocurrency and exchanges remain illegal in the Asian country.
This sovereign island city-state in maritime Southeast Asia has taken a friendlier position on this issue than its neighbors. The Republic of Singapore has legalized cryptocurrency and exchanges.
However, like many other countries, Singapore doesn’t regard crypto as legal tender. Instead, the government legally considers it as “goods.” For that reason, it applies to Goods and Services, which is the same as VAT.
The country subjects the cryptocurrency exchanges to the Monetary Authority of Singapore (MAS). The 2019 Payment Services Act (PSA) effectively brought cryptocurrency businesses under MAS in January 2020.
This island country in East Asia has passed the most progressive cryptocurrency laws. Due to the suitable trading environment, Japan was Bitcoin’s largest market in 2017. It is still one of the largest crypto markets.
Japan considers cryptocurrencies legal property and taxes them as miscellaneous income.
Digital exchanges are also legal in the country. However, the notorious Coincheck heist and other high profile hacks have prompted the government to enact stricter rules.
This South Asian country has adopted blockchain technology. However, it has illegalized cryptocurrency. The Reserve Bank of India banned crypto, and the case on the legality of the ban is in court.
The exchanges remain legal, but the government’s punitive legislation has made it difficult for them to operate. The government gave the exchanges until July 5, 2018, to wind up their operations, but the supreme court ruled that the order was illegal.
The Central Board of Direct Taxation chairman has indicated that individuals making profits from Bitcoin must pay taxes on them. According to the other Income Tax Department, crypto-assets should be taxed as capital gains.
Some reports show that the government is considering regulating cryptocurrencies instead of banning them.
Here is more about cryptocurrency exchange in India.
The increasing popularity of cryptocurrency is a positive development. However, since its regulation varies across the world, we are yet to achieve its widespread adoption. Some nations have enacted laws that protect cryptocurrencies and digital exchange, but others try hard to ban them.
The troubling issue has been the allegations that cryptos are being used to finance terrorism and money laundering activities. So, until all countries agree on the best way to approach the regulation, the concerns will likely persist and negatively affect the cryptocurrency’s mass adoption.