Regulation of Cryptocurrency Around the World

By | July 17, 2021
Regulation of Cryptocurrency

The article on ‘Regulation of Cryptocurrency Around the World’ deals with the regulation of cryptocurrency in various nations.

“To invest in crypto or not?” is a basic question which must have flashed across the minds of every Indian at least once. Although cryptocurrency is neither legal nor illegal in India, it enjoys a dominant position in various other global economies.

In the month of April, Australian cricketer, Brett Lee donated a bitcoin to supplement the financial aid required to maintain the oxygen supply in the country. Donations made through bitcoins would have remained an alien topic twenty years ago, but anymore.

Introduction

As cryptocurrencies spread across the world, regulations are also being put in place that attempts to regulate them. The landscape is constantly evolving and it is not easy to keep up with the rules of the different regions.

Cryptocurrency is a virtual or digital currency protected by encryption to ensure safe financial transactions, as double spending and counterfeiting are nearly impossible in this system.

They work with blockchain technology. Blockchain is a distributed technology distributed across computer networks that manage and records transactions. A salient feature of crypto money is that it is theoretically unaffected by government manipulation or interference, as central authorities generally do not issue it.

Online security payments are marked as virtual “tokens” that appear as entries inside the system and are unique in nature.

Regulation of Cryptocurrency Around the World

  • India

Status: Not legal tender

Cryptocurrencies are not legal tender in India.

Although trading is legal in India due to the lack of a strong regulatory framework, the lengthy licensing process makes it difficult for some crypto services and innovative technologies to function.

While there is currently no clarity on the tax status of cryptocurrencies, the chairman of the Central Commission on Direct Taxes has stated that anyone who makes a profit from Bitcoin will have to pay taxes on them. Other sources in the Income Tax Department have suggested that crypto gains should be taxed as capital gains.

On April 5, 2018, the Reserve Bank of India issued few advisory instructions on India’s password monetary activity, based on a cycle of “statements on development and regulatory policy.”

Legal entities to which RBI applies have been advised that they not trade in digital currencies, trade with individuals or corporate organizations that trade, or provide services. The circular also clarified that if a company has such a relationship, it must be terminated. This newsletter was issued to the public as well.

In 2020, a landmark Supreme Court judgement ruled the ban unconstitutional, breaking the ban and allowing exchanges to reopen.

In July 2019, an inter-ministerial committee recommended a total ban on cryptocurrencies, with the exception of the proposed official digital currency. The bill reportedly leaked proposed imprisonment for those who “mined, produce, store, sell, trade, issue, transfer, dispose or use cryptocurrencies on the territory of India”.

The bill has not reached the bottom of Parliament, but it’s evident from various instances that government plans to ban cryptocurrencies. Although there are strict crackdowns on cryptocurrencies from a regulatory standpoint, the Indian government said it is open to exploring the potential of blockchain technology.

  • Singapore

Status: Not legal tender

Singapore is known for their low taxes and regulatory framework in a business-friendly environment. Recently, many laws, such as the Blockchain and Cryptocurrency Regulation in 2020, have been signed by the country’s governments, which are organized to help the country’s crypto-currency businesses thrive.

National virtual infrastructure is overcrowded with numerous cryptocurrencies and fintech companies to help attract investors.

Exchange transactions in cryptocurrencies are legal, and the country has a more favourable approach to this issue than their neighbours in the region. Cryptocurrency is not considered a legal currency; however, Singapore tax authorities treat bitcoin as a ‘commodity’ and apply tax on it.

  • Australia

Status: Legal

Cryptocurrency, digital currencies and password currency exchanges are legal in Australia and have made huge progress in implementing cryptocurrency regulations. In 2017, the Australian Government declared that password money is legal and therefore subject to the 2006 Anti-Money Laundering and Anti-Terrorism Banking Act, Section 5 and related regulations.

Legislators have specifically stated that Bitcoin (and password money that shares its properties) must be treated as property and subject to capital gains tax.

  • Japan

Status: Legal

Japan currently has the world’s most advanced regulatory environment for cryptocurrencies, which are recognized as legal property under the Bitcoin and Other Digital Currency Payment Services Act (PSA).

All cryptocurrency trading platforms in this country must be registered with the Financial Services Agency (FSA) of Japan which started registration in September 2017.

In April 2017, cryptocurrencies as a payment method were legalized by Japan under the revised Payment Services Act. They are one of the world’s largest markets for Bitcoin, and in December 2017, the tax agency ruled that crypto income should be classified as “miscellaneous income”.

