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As cryptocurrency’s transformation from speculative investment to a balanced portfolio stablemate continues to gather pace, governments around the world remain divided on how to regulate the emerging asset class. Below, we break down the current digital currency regulatory landscape by country.
Despite a large number of cryptocurrency investors and blockchain firms in the United States, the country hasn’t yet developed a clear regulatory framework for the asset class. The Securities and Exchange Commission (SEC) typically views cryptocurrency as a security, while the Commodity Futures Trading Commission (CFTC) calls Bitcoin (BTCUSD) a commodity, and the Treasury calls it a currency. Crypto exchanges in the United States fall under the regulatory scope of the Bank Secrecy Act (BSA) and must register with the Financial Crimes Enforcement Network (FinCEN). They are also required to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) obligations.
Meanwhile, the Internal Revenue Service (IRS) classifies cryptocurrencies as property for federal income tax purposes. Crypto investors should closely monitor a high-profile court case between Ripple Labs Inc. and the SEC, for violating “registration provisions of the federal securities laws,” filed in Dec. 2020. More recently, it was announced on Sept. 7, 2021, that the agency threatened to sue leading digital currency exchange Coinbase Global Inc. (COIN), for further regulatory clarity on a new program called Lend. A few days later, Coinbase ended the program.
Regulators have generally taken a proactive stance toward crypto in Canada. It became the first country to approve a Bitcoin exchange-traded fund (ETF), the first launched on Feb. 18, 2021, and the second launched on Feb. 19, 2021, both on the Toronto Stock Exchange. Additionally, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have clarified that crypto trading platforms and dealers in the country must register with provincial regulators. Furthermore, Canada classifies crypto investment firms as money service businesses (MSBs) and requires that they register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). From a taxation standpoint, Canada treats cryptocurrency similar to other commodities.
The United Kingdom considers cryptocurrency as property but not legal tender. Additionally, cryptocurrency exchanges must register with the U.K. Financial Conduct Authority (FCA) and are banned from offering crypto derivatives trading. Moreover, the regulatory body has introduced cryptocurrency-specific requirements relating to know your customer (KYC), as well as to the above-mentioned AML and CFT. Although investors still pay capital gains tax on crypto trading profits, more broadly, taxability depends on the crypto activities undertaken and who engages in the transaction.
The land of the rising sun takes a progressive approach to crypto regulations, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA). Meanwhile, crypto exchanges in the country must register with the Financial Services Agency (FSA) and comply with AML/CFT obligations. Japan treats trading gains generated from cryptocurrency as “miscellaneous income” and taxes investors accordingly.
The land down under takes a relatively proactive stance toward crypto regulation. Australia classifies cryptocurrencies as legal property, which subsequently makes them subject to capital gains tax. Exchanges are free to operate in the country, provided that they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet specific AML/CTF obligations. In 2019, the Australian Securities and Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and banned exchanges offering privacy coins.
Similarly to the United Kingdom, the island state classifies cryptocurrency as property but not legal tender. The country’s Monetary Authority of Singapore (MAS) licenses and regulates exchanges as outlined in the Payment Services Act (PSA). Singapore, in part, gets its reputation as a cryptocurrency safe haven because long-term capital gains are not taxed. However, the country taxes companies that regularly transact in cryptocurrency, treating gains as income.
The country didn’t use to consider cryptocurrencies as legal tender or financial assets. However, in May 2021, the South Korean Financial Supervisory Service (FSS) was tasked to oversee crypto exchange regulation, with operators subject to strict AML/CFT obligations. By September 2021, cryptocurrency exchanges and other virtual asset service providers were required to register with the Korea Financial Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC). A few months later, parliament approved a new tax on digital assets to take effect in 2022. Now any cryptocurrency income earned above 2.5 million won (approximately $1,800 USD) will be taxed at 20%. But anything valued under the threshold will remain tax-free.
The emerging global power doesn’t class cryptocurrencies as legal tender; however, it does classify them as property for the purposes of determining inheritances. The People’s Bank of China (PBOC) bans crypto exchanges from operating in the country, stating that they facilitate public financing without approval. The world’s largest crypto exchange, Binance, initially launched in China but had to relocate its headquarters following the country’s crackdown on crypto regulation. The exact location of the company’s headquarters is unknown, though there are rumors the company is in Malta or the Cayman Islands. Furthermore, China placed a ban on bitcoin mining in May 2021, forcing many engaging in the activity to close operations entirely or relocate to jurisdictions with a more favorable regulatory environment.
