Regulating Cryptocurrency Around The World
Cryptocurrency has taken the world by storm, with many countries and regulators beginning to take a closer look at how best to regulate this new digital asset class. While there is no clear-cut authority that oversees cryptocurrencies, the United States, Europe and Asia are among the most common locations for cryptocurrency regulation discussions.
It has been a hot topic of conversation in the past years, evolving from simple digital money into an asset class with wildly fluctuating prices. From the technology behind it to its potential benefits, cryptocurrencies have made quite a splash in the financial world. Now, with more and more people interested in investing their money into this new asset class, it’s important to know where your investments can go and what risks come with them.
In this article, we’ll take a look at the basic overview of how cryptocurrency regulations currently work around the world. This will help us understand how they impact our investments so we can make sound decisions for our money.
Cryptocurrency regulations by country
The US has not yet defined cryptocurrency as a real-world currency, but it is legal to own and trade them. In contrast, the EU has defined cryptocurrency as both a currency and an asset class — and thus subject to certain regulatory requirements.
The UK government announced that it plans to regulate crypto assets such as Bitcoin in order to protect consumers against fraud and money laundering risks associated with cryptocurrencies. However, this does not apply retroactively; instead only those who have invested recently will have their investments regulated under current legislation (i.e., after 1st January 2020).
Cryptocurrency regulations: The United States
The United States has yet to pass a law regulating cryptocurrencies and exchanges. This means that the Securities and Exchange Commission (SEC), which regulates securities and commodities trading, does not have authority over digital currencies or exchanges in general. As such, many of the regulations applied to traditional financial markets also apply to cryptocurrencies — but not all of them.
The Commodity Futures Trading Commission (CFTC) — an independent agency of the US government that regulates the U.S. derivatives markets — is responsible for regulating futures contracts on commodities such as oil and gold; however this agency lacks jurisdiction over virtual currency and exchanges like Coinbase because they don’t fall under its jurisdiction as being subjectively defined by Congress when drafting legislation specifically designed for this purpose. So it would be up to individual state governments if they wanted their state agencies involved with overseeing these operations within their borders.
Cryptocurrency regulations: European Union
The European Union has a number of cryptocurrency regulations, including:
Cryptocurrency exchange regulation: The European Commission (EC) has issued guidelines for exchanges to comply with anti-money laundering and counter-terrorist financing requirements. This means that most major trading platforms are regulated by the EC and must comply with their rules.
Cryptocurrency regulation: The European Commission has issued guidelines for cryptocurrency businesses operating within the EU market or providing services to EU residents; however, they only apply if you provide services directly to consumers or are a payment processor (such as Coinbase). If these types of services are not being offered by the business but still want access to the European market, owners should discuss with the local regulator first.
Cryptocurrency regulations: Asia
Asia is a region with a long history of economic growth and expansion, but it has also been home to some of the most stringent cryptocurrency regulations. The following are some of the notable Asian countries who have imposed some form of regulation on cryptocurrencies:
The country applies the strictest crypto regulation around the world. All crypto-related activities are banned in the country. Further strict measures were imposed in September 2021, including further scrutiny of the companies with a history of using crypto in their transactions.
Japan is one of the most crypto-friendly countries in Asia. Its government regulators recognize Bitcoin and other cryptocurrencies as a type of money and legal property. The industry is regulated by the Financial Services Agency (FSA), which manages transactions in the country’s currency, the Yen. The Japanese Payment Services Act provides a regulatory framework for payment services and regards crypto assets as payment methods. Owning and investing in cryptocurrencies enjoys no restrictions.
Cryptocurrency trading and possession of digital assets are legal in Singapore. The country has long been one of the world’s leading countries to encourage blockchain development and the innovative application of cryptocurrencies in beneficial use cases. Companies who want to get involved in the crypto business need to apply with the Monetary Authority of Singapore (MAS), and only when licensed, can they operate their business. They must have their primary location in Singapore and be compliant with AML/CFT requirements.
