How are cryptocurrencies currently regulated in countries around the world?

[TL;DR]
The regulation of cryptocurrencies is highly variable throughout the world. Certain countries have embraced this innovation with broad welcomes, while others have actively tried to ban and hinder it. Despite the efforts of some countries to eradicate cryptocurrencies, cryptocurrencies continue to thrive and grow around the world.

As cryptocurrencies have taken off, countries around the world have rushed to put regulatory guidelines in place. There is no international regulation of cryptocurrencies yet.


Leading governments around the world have taken very different regulatory approaches to cryptocurrencies. The patchwork is still evolving, but given the slow pace of governments, much remains to be seen. Here's a list of countries around the world, and how they regulate cryptocurrencies.

The United States

Although cryptocurrencies are legal in the United States, there does not appear to be a consistent legal approach to them. Laws vary widely from state to state, and federal laws do not seem to agree on what a cryptocurrency actually is. For example, the Financial Crimes Enforcement Network (FinCEN) considers cryptocurrencies to be money transmitters, while the IRS considers them to be property.

Cryptocurrency exchanges are also highly uncertain when it comes to regulation. Several different regulators claim jurisdiction, and there is no cohesive approach yet. Policies vary widely.

That said, the U.S. is beginning to take steps to create some sort of comprehensive regulation of cryptocurrencies. The U.S. Treasury has been outspoken in its support of regulating cryptocurrencies to combat criminal activity, and a change may be on the horizon.

The European Union

As part of its digital finance strategy, the European Commission first proposed its regulation on "crypto-asset markets" in September 2020. This legislative proposal, which is currently undergoing a first reading in the Council of the European Union, ostensibly aims to create a fully harmonized European crypto-currency market by establishing a legal taxonomy of crypto-currencies and defining rules for issuers and service providers.

Its core is the regulation of cryptocurrency exchanges and stable coins, the latter being cryptocurrencies whose value is pegged to that of another asset, such as fiat currency or gold.

Russia

Russia has a complicated history with cryptocurrencies and now seems to be taking action against their use. In Russia, cryptocurrency is an alternative to money, and recent 2019 laws have now made alternatives to money illegal in the country. It is still unclear what crypto can be used.

New proposals are being made that could allow for the confiscation of cryptocurrencies, and there are whispers that these proposals will soon become law. It is unclear how the Russian government plans to confiscate cryptocurrencies, including anonymous and decentralized bitcoin.

China

Unlike most countries, cryptocurrencies are completely illegal in China. The People's Bank of China banned financial institutions from processing bitcoin transactions in 2013 and has since gone even further. Since 2017, local ICOs and cryptocurrency exchanges have also been banned.

In the past, there were a few alternatives, but the government was ruthless in its quest to stop cryptocurrencies in China. While mining was legal (or at least in a gray area), China now has banned bitcoin mining as well.

China has some of the strictest anti-crypto laws in the world, and if anything, things are only getting tougher. In late 2019, many stock exchanges in China were shut down as part of a government crackdown.

Australia

On a completely different note, Australia has been a much more advanced country when it comes to cryptocurrency and exchange regulation. Both cryptocurrencies and exchanges are legal in Australia. bitcoin and other crypto-currencies with similar characteristics are public property and are subject to capital gains tax.

Australia's financial regulator, AUSTRAC, has implemented stricter regulations for cryptocurrency exchanges. This is to prevent money laundering and terrorist financing, essentially subjecting exchanges to rules that mirror those of financial institutions.

Japan

Japan happens to be the most advanced country when it comes to cryptocurrency regulation. In fact, in 2017, Japan was the world's leading market for bitcoin and remained among the top countries.

In the country, cryptocurrencies are legal assets and are taxed as miscellaneous income. Exchange regulations are similarly progressive, however, a number of high-profile cryptocurrency exchange hacks have occurred in recent years. As a result, stricter rules now apply to cryptocurrency exchanges to protect consumers and exchanges.

Although it remains the most crypto-friendly country, recent hacks have drawn the attention of regulators. Japan now has its own cryptocurrency exchange regulator, which aims to strike a balance between progress and regulation.

Canada

Cryptocurrencies are not legal tender in the far north, although they have been legal and taxable since 2013. Overall, Canada has taken a very proactive approach to crypto-currencies - entities dealing with virtual currencies have been subject to anti-money laundering and anti-terrorist financing laws since 2014.

At the provincial level, the regulation of cryptocurrency exchanges is highly inconsistent. In contrast, at the federal level, authorities treat cryptocurrencies as securities. More regulations have come into effect in the past two years, with exchanges now subject to reporting on anti-money laundering and anti-terrorist financing regulations. Exchanges are now regulated like any other financial services business in Canada.

Singapore

Unlike most of its neighbors, cryptocurrencies and exchanges are legal in Singapore. Cryptocurrency is not legal tender but is classified as a "commodity" so it is subject to GST.

In the past, Singapore was quite lax when it came to regulating cryptocurrency exchanges. However, that all changed in 2018 when the Monetary Authority of Singapore issued a warning about cryptocurrency speculation. As a result, cryptocurrencies are now subject to the same anti-money laundering and anti-terrorist financing measures as fiat currencies.

India

While blockchain has been easily adopted by the Indian government, crypto money has faced an uphill battle. Cryptocurrency is not recognized as a legal tender and has taken on the Reserve Bank of India (RBI) in court after the bank effectively banned cryptocurrency. However, as of today, cryptocurrencies are not banned in India, but the legal battle is far from over.

The future of cryptocurrencies and exchanges is in the making, and it will be interesting to see how it all plays out. While most of the concerns about cryptocurrencies in India are about money laundering and terrorist financing, with the right regulations, regulators can provide protection and spur progress.

Latin America

Regulation of cryptocurrencies in Latin America varies considerably from country to country. Some countries, like Bolivia, have effectively banned cryptocurrencies, while others, like Brazil, are beginning to introduce regulations. Cryptocurrencies are generally treated as assets, and in most countries where they are legal, they are subject to capital gains tax.

There is very little regulation of cryptocurrency exchanges across Latin America. In general, there are far fewer regulations than in most of the countries on this list. So far, Mexico is the only country that has established real regulations for exchanges.

There is still a lot to see when it comes to cryptocurrency regulation in Latin America. While government agencies and banks are happy to issue the warnings, little has been done about them. The lack of regulation is a concern, especially with regard to money laundering and terrorist financing.


Africa


Source: report_blockchainandcryptocurrencyreg_feb2019.pdf (bakermckenzie.com)


In the end

The regulation of cryptocurrencies varies widely around the world. Some countries have welcomed the innovation with open arms, while others have actively tried to ban and stifle it. Despite the efforts of some countries to eradicate cryptocurrency, it continues to thrive and grow around the world.

Most of the concerns about cryptocurrencies revolve around their potential use for money laundering and terrorist financing. However, compared to big banks, crypto-currencies and exchanges have not been involved in any major scandals. While buying and trading cryptocurrencies do present a risk, cryptocurrencies are not used by criminals as much as traditional fiat currencies.


Author: Gate.io Researcher: Aziz. H
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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