Cryptocurrency Regulations Worldwide
As the use of cryptocurrencies increases, so do the cryptocurrency regulations that are put in place around the world to manage them. What kind of regulations do the countries of the world have;
United States
Cryptocurrencies: Not considered legal tender.
Cryptocurrency exchanges: Legal, regulation varies from state to state.
While it’s difficult to find a consistent legal approach at the state level, the U.S. continues to move forward in developing federal cryptocurrency legislation. The Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrencies to be legal means of payment, but considers cryptocurrency exchanges to be money transmitters on the basis that cryptocurrency tokens are “other money substitutes.” The Internal Revenue Service (IRS) does not consider cryptocurrency to be a legal means of payment, but defines it as “a digital representation of value that functions as a medium of exchange, a unit of account,” and is taxable.
Canada
Cryptocurrencies: Not legal
Cryptocurrency exchanges: Legal, it is necessary to register with FinTRAC after June 1, 2020.
Cryptocurrencies are not a legal means of payment in Canada, but can be used to purchase goods and services online or in stores that accept them. Canada has been quite proactive in regulating cryptocurrencies and has primarily regulated them under provincial securities laws.
In August 2017, the Canadian Securities Managers (CSA) issued a statement on the applicability of existing securities laws to cryptocurrencies, and in January 2018, the governor of the Bank of Canada described them as “technically” securities. The Canada Revenue Agency has been taxing cryptocurrencies since 2013, and Canadian tax laws apply to cryptocurrency transactions.
Japan
Cryptocurrencies: Legal, considered property.
Japan currently has the world’s most progressive regulatory environment for cryptocurrencies, recognizing Bitcoin and other digital currencies as legal property under the Payment Services Act (PSA). In December 2017, the National Tax Office ruled that earnings in cryptocurrencies should be classified as ‘miscellaneous income’ and investors should be taxed accordingly.
The latest regulations include amendments to the PSA and the Financial Instruments and Exchange Act (FIEA), which came into force in May 2020. The changes introduced the term “crypto asset” (instead of “virtual currency”) and placed greater restrictions on governance. It has facilitated regulations on users’ trading of virtual currency and crypto derivatives. According to the new rules, cryptocurrency custody service providers (who do not sell or buy crypto assets) are included in the scope of the PSA, while crypto money derivatives enterprises are included in the FIEA.
China
Cryptocurrencies: Not legal
Cryptocurrency exchanges: Illegal
The People’s Bank of China (PBOC) banned financial institutions from conducting Bitcoin transactions in 2013 and went even further by banning ICOs and local cryptocurrency exchanges in 2017. Not surprisingly, China does not consider cryptocurrencies to be legal. Under an amendment to China’s Civil Code in 2020, the government ruled that cryptocurrencies have property status for the purpose of determining inheritances.
England
Cryptocurrencies: Not legal
Cryptocurrency exchanges: Legal with the FCA
The UK’s approach to cryptocurrency regulation was measured. Although there is no specific cryptocurrency law in the UK, cryptocurrencies are not considered legal means of payment and exchanges have registration requirements. HMRC published a summary on the tax treatment of cryptocurrencies, stating that their ‘unique identity’ means they cannot be compared to traditional investments or payments and that ‘taxability’ depends on the activities and parties involved. However, gains or losses in cryptocurrencies are subject to capital gains tax.
Switzerland
Cryptocurrencies: Legal, considered payment in some contexts.
Cryptocurrency exchanges: Legal, regulated by the SFTA.
Cryptocurrencies and exchanges are legal in Switzerland, and the country has adopted a highly progressive stance against cryptocurrency regulations. The Swiss Federal Tax Office (SFTA) considers cryptocurrencies to be assets: they are subject to Swiss wealth tax and must be declared on annual tax returns.
EU
Cryptocurrencies: Legal
Cryptocurrency exchanges: Regulations vary by member state.
Cryptocurrencies are considered legal throughout the European Union, but cryptocurrency exchange regulations are different in individual member states. Cryptocurrency taxation also varies, but many member states levy a capital gains tax of 0-50% on cryptocurrency-derived profits. In 2015, the Court of Justice of the European Union ruled that the exchange of traditional currency for cryptocurrency should be exempt from VAT.
In January 2020, the EU’s Fifth Anti-Money Laundering Directive (5AMLD) brought cryptocurrency-price currency exchanges into the scope of EU anti-money laundering legislation and required exchanges to perform KYC/CDD on customers and meet standard reporting requirements. In December 2020, 6AMLD came into force: the directive made cryptocurrency compliance stricter by adding cybercrime to the list of precursor crimes of money laundering.
