Global Regulations of Cryptocurrency

6/27/2021 Global regulations of cryptocurrency - iPleaders
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Global regulations of cryptocurrency

By Diva Rai - March 14, 2021
Image source - https://bit.ly/3cIXj1p
This article is written by Vanya Verma pursuing B.B.A. LL.B (Hons.) from the Alliance
University, Bangalore. This article deals with the regulation of cryptocurrencies in various
countries.
Table of Contents 
https://blog.ipleaders.in/global-regulations-of-cryptocurrency/ 1/19
1. Introduction
2. Cryptocurrency regulations around the world
2.1. India
2.2. Switzerland
2.3. Malta
2.4. Luxembourg
2.5. Singapore
2.6. Belarus
2.7. Japan
2.7.1. South Korea
2.8. United States
2.9. Canada
2.10. United Kingdom
2.11. Australia
2.12. France
2.13. Germany
2.14. China
3. Conclusion
4. References
Introduction
A cryptocurrency is a virtual or digital currency that is secured for cryptography in order to
secure financial transactions as it makes it nearly impossible to double-spend or counterfeit.
Cryptocurrencies work on blockchain technology. Blockchain is a decentralized technology that
is spread across a network of computers that manage and record the transactions. A
distinguishing characteristic of cryptocurrencies is that central authority generally does not
issue them thus, making them theoretically immune to government manipulation or
interference.
Online secure payments are allowed by cryptocurrencies which are denominated as virtual
“tokens,” which are represented by the ledger entries internal to the system.
Cryptocurrency regulations around the world

