12/2/21, 12:23 PM Global Cryptocurrency Regulatory Landscape - Technology - Worldwide

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ARTICLE

Worldwide: Global Cryptocurrency Regulatory Landscape

09 March 2021
by
Ikigai Law
Ikigai Law

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with the authors

In this note, we have discussed three categories of

countries on the basis of their approach to regulating
cryptocurrency-
(a) countries that have legalized cryptocurrency by
regulating it; (b) countries that have proposed to regulate it, and
(c)
countries that have banned cryptocurrency. We have discussed a
few examples of countries for each category to
demonstrate that
most progressive jurisdictions fall in the first two categories.
The countries that have banned
cryptocurrency are generally
discussed for their regressive economic and social policies, and
India may not want to be a
part of that club. In tables A and B to
this blogpost, we have discussed many other jurisdictions across
the
abovementioned three categories. 

a. Countries that have regulated

cryptocurrency:

United Kingdom: All the businesses engaged in

crypto-asset related activities in the UK have to register with
the UK's Financial
Conduct Authority. Crypto-businesses are allowed to apply for the
'Authorized Payment
Institutions' license. BCB
Payments Limited became the first crypto asset entity
to get this license in the UK. All
the regulated crypto-asset businesses have to comply
with anti-money laundering (AML)/combating the
financing of
terrorism (CFT) measures under UK law. The UK High Court recently recognised crypto-assets
such as Bitcoin
as property under UK common law.

Singapore: Trading in cryptocurrencies is legal

and is regulated by the Monetary Authority of Singapore under
Singapore's Payment Services Act, 2020. Cryptocurrency
businesses have to obtain a license to operate a
cryptocurrency
exchange. Public offerings or issues of digital coins are
also regulated under
Singapore's Securities and Futures Act, 2001. Several
Indian cryptocurrency and blockchain startups have
migrated to
Singapore in recent years. One of India's largest
cryptocurrency exchange,
CoinDCX, migrated their holding
company to Singapore. The startup has since raised over INR 100
crores from
global investors. Unocoin is another Indian
cryptocurrency exchange which has followed suit. 

Indonesia: This is a unique example of a

country which initially banned cryptocurrency, and then legalized
it.
Initially in January 2018, Indonesia banned all payment
system and financial technology operators from
processing virtual
currency transactions. However, in 2019, the Indonesian government
published regulations to regulate trading of crypto
assets as commodities under the supervision of its
Commodity
Futures Trading Regulatory Agency. Any entity dealing in crypto
assets as commodity
futures must comply with AML/CFT norms. The
entities are also required to report to Indonesian Financial
Transaction Reports and Analysis Center.

Canada:1 In 2018, the Canadian

Securities Administrators (CSA) issued a notice clarifying that securities law
requirements will apply to crypto-businesses offering coins or
tokens. In January 2020, another notice clarified
the situations where
securities law would apply to platforms facilitating trading of
crypto-assets. From 01 June
2020, Canada's money laundering law requires all
entities dealing in virtual currency to registerwith the
Financial Transactions and
Reports Analysis Centre of Canada ('FINTRAC') and implement
the applicable
AML/CFT measures.

Thus, all these countries have introduced laws to

regulate cryptocurrency trading. To take care of financial
fraud
and money laundering activities, they have subjected cryptocurrency
businesses to their respective
AML/CFT norms. India can also follow
a similar approach.

Other countries which have regulated cryptocurrency instead of

banning it include Philippines, Switzerland,
Germany, Australia,
Netherlands, Thailand and South Korea (see Table-A to this
note).

b. Countries that have proposed to regulate

cryptocurrency:

United States of America:  Some states in

USA  have regulated cryptocurrencies while
others are considering
laws to regulate.  New
York has proposed a conditional licensing
framework to make it easier for start-ups
dealing in virtual
currencies to operate. Wyoming has already passed a bill allowing
the creation of a bank
which is specially meant to allow business
to hold digital assets safely and legally. Oklahoma has introduced
a
bill authorizing the use, sale and exchange of cryptocurrencies
within government agencies. The Financial
Crimes Enforcement
Network of the US Treasury Department has issued a draft
law requiring virtual currency
operators to maintain records,
and verify the customer's identity in transactions involving
virtual currencies or
digital assets. The US Department of Justice
has also suggested future strategies to combat
illicit uses of
cryptocurrencies including promoting law
enforcement awareness and expertise in cryptocurrency
technology to
efficiently conduct investigations.

