There’s been several judgments and skepticism around the Cryptocurrency space on how its transactions are so uncontrolled by anyone as it relates to the normal financial system. Well, many individuals seek to know about Cryptocurrency regulations around the world to know if such regulations will dampen the anonymity of the crypto space.
Therefore, the objective of this article is to entail all the regulatory policies enforced by countries across the globe on cryptocurrencies.
Crypto Regulations (Introduction)
U.S. market regulators including the Securities and Exchange Commission (SEC) are ramping up their efforts to control the cryptocurrency market. However, there is a central issue that remains unclear: Is Bitcoin or any cryptocurrency not a security?
The problem is hidden in the second half of the crypto portmanteau: currency. This was done on purpose by the movement’s founders to emphasize their goal of replacing fiat currencies as a medium of exchange and a store of value.
Since Bitcoin’s (BTC) release in January 2009, the cryptocurrency market has essentially been the “Wild West” of the financial sector. Its decentralized character has historically shielded it from the oversight of centralized authorities.
Many crypto fans find themselves drawn to the industry because of its decentralized nature. However, because there are so few rules in place, unscrupulous people can easily take advantage of unsuspecting investors.
The collapse of stablecoin TerraUSD in May wiped away over $600 billion in worth and triggered a wave of bankruptcies, further exacerbating the crypto winter. The response from the Biden administration was to lay out a plan for the future of cryptocurrency, which contained some cautious gestures toward eventual regulation.
Cryptocurrency Regulations Around The World
Governments across the globe are looking into methods to regulate cryptocurrencies as it evolves from a risky investment to an unique asset class. The regulatory framework for virtual currencies in various nations is outlined here.
#1. United States
In 2022, the United States unveiled a new framework that allowed for additional regulation. Existing market regulators such as Securities and Exchange Commission (SEC) and also Commodity Futures Trading Commission (CFTC) have been given more authority as a result of the new order (CFTC).
Already in 2020, the SEC is suing Ripple, alleging that the company illegally raised over $1.3 billion by trading its native coin, XRP, in unlicensed securities transactions. The SEC has been focused on cryptocurrency exchanges like Coinbase (COIN) and Binance because of the products they offer. Gary Gensler, chairman of the regulatory agency, has spoken out against bitcoin, calling it “a Wild West.”
According to Gensler, “nothing about the cryptocurrency marketplaces is contradictory with the securities law.” Regardless of the underlying technologies, “investor safety is just as important.”
In China, cryptocurrency is considered assets for the sake of estate planning.
The People’s Bank of China (PBOC) has prohibited cryptocurrency exchanges from functioning within its borders on the grounds that they enable unregulated public financing. In addition, China outlawed bitcoin mining in May 2021, compelling many miners to either stop their operations or move to countries with friendlier regulations.
There was a complete restriction on cryptocurrency trading as of September 2021. However, efforts have been made to create a digital yuan in the country (e-CNY). The second phase of its pilot test operation for its central bank virtual currency (CBDC) launched in August 2022.
Though Canada is not among the countries that recognize cryptocurrency as legal tender, it has been among the most progressive in terms of crypto policy. Canada was the first country to legalize Bitcoin ETFs, and now the Toronto Stock Exchange is home to dozens of them.
Trading systems and merchants in Canada must register with provincial authorities in order to comply with rules set forth by the Canadian Securities Administrators (CSA) and also Investments Industry Regulatory Organization of Canada (IIROC).
All cryptocurrency investment firms in Canada must apply with the Monetary Transactions and Records Analysis Centre of Canada as money services companies (MSBs) (FINTRAC). Canada taxes cryptocurrencies in the same way it taxes other commodities.
#4. United Kingdom
Though the United Kingdom has no cryptocurrency-specific legislation, digital currencies are treated as assets (not fiat currency), and crypto exchanges are mandated to enroll with the Financial Conduct Authority (FCA). Trading in cryptocurrency derivatives is illegal in the United Kingdom as well. Know your customer (KYC) regulations, anti-money laundering (AML), and Anti – Terrorism financing (CFT) all have reporting obligations that are unique to cryptocurrency (CFT). Cryptocurrency trading profits are still subject to capital gains tax for investors, but the extent to which they are taxable depends on the nature of the crypto activity and the person making the transaction.
Cryptocurrency exchanges and custodial wallet providers are subject to new reporting requirements from the Office of Economic Sanctions Enforcement as of 30 August 2022. (OFSI). If a cryptocurrency firm knows or has reasonable suspicion that a customer is subject to penalties or has violated a financial sanctions infraction, they must immediately notify OFSI.
The British House of Commons voted to officially classify cryptocurrency as a form of legal tender in October 2022. Current regulations pertaining to payment instruments are expanded to include stablecoins in the proposed legislation.
Within the Payment Transactions Act, Japan is one of the most progressive countries when it comes to cryptocurrency legislation (PSA). Financial Services Agency (FSA) registration and AML/CFT compliance are prerequisites for operating a cryptocurrency exchange in the country. In 2020, Japan founded the Japanese Virtual Currency Exchange Association (JVCEA), of which all crypto exchanges are now members. Profits made from trading cryptocurrencies are considered “miscellaneous income” and subject to taxation in Japan.
Multiple areas of regulation, including taxation, have been under scrutiny and are being worked on by the country. Government officials said in September 2022 that they planned to implement remittance restrictions by May 2023 to stop criminals from exploiting cryptocurrency exchanges as money laundering conduits. In order to better collect information from customers, the Act on Restriction of Transportation of Criminal Products will be updated.
Cryptocurrencies are liable to capital gains tax in Australia because of their status as legal property. As long as they comply with certain anti-money-laundering and counter-terrorist-financing regulations and register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), exchanges are welcome to do business in Australia. The Australian Securities and Investments Commission (ASIC) prohibited “privacy coin” exchanges in 2019 and enacted regulations for initial coin offerings (ICOs) to protect investors’ anonymity by hiding the movement of funds through their networks. The Australian government has stated its intention to establish a regulatory framework for cryptocurrencies in 2021, and maybe introduce a digital currency issued by the central bank (CBDC).
It is similar to the United Kingdom in that cryptocurrency is considered an asset but not legal cash in this island nation. According to the Payment Services Act, the Monetary Authority of Singapore (MAS) issues licenses and oversees exchanges (PSA). Because long-term investment income is not taxed, Singapore has been known as a refuge for bitcoin investors. However, businesses that engage in cryptocurrency transactions regularly are subject to taxation in the country on the profits they make. In 2022, Singapore released guidelines urging DPT suppliers not to advertise their services to the general public.
Frequently Asked Questions
How is cryptocurrency regulated internationally?
In terms of cryptocurrency regulation, Gibraltar is at the forefront of international jurisdictions.
In which country is crypto completely unregulated?
Will the United States outlaw cryptocurrency?
U.S. Will Not Ban Cryptocurrencies, According to SEC Chairman.
The necessity for Cryptocurrency regulation is to manage the entire economic atmosphere as a whole. Reducing excessive scarcity, managing inflation and many other economical factors. Cryptocurrency decentralization is great but still needs to be regulated to an extent.