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Cryptocurrency Regulations Around the World

Cryptocurrency Regulations Around the World
Written by publisher team

As cryptocurrencies continue to shift from a speculative investment to a stable fellow in a balanced portfolio, governments around the world remain divided over how to regulate the emerging asset class. Below, we break down the current digital currency regulatory landscape by country.

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  • As cryptocurrencies become a more important factor in the global investment landscape, countries have taken different approaches to regulating the asset class.
  • Despite the proliferation of cryptocurrency in the United States, the country has not yet established a clear regulatory framework.
  • The combination of regulations in other countries means that cryptocurrencies are subject to different classifications and tax transactions around the world.

United States of America

Although there are a large number of cryptocurrency investors and blockchain companies in the United States, the country has not yet established a clear regulatory framework for the asset class. The Securities and Exchange Commission (SEC) usually views cryptocurrency as a security, while the Commodity Futures Trading Commission (CFTC) calls Bitcoin (BTCUSD) a commodity, and the Treasury calls it a currency. US cryptocurrency exchanges fall under the regulatory scope of the Banking Secrecy Act (BSA) and must be registered with the Financial Crimes Enforcement Network (FinCEN). They are also required to comply with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) obligations.

Meanwhile, the Internal Revenue Service (IRS) classifies cryptocurrencies as property for federal income tax purposes. Cryptocurrency investors should keep a close eye on a high-profile lawsuit between Ripple Labs Inc. and the SEC, as well as the agency’s threats to sue Coinbase Global Inc. (COIN), the leading cryptocurrency exchange, for greater regulatory clarity.

Canada

Regulators have generally taken a proactive stance towards cryptocurrencies in Canada. It became the first country to approve a Bitcoin Trading Fund (ETF) in February 2021. In addition, the Canadian Securities Administrators (CSA) and the Canadian Investment Industry Regulatory Organization (IIROC) indicated that cryptocurrency exchanges and traders in the country must register with regional regulators. Furthermore, Canada classifies crypto investment firms as Financial Services Companies (MSBs) and requires them to register with the Financial Transactions and Reporting Analysis Center of Canada (FINTRAC). From a tax standpoint, Canada treats cryptocurrencies similarly to other commodities.

United kingdom

The UK considers cryptocurrency to be proprietary and not legal tender. In addition, cryptocurrency exchanges must register with the UK’s Financial Conduct Authority (FCA) and are prohibited from offering crypto derivatives trading. Furthermore, the regulator has introduced cryptocurrency-specific know-your-customer (KYC) requirements, in addition to the aforementioned AML/CFT. Although investors still pay capital gains tax on cryptocurrency trading profits, more broadly, the taxation is dependent on what crypto activities are being conducted and who is involved in the transaction.

Japan

The Land of the Rising Sun follows a progressive approach to crypto regulation, with cryptocurrencies recognized as legal property under the Payment Services Act (PSA). Meanwhile, cryptocurrency exchanges in the country must register with the Financial Services Agency (FSA) and comply with anti-money laundering and terrorist financing obligations. Japan treats trading gains from cryptocurrencies as “diversified income” and taxes investors accordingly.

Australia

The Earth Below is taking a relatively proactive stance towards crypto regulation. Australia classifies cryptocurrencies as legal property, which subsequently makes them subject to capital gains tax. The exchanges are free to operate in the country, provided they register with the Australian Transaction Reporting and Analysis Center (AUSTRAC) and meet specific AML/CTF obligations. In 2019, the Australian Securities and Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and banned exchanges offering privacy coins.

Singapore

Similar to the United Kingdom, the island nation classifies cryptocurrency as proprietary but not legal tender. The Monetary Authority of Singapore (MAS) licenses and regulates exchanges as set out in the Payment Services Act (PSA). Singapore has earned, in part, its reputation as a safe haven for cryptocurrency because long-term capital gains are not subject to taxation. However, companies that regularly deal in cryptocurrency are taxed by the state, and the winnings are treated as income.

South Korea

The country does not consider cryptocurrencies to be legal tender or financial assets. As such, digital currency transactions avoid capital gains tax. The Financial Supervision Service of South Korea (FSS) oversees the regulation of cryptocurrency exchanges, where operators are subject to stringent anti-money laundering and terrorist financing obligations. From September 2021, crypto exchanges and other virtual asset service providers must register with the Korea Financial Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC).

China

The emerging global power does not classify cryptocurrencies as legal tender; However, it classifies it as a property for purposes of determining inheritance. The People’s Bank of China (PBOC) has banned cryptocurrency exchanges in the country, stating that they facilitate public financing without approval. Binance, the world’s largest cryptocurrency exchange, initially launched in China, but moved its headquarters to the Cayman Islands in 2017 following the country’s crackdown on crypto regulation. Moreover, China imposed a ban on bitcoin mining in May 2021, forcing many of those involved in this activity to shut down operations entirely or move to jurisdictions with a more favorable regulatory environment.

India

Like most countries, the subcontinent specifies that cryptocurrencies are not legal tender. Despite this, the country’s Central Board of Direct Taxes specifies that investors must pay taxes on cryptocurrency trading profits. In 2018, the Reserve Bank of India (RBI) banned financial institutions from dealing in virtual currencies; However, this decision was overturned by the Supreme Court in March 2020. However, the regulations are still uncertain in the country. For example, India proposed a law in early 2021 that would make it illegal to issue, hold, mine and trade cryptocurrencies other than state-backed digital assets.

European Union

Cryptocurrency is legal in most parts of the European Union (EU), although the governance of the exchange depends on individual member states. Meanwhile, taxes also vary by country within the EU, ranging from 0% to 50%. In recent years, the EU’s fifth and sixth Anti-Money Laundering Directives (5AMLD and 6AMLD) have come into force, which tighten KYC/CFT obligations and standard reporting requirements. In September 2020, the European Commission proposed the Markets in Crypto Assets Regulation (MiCA) – a framework that increases consumer protection, establishes clear behavior in the crypto industry, and introduces new licensing requirements.

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