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Pakistan:  In 2018, the State Bank of

Pakistan issued an official circular advising the
public that virtual
currencies are not recognised as legal tender.
It also advised banks and payment system operators to not
facilitate virtual currency transactions. However, the State Bank
of Pakistan reportedly stated in a court
proceeding
that its circular was not to ban crypto-currency, but only to
caution citizens against its unregulated
use.  In November 2020, the Securities and
Exchange Commission of Pakistan published a position paper on
the regulation of
cryptocurrency, suggesting measures for regulating it. 

Brazil: A bill aiming to define cryptocurrencies is

currently under discussion in the Brazilian Parliament. The
bill allows crypto-currencies to be freely
issued, transferred and used. In a guidance document issued by
Brazil's
finance ministry, cryptocurrencies are recognized as a financial
asset. The document requires
individuals and businesses to report
any cryptocurrency transactions above 30,000 Brazilian real (USD
7,600)
to tax authorities.

South Africa is another country where cryptocurrency has been

proposed to be regulated with sufficient
checks and balances (see
Table-A to this note).

c. Countries that have banned

cryptocurrency:

China: According to a notice issued by various Chinese government

agencies jointly, 'fundraising and trading
platforms' such
as crypto-exchanges are prohibited in China. All initial coin
offerings in China are also illegal
and prohibited. However, there
is no law or regulation which prohibits Chinese people from holding
or
transacting in crypto-currencies.2 Thus, the ban
envisaged by the Indian government will likely be wider in
scope
than that imposed by China.

Bangladesh: In 2017, Bangladesh's central

bank issued a notice stating that
cryptocurrencies are illegal in
Bangladesh. Transactions with
cryptocurrencies violate existing foreign exchange, money
laundering and
terrorist financing regulations.

Algeria:  It has prohibited the purchase, sale, use and

possession of virtual currency, making it a punishable
offence.

Cryptocurrencies are also illegal in Ecuador, Macedonia, Qatar,

Morocco and Bolivia (see Table-B to this note).
These are countries
with generally regressive economic, social and political policies
on many issues. By
banning cryptocurrencies, India will also be
joining this list of countries. 

TABLE A- LIST OF COUNTRIES REGULATING/PROPOSING TO

REGULATE CRYPTOCURRENCIES

Regulations addressing
S.
Country Crypto-friendly norms concerns of illicit use of
No.
cryptocurrencies 

To combat anonymity of
cryptocurrency transactions,
it has
proposed a
France currently does not regulate cryptocurrency new Ordinance is proposed
1 France trading.
However, it is slowly moving towards with stricter AML
and CFT
regulation.   norms, ensuring mandatory
compliance with standards of
the
Financial Action Task
Force (FATF). 

Switzerland classifies cryptocurrencies as assets and

accepts
Bitcoins as legal tender in some regions. It
recently enacted a law to regulate crypto-based
assets,
and requires a license for DLT trading facilities. Cryptocurrencies and
Switzerland was one of the first countries to introduce operation of trading
progressive
regulation for cryptocurrency businesses and platforms come under
has benefitted
immensely. Switzerland is home to the the scope of Switzerland's
2 Switzerland  'Crypto
Valley', which is a fintech hub catering to AML law.
Persons who
cryptocurrency
businesses in Switzerland and exchange cryptocurrencies
Liechtenstein. It houses more than 900 companies, and for fiat money and vice versa
the
combined valuation of the top 50 companies is are also regulated under this
around USD 37.5
billion. Switzerland's principal stock law.
exchange, SIX Swiss
Exchange, announced in January that
its trading
turnover for crypto products crossed USD 1
billion in
2020. 

Pursuant to the new law,

Cryptocurrencies are treated as financial instruments
cryptocurrency businesses
3 Germany  under a
recently enacted German law. It introduces new
are subject
to Germany's
licensing requirements for cryptocurrency
businesses.   
AML law. 

All EU states have to follow

the AML Directive 5 which
has
strict rules to combat
money laundering. Member
states are required
to include
cryptocurrency businesses
The EU Commission has introduced a directive on within the ambit of these
European
4 'Markets in
Crypto-assets' to regulate trading in crypto- AML
obligations. 