There are legal frameworks employed by various countries for the regulation of
cryptocurrency. Some countries have made regulations to either curb or foster the use of
cryptocurrency, in some countries it is uncertain or developing while there are few countries
that have allowed the use of cryptocurrency. The various countries in relation to how they deal
with cryptocurrency are as follows:
India
On April 5, 2018, few advisory guidelines were issued by Reserve Bank of India (RBI)
concerning the activities of cryptocurrency in India under a circular named ‘Statement on
Developmental and Regulatory Policies’. In paragraph 13 of the circular, the entities governed
by RBI were asked not to deal with, or give services to any person or business organizations
which deal with or transact in digital currencies. Further, the circular also stated that the
entities should end such ties if any. The circular was issued in the public interest as per RBI.
This circular was challenged in the court of law by the ‘Internet And Mobile Association Of
India‘ who was the chief petitioner. After almost two years a historical judgment was delivered
striking down the central bank’s April 2018 circular which bans regulated financial institutions
from providing services to crypto businesses on March 4, 2020, by the Supreme Court of
India. The court held that the circular issued by RBI is unconstitutional, as reported by the
news.Bitcoin.com. The Indian crypto community won the case against the RBI. The ban was
finally lifted by the Supreme court on cryptocurrencies, and thus, trading in cryptocurrencies is
now legal.
Though the plea for striking down the applicability of the circular was upheld by the Supreme
Court of India, the order pronounced by the bench consisting of Justice V. Ramasubramanian,
Rohinton Fali Nariman and Aniruddha Bose may need careful evaluation for a better
understanding of the judgment.
Switzerland
The government of Switzerland was open to the idea of cryptocurrency or blockchain
technology from the beginning itself. For example, the local authority provides a lot of impetus
to the Crypto startup looking forward to establishing their operations such as low tax rate, tax
exemptions. The finance regulator of Switzerland classifies the digital currency as assets that
need to be disclosed on one’s annual return and it is subject to the country’s prevailing wealth
tax scheme.
As per the report released in the year 2018, Switzerland’s “crypto valley” (that is the canton of
Zug) houses a surplus of cryptocurrency or blockchain technology-related businesses that are
estimated to be worth $ 44 billion.
Malta
Malta does not have any predefined laws to directly handle cryptocurrencies such as bitcoin or
any other digital assets. Due to relaxed tax laws in Malta, a number of big firms of
cryptocurrency have established their firms in the country, the primary reason being that the
firms bypass some of the legal hurdles that these businesses have to encounter before
establishment, mostly in the major nations of Europe.
Further, a couple of years back, Malta’s prime minister, Joseph Muscat, gave rise to an effect of
economic strategy which was designed in order to help in attracting more investments to the
country from all over the globe.
Luxembourg
Luxembourg is a tiny European country that houses one of the biggest platforms for
cryptocurrency exchange that is Bitstamp. All the transactions related to cryptocurrency in the
country are exempted from tax. The local government of the country in terms of how
cryptocurrency is defined views them as “intangible assets”, not subject to income tax unless
they are exchanged for some declaration.
Singapore
The powerhouse of Asia is well known for its regulatory framework in a low tax and business-
friendly environment. In recent years, a number of laws like Blockchain and Cryptocurrency
Regulation, 2020 have been signed by the government of the country that is organized in
order to prosper the business of cryptocurrency in the country. In the year 2018, a new
regulatory framework for the service of payment was finalized by the central bank of
Singapore and the frameworks now include cryptocurrency.
The virtual infrastructure of the country is crowded with a large number of crypto and fintech
firms that can help in attracting investors.
Belarus
The President of the Republic of Belarus passed a decree which permitted the local residents of
the country the right to buy and sell crypto assets which also included the right to develop
one’s own digital currencies. In addition to that, the decree also allows the crypto enthusiasts
to indulge in activities such as mining of various altcoins and trading crypto assets in exchange
for Belarusian rubles, foreign currencies, and even other forms of electronic money.
Moreover, till January 1 2023, the government of Belarus has exempted the owners of digital
currency from payment of any taxes on their crypto holdings.
Japan
All the cryptocurrency trading platforms in this country are required to be registered with
Japan’s Financial Services Agency (FSA). The agency had started registering them in
September 2017. In April 2017, the cryptocurrencies as a means of payment were legalized by
Japan under the amended Payment Services Act The latest cryptocurrency that was registered
under FSA was Okcoin Japan which is a Japanese subsidiary of Ok Group.
As of today that is in the year 2020, there are 23 registered crypto exchanges registered by
FSA in Japan as “Class 1” members of the JVCEA. The association also has “Class 2” members
which comprises companies that are still not licensed by the FSA, such as Payward Asia,
Coinbase, and Wirex Japan.
South Korea
This East Asian country, South Korea is another instance, with the Financial Intelligence Unit
(FIU) which disclosed its plans to regulate local crypto exchanges by bringing all of them
together under a unified administrative umbrella. Further, South Korea regulates its crypto
industry by using a “real-name system,” which means that if any crypto user wants to
withdraw or deposit Korean won, he must possess a real-name-verified account at the bank
which is providing this service to the exchange. As of now, only Korbit, Bithumb, Coinone, and
Upbit are providing the aforementioned services for their users.
United States
Compared to many other countries the US government has been more open and positive
about Cryptocurrencies and undoubtedly one of the leading global leaders with respect to
crypto adoption and its use. Cryptocurrencies have been classified as MSB (Money Services
