Exploring Cryptocurrency Regulations Across the Globe
The journey of cryptocurrency from speculative investment to a recognized asset class has spurred governments worldwide to contemplate regulatory frameworks. As of January 2024, while some nations have forged ahead with protective measures, others are still deliberating.
Cryptocurrency’s rise in prominence has led countries to adopt diverse approaches to regulation.
The European Union took the lead by implementing measures mandating crypto service providers to detect and prevent illicit crypto activities.
The U.S. is gradually moving towards regulation, with stakeholders engaged in legal battles while frameworks are being developed.
In various jurisdictions, cryptocurrencies are subject to distinct classifications and taxation policies.
United States
In 2022, the U.S. unveiled a new framework paving the way for enhanced regulation, empowering existing market regulators like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The SEC’s oversight is evident through its numerous litigations against crypto-focused entities, such as Ripple, Coinbase, and Binance, over alleged violations related to crypto offerings and services.
However, in 2023, a district court ruling deemed Ripple’s XRP sales as securities only when sold to institutions, marking a partial victory for the crypto sector. Subsequently, in November, the Commission’s denial of Grayscal’s Bitcoin ETF Trust application was overturned, leading to the approval of the first Bitcoin Spot ETFs in January 2024.
The ongoing tussle between regulators, market players, and investors underscores the evolving nature of crypto regulation in the U.S., despite the introduction of frameworks and regulatory empowerment.
As SEC Chair Gary Gensler emphasized, regulatory approvals do not signify a blanket endorsement of crypto assets, and the majority are deemed investment contracts subject to federal securities laws.
Central Bank Digital Currencies (CBDCs) are distinct from cryptocurrencies and are issued and backed by governments. This article focuses on cryptocurrencies and excludes CBDCs.
China
China’s People’s Bank prohibits crypto enterprises, citing concerns over unapproved public financing activities.
Additionally, China banned Bitcoin mining in May 2021, prompting many miners to shut down or relocate to more crypto-friendly jurisdictions.
Furthermore, cryptocurrencies were outright banned in September 2021.
Canada
While not recognized as legal tender, Canada has taken proactive steps in crypto regulation. It became the first to approve a Bitcoin exchange-traded fund (ETF), with several now trading on the Toronto Stock Exchange.
Crypto trading platforms and dealers must register with provincial regulators, as mandated by the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC).
All crypto investment firms are classified as money service businesses (MSBs) and must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
From a tax standpoint, cryptocurrency is treated akin to other commodities.
United Kingdom
The lower house of the British Parliament recognized crypto assets as regulated financial instruments in October 2022. The Financial Services and Markets Act of June 2023 extended existing laws to encompass all crypto assets, services, and providers.
Specific reporting requirements related to Know Your Client (KYC) standards, anti-money laundering (AML), and combating the financing of terrorism (CFT) are in place. While capital gains tax is levied on crypto trading profits, tax treatment depends on various factors.
The U.K. prohibits crypto derivatives trading.
Crypto exchanges and custodian wallet providers must adhere to reporting obligations set by the Office of Financial Sanctions Implementation (OFSI). They are required to notify OFSI promptly if they suspect sanctions violations.
Japan
Japan adopts a progressive stance on crypto regulation, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA). Crypto exchanges must register with the Financial Services Agency (FSA) and comply with AML/CFT obligations.
The Japanese Virtual Currency Exchange Association (JVCEA), established in 2020, oversees all crypto exchanges.
Japan taxes gains from crypto trading as miscellaneous income.
The government is actively enhancing regulations, including taxation. In September 2022, it announced plans to introduce remittance rules by May 2023 to curb money laundering via crypto exchanges.
Australia
Australia classifies cryptocurrencies as legal property, subjecting them to capital gains tax.
Exchanges must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and fulfill AML/CTF obligations.
In 2019, the Australian Securities and Investments Commission (ASIC) imposed regulatory requirements for initial coin offerings (ICOs) and banned exchanges from offering privacy coins.
In 2021, plans were announced to establish a licensing framework and potentially launch a central bank digital currency (CBDC).
In October 2023, the treasury proposed a regulatory framework, slated for a 12-month transitionary period if approved.
Singapore
Similar to the U.K., Singapore regards cryptocurrency as property but not legal tender. The Monetary Authority of Singapore (MAS) regulates exchanges under the Payment Services Act (PSA).
In 2022, guidelines warned digital payment token (DPT) providers against public advertising.
In August 2023, MAS introduced a framework to regulate stablecoin issuance, requiring approval for “MAS-regulated stablecoins.”
Long-term capital gains on cryptocurrencies are tax-free in Singapore, but companies engaging in regular crypto transactions are taxed on gains as income.
South Korea
Cryptocurrency exchanges and virtual asset service providers in South Korea must register with the Korea Financial Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC). Privacy coins were banned from exchanges in 2021.
In 2023, the Act on the Protection of Virtual Asset Users came into effect, designating the Financial Services Commission as the regulator for virtual assets and outlining permissible uses.
India
India’s stance on crypto regulation remains undecided, with no legalization or penalization in place. A bill prohibiting private cryptocurrencies is pending, subject to voting.
A 30% tax is imposed on all crypto investments, with a 1% tax deduction at source (TDS) on trades.
While India refrains from outright bans or regulations, the Finance Bill of 2022 classified virtual digital assets as property, outlining tax requirements.
Brazil
Brazil does not recognize Bitcoin as legal tender, but a law enacted in June 2023 legalized cryptocurrencies as payment methods nationwide.
The Central Bank regulates crypto exchanges, as per Decree No. 11,563 of June 13, 2023.
European Union
Cryptocurrency is legal in most EU countries, with exchange governance varying.
Taxation differs across EU nations, ranging from 0% to approximately 48%.
Recent directives, like the Fifth and Sixth Anti-Money Laundering Directives (5AMLD and 6AMLD), tighten KYC/CFT obligations and reporting standards.
In April 2023, Parliament approved measures requiring certain crypto service providers to obtain operating licenses, as part of the Markets in Crypto-Assets Regulation (MiCA) framework.
The landscape of cryptocurrency regulation is evolving globally, with countries enacting policies and