The country is currently in the process of transitioning into digital and electronic payments, favoring cashless methods and encouraging apps, QR codes and e-wallets. Cryptocurrencies appear as an attractive payment method considering millions of Vietnamese are reported to be using crypto in day-to-day transactions, and the figure is only expected to move up considerably within the next few years.
In 2016, the country imposed a complete ban on all crypto-related activities, from mining to buying, selling and holding assets. Things have changed now as the country is considering regulating the crypto industry in an upcoming Cryptocurrency and Regulation of Official Digital Currency Bill, which outlines a clear distinction between cryptocurrencies and the types of crypto-related activities allowed.
Under specific guidelines, exchange platforms will be allowed to work as crypto providers for customers’ sales, purchases and storage services. Tax implications will also be considered to generate additional revenue for the country.
The cryptocurrency boom in the country signaled Thai authorities to regulate the industry to mitigate financial risks for investors, including assets’ volatility, cyber theft, personal data leakage and money laundering. Thailand’s central bank announced it will start the trial for a Central Bank for Digital Currency (CBDC) in 2022 to further mitigate the threat of crypto to the country’s financial system. The country also imposed a 15% capital gains tax on profits from cryptocurrency trading to gain some revenue from the industry.
Cryptocurrency is legal and regulated in Malaysia by their Security Commission (SC) under the Capital Markets and Services Order 2019. It is considered a security and is therefore subject to Malaysia’s securities laws. However, it cannot be used as legal tender or payment instruments as per their central bank.
It is legal to own, sell and buy crypto assets in South Korea, but it is not legalized as an official tender by the South Korean government. The country’s crypto laws are rigorous, including government registration and other procedures monitored by the Financial Supervisory Service of South Korea (FSS).
The new law restricts cryptocurrency trading to “real-name bank accounts,” which indicates that a trader (client) must create a real-name account with the same bank as their cryptocurrency dealer in order to deposit or withdraw funds from their e-wallet. In accordance with standard AML/CFT rules and structured transaction reporting requirements, both the bank and the dealer must verify the trader’s identity.
Cryptocurrency Regulations: Canada, Australia and South American
The Canadian government has been regulating cryptocurrencies since 2014, but not all companies are required to register with the Financial Transactions and Reports Analysis Center of Canada (FINTRAC). Like other countries, cryptocurrencies are not legal tender in Canada. However, the country’s central bank is working on a token-based digital currency which will be in circulation soon.
The Australian Prudential Regulation Authority (APRA) has laid out a policy roadmap for the implementation of regulation for financial entities engaging in activity with crypto-assets. Australia’s financial regulator set a tentative goal of 2025 for its framework to be effective. To this end, APRA plans to conduct consultations on requirements for the financial treatment of crypto-assets, expected to be undertaken in 2023.
This continent has the highest adoption rate for cryptocurrencies than any other countries combined. Countries like Argentina, Cuba, El Salvador, are now considering the adoption of cryptocurrencies as their official legal currency since their fiat currency is losing its value. The economic situation of these countries gets worse as the days pass by, deeming the people’s money worthless and resorting to using US dollars for daily transactions to survive the skyrocketing inflation.
To know how important cryptocurrency is in this side of the world, check out the article we’ve published here.
More countries will regulate crypto
In summary, cryptocurrency has become a global phenomenon. While there are similarities between countries’ regulations, each country has its own unique set of rules and regulations for cryptocurrency trading.
The legal status of cryptocurrencies varies from country to country and state to state. Some states have officially recognized digital currencies as legitimate payment methods for goods and services; others have yet to pass any legislation on the subject at all or have only passed laws regulating certain aspects of their use (such as money transmission).
The European Union (EU) has proposed a unified approach that would allow EU member countries to regulate cryptocurrencies within their territories without having any impact in their economies, where they may be traded freely without regulation by central authorities such as banks or governments
Cryptocurrencies are becoming more and more popular, with many countries around the world now regulating the market. As such, it’s important that you know what your options are if you want to start investing in them.