  • United States

Status: Not considered legal tender

Compared to many other countries, the U.S. government is more open and positive about cryptocurrencies and is certainly one of the world’s top leaders in the use of crypto and its use

However, the Financial Crimes Enforcement Network does not consider cryptocurrencies to be legal tender but considers them to be money transmitters on the basis that cryptocurrency tokens are “other value that substitutes for currency.”

Encryption laws vary from state to state, and even national level regulators have different opinions on how to handle cryptocurrencies. For example, the Securities and Exchange Commission (SEC) considers digital assets to be securities, while the Commodity Futures Trading Commission (CFTC) classifies them as commodities (this allows users to trade cryptocurrencies derivatives publicly).

The Justice Department continues to coordinate with the SEC, CFTC, and other agencies over future cryptocurrency regulations to ensure effective consumer protection and more streamlined regulatory monitoring.

  • United Kingdom

Status: Not legal tender

The UK’s approach to cryptocurrency regulation is measurable but maturing in the post-Brexit financial situation. The UK has confirmed crypto assets are property in 2020, but cryptocurrencies are not considered fiat currencies, as opposed to specific crypto-currency laws.

The UK is widely regarded as a world leader. Although digital currencies are still not banned across the country, they are still not considered fiat currencies. Value-added tax (VAT) is not applicable nationwide on the purchase of various cryptocurrencies. Instead, surcharges apply to goods or services acquired in exchange for bitcoin or other similar cryptocurrencies.

  • Canada

Status: Not legal tender

Canada is also very open and positive in crypto approval. Canada is home to many password money venture businesses and start-ups and considers future crypto money to be an exchange payment method.

Password currency is classified as a commodity in Canada, which legally refers to all password currency transactions in that country as barter transactions. This income generated from password money is basically “business income”. The Canadian government wants to ensure strict anti-money laundering legislation in relation to password money.

Crypto money can be used to purchase goods or services online or at stores that accept them.

The country’s legal system requires companies that handle digital currencies to register with Canada’s Center for Financial Transactions and Reports Analysis (FINTRAC). Local banks are not permitted to open or maintain clients’ accounts to process digital currencies.

  • South Korea

Status: Not legal tender

Cryptos are not considered a legal bid in South Korea however exchanges are legal, but it is part of a closely monitored regulatory system. Trading password currencies are currently tax-exempt as it is not considered a currency or financial asset.

However, the Ministry of Economy and Finance has announced that it is considering taxing password currency transaction revenues and plans to announce a taxation framework for 2022.

  • China

Status: Not legal tender

The People’s Bank of China (PBOC) banned the processing of bitcoin transactions by financial institutions in 2013 and banned initial coin offerings and domestic cryptocurrency exchanges in 2017.

Naturally, China doesn’t consider cryptos as fiat currency and is highly regarded worldwide for its stringent currency management regulations for the majority, including cryptocurrencies. Following the 2020 amendments to China’s Civil Code, the government has ruled that state-approved cryptocurrencies have property cryptocurrencies to determine inheritance.

According to Zhou Xiaochuan, ex-governor of the People’s Bank of China, regulators have instructed local financial institutions that digital currencies are not recognized as a means of retail payment.

  • Switzerland

Status: Legal

In Switzerland, password currencies and cryptocurrencies are classified as assets. Exchanges are legal, and the state has taken a significantly progressive position in password currency regulation based on the nature of its assets and investor protection.

Cryptocurrency exchanges and platforms are considered equivalent to Swedish financial institutions, demonstrating compliance with local AML / CTF and consumer protection obligations with exemptions or less burden on certain bank regulations and standards.

Cryptocurrency is subject to the Swiss Department, Income and Capital Tax and must be filed for an annual tax return.

  • Gibraltar

Status: Not considered legal tender

Gibraltar is a world leader in password monetary regulation. Gibraltar has a good reputation for its low tax environment. Cryptocurrency exchanges that do not impose capital gains or but are subject to a 10% corporate income tax rate.

Conclusion

The global monetary scenario is undergoing rampant changes. Many countries that previously banned cryptocurrencies have equally legalized them. For example, digital currencies are now legal in India, reversing the order of their recent predecessors. Countries that have banned cryptocurrencies may have to lift their ban to maintain stability in the domestic monetary system.


References

  1. Comply Advantage, Cryptocurrency Regulations Around The World, Available Here
  2. Mukund Agarwal, India on Cryptocurrency, Available Here
  3. Library of Congress, Regulation of Cryptocurrency Around the World, Available Here

  1. Law Library: Notes and Study Material for LLB, LLM, Judiciary and Entrance Exams
  2. Legal Bites Academy – Ultimate Test Prep Destination

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