With the rise of cryptocurrency, countries all over the world have been rushing to build regulatory frameworks. There has yet to be a set of international regulations regarding cryptocurrency, but many hope that the Financial Action Task Force will be adding recommendations as to how to deal with non-FIAT currencies.
Major governments across the globe have taken very different approaches to the regulation of cryptocurrency. The landscape is still evolving, but given how slow governments are, much remains to be seen. Here is a list of countries around the world, and how they regulate cryptocurrency.
The United States
While cryptocurrencies are legal in the US, there doesn’t seem to be a consistent legal approach to them. Laws vary greatly state by state, and federal laws can’t seem to agree as to what cryptocurrency actually is. For example, the Financial Crimes Enforcement Network (FinCEN) considers cryptocurrencies to be money transmitters, while the IRS regards them as property.
Cryptocurrency exchanges also face much uncertainty when it comes to regulation. Several different regulators claim jurisdiction, and there has yet to be a cohesive approach. Policies vary greatly.
That being said, the US is beginning to take steps to create some kind of overarching crypto regulation. The US Treasury has been outspoken regarding the regulation of cryptocurrencies to combat criminal activities, and change may be on the horizon.
The European Union
Cryptocurrency is widely considered legal across the EU, but the rules for exchanges differ across member states. Taxation also varies, ranging anywhere from 0% to 50%, and crypto is subject to capital gains tax. To date, the EU Parliament has passed no specific legislation regarding cryptocurrencies.
Exchanges are required to register with their local financial authority, and from there can operate across the entirety of the EU. The 5th AML Directive now requires that crypto exchanges follow the EU’s anti-money laundering regulations. Luckily for some, exchanging FIAT currency to crypto is not subject to VAT.
The United Kingdom
While the UK is currently part of the EU, they won’t be for long and have created their own regulations for cryptocurrencies. Currently, crypto is not considered to be legal tender, although cryptocurrency exchanges are legal. The potential taxability of cryptocurrency depends on the activities and parties involved, although gains or losses on cryptocurrency are subject to capital gains tax.
Cryptocurrency exchanges will need to register with the Financial Conduct Authority (FCA), however, some exchanges may be able to apply for an e-license. As of January 2020, the FCA now has the power to supervise how cryptocurrency businesses deal with the risks of money laundering and terrorist financing.
In the grand scheme of things, the UK has a long way to go and it will be interesting to see how the regulations shift post-Brexit.
Russia has a complicated history regarding cryptocurrency, and now seems to be taking actions against its use. In Russia, crypto is considered to be a money substitute, and recent laws of 2019 have now made money substitutes illegal in the country. It is still unclear what crypto is defined as and can be used for.
New proposals are being made that could allow crypto to be confiscated, and these proposals are rumored to soon be made into law. It’s unclear as to how the Russian government plans to confiscate crypto, especially Bitcoin which is anonymous and decentralized.
Unlike most of the countries on our list, cryptocurrency is completely illegal in China. The People’s Bank of China banned financial institutions from handling Bitcoin transactions in 2013, and has since gone even further. As of 2017, ICOs and domestic cryptocurrency exchanges are also banned.
In the past, there were a few workarounds, but the government has been ruthless in its pursuit of stopping cryptocurrency in China. While mining used to be legal (or at least in a gray area), China is now looking to ban Bitcoin mining as well.
China has some of the toughest anti-cryptocurrency laws in the world, and if anything, things are only going to get stricter. As of late 2019, several exchanges have closed in China as part of a government crackdown.
On a very different note, Australia has been a far more progressive country when it comes to cryptocurrency and exchange regulations. Both cryptocurrencies and exchanges are legal in Australia. Bitcoin, and other crypto with similar properties, are considered to be public property and are subject to capital gains tax.
Australia’s financial regulatory body, AUSTRAC, has created more robust regulations for crypto exchanges. This is to prevent money laundering and terrorist financing, essentially making exchanges subject to rules mirroring that of financial institutions.
Japan happens to be the most progressive country when it comes to cryptocurrency regulations. In fact, in 2017 Japan was the world’s biggest market for Bitcoin and has continued to be among the top countries.
In the country, cryptocurrencies are considered to be legal property and are taxed as miscellaneous income. Exchange regulations are similarly progressive, however, there have been a number of high profile crypto exchange hacks in the past few years. As a result, there are now stricter rules when it comes to cryptocurrency exchanges in an effort to protect consumers and exchanges.
While it remains the most friendly country towards crypto on our list, the recent hacks have grabbed the attention of regulators. Japan now has its own regulatory body specifically for cryptocurrency exchanges, which aims to find a balance between progress and regulation.
Cryptocurrency is not legal tender in the great white north, though it is legal and has been taxable since 2013. As a whole, Canada has been pretty proactive in its approach to crypto – entities that deal with virtual currencies have been subject to anti-money laundering and counter terrorist financing laws since 2014.
On a provincial level, cryptocurrency exchange regulations are pretty inconsistent. However, on a federal level, the authorities treat crypto as securities. More regulations have come into effect in the past couple of years, as exchanges are now subject to reporting for anti-money laundering and terrorist financing regulations. Exchanges are now regulated like any other money service business in Canada.
Unlike most of its neighbors, cryptocurrencies and exchanges are legal in Singapore. Crypto is not considered to be legal tender, but it is labelled as “goods” so it is subject to Goods and Services Tax.
In the past, Singapore has been quite lax in regards to regulating cryptocurrency exchanges. However, this all changed in 2018 when the Monetary Authority of Singapore issued a warning regarding crypto speculation. As a result, cryptocurrencies are now subject to the same anti-money laundering and counter terrorist financing measures as fiat currencies.
While blockchain has been readily adopted by the Indian government, cryptocurrency has faced an uphill battle. Crypto is not recognized as a legal currency, and has been facing the Reserve Bank of India (RBI) in court after the bank effectively banned crypto. However, as of today, cryptocurrency is not banned in India, but the court battle isn’t over yet.
The future of cryptocurrency and exchanges is very much up in the air right now, and it will be interesting to see how everything plays out. While much of the concern about crypto in India surrounds money laundering and terrorist financing, with the right regulations, regulators can offer protection and foster progress.
Cryptocurrency regulations in Latin America vary greatly by country. Some countries, like Bolivia, have effectively banned crypto while others, like Brazil, are only just now starting to roll out regulation. Cryptocurrencies are typically treated as assets, and in most countries where they are legal, are subject to capital gains tax.
Regulations for cryptocurrency exchanges are quite sparse across Latin America. In general, there are far less regulations than most of the countries on this list. So far Mexico is the only country to put in place real regulations for exchanges.
A lot remains to be seen when it comes to cryptocurrency regulations in Latin America. While government bodies and banks are happy to issue warnings, nothing much is done about them. The lack of regulation is a cause for concern, especially regarding money laundering and terrorist financing.
Conclusion – A varied landscape
The regulation of cryptocurrency varies widely around the world. Some countries have welcomed this innovation with open arms, while others have actively tried to ban and stifle it. Despite some countries’ efforts to eradicate crypto, it continues to thrive and grow across the globe.
Many of the concerns when it comes to cryptocurrency revolve around the potential uses for money laundering and terrorist financing. However, compared to major banks, cryptocurrencies and exchanges have not been involved in any major scandals. While buying and trading crypto does present a risk, crypto isn’t used by criminals as much as traditional fiat currencies are.
As time goes on, we will have to see how cryptocurrency regulations develop. It remains to be seen if the FATF will introduce some guidelines for countries to follow when it comes to cryptocurrency regulations, and even if countries can agree as to how to approach regulation.