Union (EU)
assets and
support digital finance in all EU states.   

EU has also introduced

an Action Plan to prevent
money laundering
and
terrorist financing, beyond
the standards adopted by the
FATF.

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In 2017, the Australian

The Australian Taxation Office has a guidance document
government amended
on tax treatment of virtual
currencies. The guidance
its AML/CFT law to require
states that the transactions related
to crypto-currencies
digital currency
exchanges to
are "akin to a barter arrangement, with
similar tax
register with the Australian
consequences". As per the guidance, the digital
Transaction Reports and
currencies are not money.

5 Australia3 Analysis Centre. They must

 

also implement the

The Australian Securities and Investment Commission
necessary AML/CFT
has issued
a guidance on regulation of certain
crypto-
measures to mitigate the
currencies as 'financial products' under its
securities law.
risks of money laundering,
The guidance indicates that entities carrying on a
and to identify
and verify
cryptocurrency business need to be licensed.
their customers' identity.

The law requires crypto asset

In March 2020, the South Korean Parliament amended its
service providers to comply
'Act on Reporting and Use
of Specific Financial
with
enhanced KYC and AML
Transaction Information' to extend the
AML/CFT
rules. Crypto asset service
obligations to crypto asset service providers, including
providers will
have to file
4
6 South Korea crypto-currencies and crypto-exchanges. suspicious transaction and
The amended law requires crypto asset service providers
currency transaction
reports
to
register with the Financial Services Commission and
with the Korean Financial
partner with
one regulated bank for handling deposits
Unit, and conduct customer
and withdrawals. 
due
diligence.

There are no AML/CFT

compliances specifically for
crypto-currency currently in
South Africa. South Africa's
AML
law requires all
businesses including crypto
In April 2020, South Africa's Intergovernmental Fintech asset service
providers to
Working Group ('IFWG') released a position paper on report suspicious and
regulation of
crypto-assets. The IFWG has recommended unusual transactions to
its
the South African
government to employ clear "policy Financial Intelligence Centre. 

stances",
"enforce" strict oversight and codify AML  

measures for
policing crypto-businesses. The members The IFWG's position paper
of IFWG include all the
financial regulators of South has recommended the
7 South Africa Africa.
government to
introduce
 
enhanced AML/CFT
In November 2020, South Africa's Financial Services requirements for crypto
Conduct
Authority released a draft declaration of crypto- asset service
providers. This
assets as a
financial product under South Africa's will include conducting
financial services law.
If enforced, this law will require customer identification and
crypto asset service providers
to apply for authorisation verification, customer due
as a financial services provider. diligence, keeping records,
monitoring
for suspicious
and unusual activity on an
ongoing basis, and
reporting
of suspicious transactions to
the Financial Intelligence
Centre. 

The Dutch Implementation

Act also updated the existing
anti-money laundering rules
Trading in crypto-currency is regulated in the to implement EU's AMLD5
Netherlands. 
directives
in the Netherlands.
 
Therefore, the crypto service
8 Netherlands In May 2020, the Dutch AMLD5 Implementation Act 
was providers in the
Netherlands
passed. The Act requires crypto-exchanges and crypto now have to record and
custodian wallet providers to register with the Dutch verify customers identity,
central bank
to offer services in the Netherlands. monitor transactions and file
Suspicious Activity Reports
(SARs)
with local law
enforcement agencies. 

Thailand passed a law in May 2018 to regulate

businesses
relating to crypto-currencies and digital
tokens under the
supervision of the Office of the
Securities and Exchange Commission
(SEC). Any entity
Digital asset business
interested in offering digital tokens has to
obtain
operators and digital token
approval for offering from SEC. On the other hand, all
portal
service providers are
entities wanting to operate as digital asset business
regulated as financial
operators
have to obtain a license from the finance
9 Thailand institutions
under the Anti-
minister on the
recommendation of the SEC.

Money Laundering Act B.E.

 

2542
(1999) and are required
In November 2020, Thailand's finance
to implement AML measures
ministry notified the Digital Asset Business
Notification to
prescribed therein. 
recognise new categories of digital asset
businesses, and
the Digital Asset Business Licensing Notification
to
introduce additional licensing requirements for such
businesses. 