Business) by the US government. Instructions have been given to several government bodies
that all transactions related to cryptocurrency are needed to be carried out only in legal terms
as there is a presence of cryptocurrencies in the US derivatives market.
The investors have the choice of not only purchasing Bitcoin but also over other 45 digital
assets across the country. The cryptocurrency has been categorized by the country’s Financial
Crimes Enforcement Network (FinCEN), as “money transmitters” and therefore, they are
bound by certain niche laws. Similarly, the Internal Revenue Service (IRS) has also classified
crypto assets as the ones with value and property and thus cryptocurrencies are taxable
entities in the U.S.
The laws regarding crypto differ from state to state, and even the national-level regulators
have different opinions as to how cryptocurrencies should be dealt with. For instance, while
the Securities and Exchange Commission (SEC) considers digital assets to be securities, the
Commodity Futures Trading Commission (CFTC) classes them as commodities (thereby
allowing users to publicly trade cryptocurrency derivatives).
Earlier a Joint Economic Report (JER) was released by the U.S. Congress which indicated that
within the next 12 months or so, the country will move towards a more streamlined regulatory
approach to crypto.
Canada
Canada, similar to the U.S., is also quite open and positive in approving cryptocurrencies.
Canada is home to a large number of established crypto business ventures and startups and it
sees cryptocurrencies as an alternative form of payment in the future. Cryptocurrencies are
classified as a commodity in Canada, which means that all transactions in cryptos in the
country are legally termed as a barter trade. This income generated by cryptocurrencies is
basically ‘business income’. Canada government wants to ensure strict Anti Money Laundering
laws when it comes to cryptocurrencies.
The country’s legal system requires that the firm which deals with digital currencies should
register themselves with the Financial Transactions and Reports Analysis Centre of Canada
(FINTRAC). Local banks are not permitted to open or maintain the client’s accounts to deal
with digital currencies (i.e., if they are not registered with FINTRAC).
United Kingdom
When it comes to crypto adoption and innovation U.K. is widely considered to be a global
leader. While digital currencies are not yet banned across the country, they are still not
considered to be legal tender. No value-added tax (VAT), is applicable across the country on
the purchase of various cryptocurrencies. Instead, a surcharge is applicable on goods or
services that are obtained in exchange for Bitcoin or other similar cryptocurrencies.
If the investors incur any profit or loss in relation to their crypto assets are subject to capital
gains tax. CryptoUK which is a self-regulatory trade association is seeking to enhance the
U.K.’s existing industry standards (surrounding Bitcoin) by executing a code of conduct that
comprises a number of niche provisions which are related to data security, individual privacy,
and anti-money laundering.
Australia
The Reserve Bank of Australia appears to have an open mind towards the crypto industry, it
was stated by the regulatory body that it does not prevent people from making use of digital
currencies. In 2017, it was declared by the Australian government that Bitcoin would be
treated like regular money and will not be subject to double taxation.
France
The Court ruling on cryptocurrency offered the companies which operate cryptocurrency or
offer services related to cryptocurrency, have legal certainty to operate in the country. Earlier
the country had passed a bill that was to establish a new legal framework to govern
cryptocurrency operations like Initial Coin Offerings (ICOs) across the nation.
Crypto-related firms have to voluntarily abide by the standards on consumer protection and
capital requirements and pay tax in the country, in exchange for approval from the regulator.
Germany
In Germany, the cryptocurrencies are classified by The German Federal Financial Supervisory
Authority (BaFin) as “units of account” that can be used for the purpose of payment.
Nevertheless, individuals or firms that indulge in token purchases (for commercial purposes)
should obtain approval in advance from the regulatory body. BaFin has prescribed a case-by-
case examination for firms looking to conduct an Initial Coin Offering (ICO) and thus
suggesting that it has an open mind towards such developing methods of fundraising.
Starting from the year 2020, German banks and other regulated financial institutions are
allowed to operate cryptocurrencies such as bitcoin on behalf of their clients, after
amendments were adopted by Berlin reversing Europe’s anti-money laundering rules into
national law. German fintech also rushed to offer similar services.
China
Early in the year 2018, China had banned all activities related to cryptocurrencies to take
place within the borders of the country and had shut down domestic cryptocurrency
exchanges. Moreover, there also exists an access ban that has been imposed by the
government on all the locals and international crypto exchange platforms. According to Zhou
Xiaochuan, ex-governor of the People’s Bank of China, instructions have been given to the
local financial institutions by the regulators that digital currencies will not be recognized as a
tool for any retail payment.
Conclusion
Many countries who had earlier banned cryptocurrencies have now legalized the same, like
India who has recently reversed its previous order and now the digital currency is legal in
India. While there are some countries that are still striving to construct an economic
framework for digital currency, there are some countries that have already built systems that
require the digital currency service providers to be licensed by the appropriate local regulatory
bodies. It is likely that in the coming years the countries who have banned cryptocurrency will
lift their ban in the need of the hour.
References
https://www.cryptoexchangescript.com/countries-where-cryptocurrency-is-legal-2020
https://cointelegraph-com.cdn.ampproject.org/v/s/
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6/27/2021 Global regulations of cryptocurrency - iPleaders

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Global regulations of cryptocurrency

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Cryptocurrency regulations around the world

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