As digital currency is increasingly becoming more accepted as a stable investment, many governments are still debating on how to best regulate this new asset class. Below is a summary of the current cryptocurrency regulatory landscape by country.
Despite the fact that cryptocurrency investors and blockchain companies are plentiful in the United States, the asset class has yet to receive a clear regulatory framework. Cryptocurrency is generally considered a security by the Securities and Exchange Commission (SEC), while Bitcoin is seen as a commodity by the Commodity Futures Trading Commission (CFTC). The Treasury refers to it as a currency. Cryptocurrency exchanges in the United States are regulated by the Bank Secrecy Act (BSA) and must register with the Financial Crimes Enforcement Network (FinCEN). They must also comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) standards.
Meanwhile, the Internal Revenue Service (IRS) considers cryptocurrencies as property for income tax purposes.
The Ripple case against the SEC, which alleges that the regulator has violated “registration requirements of the federal securities laws,” is a high-profile court dispute worth following.
The regulatory agency recently announced their plan to sue leading digital currency exchange Coinbase Global Inc. if they did not provide more information about a new program called Lend. A few days after the announcement, Coinbase ended the program.
In Canada, regulators have taken a proactive approach to cryptocurrency. On February 18, 2021, it became the first country to approve a Bitcoin ETF (exchange-traded fund), which was launched on the Toronto Stock Exchange on February 19, 2021.
Moreover, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have declared that crypto trading platforms and dealers in the country must sign up with provincial regulators. Furthermore, Canada sorts crypto investment firms as money service businesses (MSBs) and necessitates that they register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Canada considers cryptocurrency to be comparable to other commodities when it comes to taxation.
In the United Kingdom, cryptocurrency is classified as property but not legal tender. In order to operate,cryptocurrency exchanges must first register with the U.K.’s Financial Conduct Authority (FCA). Additionally, these types of organizations are banned from offering crypto derivatives trading. The regulatory body has also put into place certain requirements – concerning know your customer (KYC) procedures , as well anti-money laundering(AML) and countering-the-financing of terrorism(CFT) efforts – that are specific to cryptocurrencies.
Taxability of cryptocurrencies is more complicated than other asset classes. While investors pay capital gains tax on crypto trading profits, the legality of the activity depends on who performs it and how.
Japan is one of the most progressive countries when it comes to cryptocurrency regulation. Under the Payment Services Act (PSA), cryptocurrencies are recognized as legal property. Meanwhile, crypto exchanges in Japan must register with the Financial Services Agency (FSA) and comply with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) obligations. Trading gains generated from cryptocurrency are treated as “miscellaneous income” and taxed accordingly.
Australia is taking a more proactive stand than most countries when it comes to regulating cryptocurrencies. Classifying them as legal property subjects them to capital gains tax.
Exchanges are not taxed in Australia, as long as they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and fulfill certain AML/CTF standards.
In 2019, the Australian Securities and Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs), effectively banning exchanges that offered privacy coins.
Just like the United Kingdom, cryptocurrency is classified as property but not legal tender on this island state. The country’s Payment Services Act (PSA) requires exchanges to be licensed and regulated by the Monetary Authority of Singapore (MAS).
Cryptocurrency investors often flock to Singapore because of its reputation as a safe haven for digital assets. One of the reasons why Singapore is so attractive to crypto investors is that it does not tax long-term capital gains.
However, the government taxes firms that engage in bitcoin transactions as if they were earning income.
The country never regarded cryptocurrencies as legal currency or financial assets. The South Korean Financial Supervisory Service (FSS) was assigned the duty of overseeing crypto exchange regulation in May 2021, with operators subject to stringent AML/CFT standards.
In September 2021, cryptocurrency exchanges and other virtual asset service providers were required to register with the Korea Financial Intelligence Unit (KFIU), a unit of the Financial Services Commission (FSC).
A few months after that, the government approved a tax on digital assets. Now, any cryptocurrency income earned over 2.5 million won (or about $2,000 USD) will be taxed at 20%. Assets worth less than the threshold remain tax-free.
The rising global power does not recognize cryptocurrencies as legal currency, but it considers them property for the purpose of inheritance determination. The People’s Bank of China (PBOC) prohibits crypto exchanges in the country, claiming they facilitate unlicensed public financing.
Binance, the world’s largest cryptocurrency exchange, began in China but had to move its headquarters as a result of China’s ban on cryptocurrency regulation. The company’s headquarters are unclear, although it is said to be in Malta or the Cayman Islands.
Additionally, in May 2021 China placed a ban on bitcoin mining, causing those participating to close their operations or relocate.
Cryptocurrencies are not legal tender in most countries, India included. Despite this fact, the Central Board of Direct Taxation requires that investors pay taxes on profits earned through cryptocurrency trading. In 2018, the Reserve Bank of India (RBI) placed a ban on financial institutions from transacting in virtual currencies; however, this decision was reversed by the Supreme Court in March 2020.
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; however, regulations remain uncertain in the country.
Cryptocurrency is lawful in most of Europe (EU), with the exception of several countries that have their own cryptocurrency policies.
Meanwhile, taxation also varies 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 gone into effect, tightening KYC/CFT obligations and standard reporting requirements.
In September 2020, the European Commission put forward the regulations for crypto-assets under the Markets in Crypto-Assets Regulation (MiCA), a framework that improves consumer protections, establishes clear industry standards, and introduces new licensing demands.