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Under the Act on Prevention

of Transfer of Criminal
Under Japanese law, crypto-assets are defined and
Proceeds, crypto-asset
regulated
under the Payment Services Act, 2009 (PSA
exchange services have to
2009).
All business entities interested in operating crypto-
comply with
advanced KYC
asset exchange
services are required to be registered
procedures. These
10 Japan5 with the Financial Services
Agency of Japan.

businesses are required to

 

verify
identity of customers,
Security Token Offerings and Initial Coin Offerings are
record and verify transaction
regulated
under Japan's Financial Instruments and
records and
report
Exchange
Act (FIEA).
suspicious transactions to
the concerned authorities.

TABLE-B: COUNTRIES THAT HAVE BANNED

CRYPTOCURRENCIES

S.
Country Status of ban
No.

It passed a law banning Bitcoin and

decentralized digital currencies in 2014. The Central
Bank of
Ecuador clarified that Bitcoin and other
decentralized digital currencies are
1 Ecuador effectively banned in Ecuador.
It also clarified that the purchase and sale of crypto-
currencies
through the internet is not forbidden, but the same do not qualify
as legal
tender.

In 2016, the National Bank of Macedonia issued a statement prohibiting Macedonian

2 Macedonia
residents to have investments in cryptocurrency.

The Saudi Arabian Monetary Agency has issued statements warning against trading in

virtual currencies as they are out of government supervision. It
was further clarified that
Saudi virtual currencies are not approved as
official currencies.

3
Arabia  

In 2019, the finance ministry reiterated its warning against dealing or

investing in virtual
currencies, including crypto-currencies.

The Moroccan Exchange Office informed the public that transactions

through virtual
currencies constitute a violation of the exchange
regulations and are subject to penalties
4 Morocco
and fines. However, the
press release also stated that various financial institutions in
Morocco are following the evolution of virtual currencies in
Morocco with interest.

In February 2018, Qatar's Central Bank issued a circular to banks declaring Bitcoin as
illegal, and prohibited all banks from dealing with
crypto-currencies. In January 2020, the
5 Qatar
Qatar Financial Centre
(QFC) also announced that it will ban activities
related to
cryptocurrency.

In October 2017, the State Bank of Vietnam issued a decree on cryptocurrency outlawing
the
issuance, supply and use of cryptocurrencies. It also imposed fines
up to 200 million
dongs. The directive became enforceable in
2018.

6 Vietnam
 

In March 2020, the Vietnamese finance ministry reportedly established a Digital Asset

Research Group to propose guidelines and regulations on
crypto-related activities.

The Central Bank of Bolivia effectively banned crypto-currency,

stating that the use of
coins not issued or regulated by countries
or zones, as well as the processing of electronic
7 Bolivia
payment orders in
currencies and monetary denominations not authorised by it in the
field of the national payment system, are illegal and
prohibited.

Footnotes

1 https://www.tookitaki.ai/compliance_hub/cryptocurrency-regulation-in-canada-
2020/; https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/canada

2 https://www.mondaq.com/china/fin-tech/944330/regulation-of-cryptocurrency-in-china; 
https://iclg.com/practice-areas/fintech-
laws-and-
regulations/china#:~:text=ICOs%20are%20expressly%20prohibited%20in,crypto%2Dassets%20is%20legally%20permissible.&text=In%20judicial%20practice%2C%20Chinese%20courts,has%20not%20been%20w

3 https://www.loc.gov/law/help/cryptocurrency/australia.php#_ftn51; https://www.loc.gov/law/help/cryptocurrency/australia.php;

https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-
regulations/australia; https://www.lexology.com/library/detail.aspx?g=b0f981f6-af9c-408b-ad8d-fdf0a8f2d43b.

4 Danny Crichton, 'South Korea passes one of the

world's first comprehensive Cryptocurrency laws'
(TechCrunch, 5 March 2020)
(https://techcrunch.com/2020/03/05/south-korea-passes-one-of-the-worlds-first-comprehensive-cryptocurrency-laws/)
accessed 25
January 2021. 

5 https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/japan; https://www.sygna.io/blog/japan-
crypto-asset-regulation-financial-services-agency-changes-psa-fiea-may-2020/

The content of this article is intended to provide a general

guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

AUTHOR(S)

Ikigai Law
Ikigai Law

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