The question concerning the legal status of digital currencies is considered differently in each state. Several countries are crypto-friendly and have a regulation in place that helps further development of the industry and minimization of the issues related to tax evasion and money laundering.
On the other side, there are countries who either banned digital currencies altogether such as India and China or have placed legal impositions on the digital asset class making it difficult for people to run their daily transactions using cryptocurrencies. The majority of the countries have not quite settled in their opinion about cryptocurrencies preferring instead to take a wait-and-see approach.
Here’s the quick update on what’s going on with crypto-related legal frameworks employed by various countries across the world.
While some countries are struggling to develop the frameworks that include digital assets, there are also countries that are apparent frontrunners.
In Japan, all cryptocurrency exchange services and trading platforms should be registered with the nation’s Financial Services Agency. Many of the businesses are already fully licensed, with other local crypto companies committed to doing the same.
South Korea regulates the crypto industry by using a “real-name system,” which means that any crypto user willing to withdraw or deposit in local currency must have a verified account at the bank cooperating with the exchange. Currently, only Bithumb, Upbit, Coinone are providing such services for their users.
Malta was amongst the first countries to embrace crypto aiming to attract more investments from all over the globe, although Malta does not have any specific laws related to digital assets. Coupled with the relaxed tax laws, many top crypto firms (like Binance) have set up a business in Malta.
Switzerland has welcomed the idea of blockchain and crypto from the very start inviting crypto startups looking to set up their operations. The local regime offers a lot of financial benefits (such as low tax rates, tax exemptions). The Swiss “Crypto Valley” is home to several crypto/blockchain companies with estimated worth around $44 billion.
Singapore is well known for its business-friendly tax regulatory framework. Its new regulatory framework for payment services which now includes digital currencies is designed to encourage the development of cryptocurrency business within the region.
Businesses can provide crypto wallet and cryptocurrency exchange services legally once they obtain the license from government authorities. Many startups thus moved their operations to a crypto-friendly country.
Yes to crypto
The US is one of the global leaders when it comes to crypto adoption and use. Over 70% of bitcoin ATMs are installed in the US. Investors can purchase not only Bitcoin but over 45 other digital assets across the country. The US has classified crypto assets as being property with value — and thus a subject to taxation. US regulators have different opinions on how cryptocurrencies should be treated, the Securities and Exchange Commission (SEC) considers digital assets to be securities, the Commodity Futures Trading Commission (CFTC) classes them as commodities (allowing users to trade cryptocurrency derivatives).
Aa well as Malta Canada is home to a large number of crypto startups and business ventures and uses its existing Anti-Money Laundering and counter-terrorist financing laws to regulate this relatively new digital asset class. Current legislation requires businesses dealing with digital currencies to register with the Financial Transactions and Reports Analysis Centre of Canada.
While cryptocurrencies are not banned across the country, they are still not considered to be legal means of payment. There’s no VAT applicable on the purchase of cryptocurrencies across the UK, but a surcharge is applicable on goods or services that are acquired in exchange for Bitcoin or other crypto assets. All profits incurred by investors coming from cryptocurrency transactions are subject to capital gains tax.
New Zeland has become the first country to support the companies that are paying employees in crypto. In August 2019 the Tax Office announced new rules that legalize salaries in cryptocurrencies.
No to crypto
China issued a ban on any crypto activities taking place within its borders, including crypto mining. However, it’s unlikely they will effectively eliminate cryptocurrency trading. At the same time, China has announced the upcoming launch of its state-controlled digital currency similar to Facebook’s proposed coin.
The Indian government ban on ‘non-sovereign’ cryptocurrency would see holders jailed for up to 10 years. Also, Facebook’s new digital currency Libra has received an early jolt from the Indian government. The authorities in India are no more keen on the Facebook project than any cryptocurrency that came before it.
The overall tendency is moving towards a global acknowledgement of crypto and developing the regulation or adjusting a current one.
In June 2019 at G20 summit in Osaka finance ministers and central bank governors declared their commitment to applying the recently amended FATF (Financial Action Task Force) standards to virtual assets. Under these new standards, crypto service providers such as Mercuryo will be required to implement the same measures as traditional financial institutions related to Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT).
Following the summit, fifteen countries, including G7 members joined by Australia and Singapore, pledged to cooperate in setting up a system for monitoring cryptocurrency transactions together with the FATF. The system is designed to help collect and share the data associated with individuals who regularly make cryptocurrency transactions. It will be managed exclusively by firms operating within the private sector. Presumably, the system will have its basic functionality by the end of 2020 and will be rolling out throughout the following years.