Like most countries, the subcontinent outlines that cryptocurrencies are not legal tender. Despite this, the country’s Central Board of Direct Taxation specifies that investors must pay taxes on crypto trading profits. In 2018, the Reserve Bank of India (RBI) banned financial institutions from transacting in virtual currencies; however, the Supreme Court reversed this decision in March 2020. Still, regulations remain uncertain in the country. For instance, India proposed a law in early 2021 that would make it illegal to issue, hold, mine, and trade cryptocurrencies other than state-backed digital assets.
Cryptocurrency is legal throughout most of the European Union (EU), although exchange governance depends on individual member states. Meanwhile, taxation also varies by country within the EU, ranging from 0% to 50%. In recent years, the EU’s Fifth and Sixth Anti-Money Laundering Directives (5AMLD and 6AMLD) have come into effect, which tighten KYC/CFT obligations and standard reporting requirements. In September 2020, the European Commission proposed the Markets in Crypto-Assets Regulation (MiCA)—a framework that increases consumer protections, establishes clear crypto industry conduct, and introduces new licensing requirements.
U.S. Commodity Futures Trading Commission. "Bitcoin Basics Brochure," Page 1.
U.S. Department of Treasury, Financial Crimes Enforcement Network. "FIN-2013-G001," Pages 1-3.
U.S Securities and Exchange Commission. "Investor Bulletin: Initial Coin Offerings."
Internal Revenue Service. "Virtual Currencies."
U.S. Securities and Exchange Commission. "SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering."
Coinbase. "Update as of 5pm ET, Friday, September 17th: We Are Not Launching the USDC APY Program Announced Below."
Coinbase. "The SEC Has Told Us It Wants to Sue Us Over Lend. We Don’t Know Why."
Evolve ETFs. "Evolve Announces Bitcoin ETF Begins Trading on TSX."
Global NewsWire. "Purpose Investments Launches World’s First Bitcoin ETF, Invested Directly in the Digital Asset."
Financial Transactions and Reports Analysis Centre of Canada. "Money Services Businesses."
Canadian Securities Administrators. "Staff Notice 21-329 Guidance for Crypto Asset Trading Platforms: Compliance with Regulatory Requirements," Pages 1-4, 28.
Government of Canada. "Guide for Cryptocurrency Users and Tax Professionals."
Financial Conduct Authority. "Cryptoassets."
UK.gov. "HMRC Internal Manual, Cryptoassets Manual: CRYPTO20050 – Cryptoassets for Individuals: Which Taxes Apply."
National Tax Agency Japan. "2021 Income Tax and Special Income Tax for Reconstruction Guide," Download PDF, "1-4 Types of Income & Taxation Methods."
Australian Taxation Office. "Crypto Asset Investments."
Australian Transaction Reports and Analysis Centre. "Digital Currency Exchange Providers."
The Financial Action Task Force. "Guidance for a Risk-Based Approach, Virtual Assets and Virtual Asset Service Providers, June 2019," Pages 6, 28, 36-37.
Australian Securities and Investments Commission. "Crypto-assets."
Singapore Statutes Online. "Payment Services Act 2019."
Inland Revenue Authority of Singapore. "Gains from Sale of Property, Shares and Financial Instruments."
Inland Revenue Authority of Singapore. "Taxable & Non-Taxable Income: Tax Treatment of Digital Tokens."
Bitcoin.com. "South Korean Financial Supervisory Service Tasked with Crypto Market Oversight."
CoinDesk. "Upbit Is First Korean Exchange to Register with Authorities Before September Deadline."
Bitcoin.com. "South Korea to Charge 20% Tax on Bitcoin Profits Under New Law."
Library of Congress. "China: Central Bank Issues New Regulatory Document on Cryptocurrency Trading."
CoinDesk. "Binance."
CoinDesk. "Binance Not Authorized to Operate in the Cayman Islands, Regulator Says."
Library of Congress. "China: National Development and Reform Commission Issues Notice Restricting Cryptocurrency Mining."
The Supreme Court of India. "Writ Petition (Civil) No.528 of 2018: Internet and Mobile Association of India v. Reserve Bank of India," Page 65.
Department of Economic Affairs, Ministry of Finance (New Delhi, India). "Report of the Committee to Propose Specific Actions to Be Taken in Relation to Virtual Currencies, 28th February 2019," Pages 21, 22, 27, 34-35.
Ministry of External Affairs, Government of India. "Crypto May be Allowed as Assets."
Reuters. "India to Propose Cryptocurrency Ban, Penalising Miners, Traders – Source."
European Union. "Proposal for a Regulation of the European Parliament and of the Council on a Pilot Regime for Market Infrastructures Based on Distributed Ledger Technology."
Bitcoin.com. "0 to 50% – Time to Pay Crypto Taxes in the European 'Union'."
European Union. "Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018."
European Union. "Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018."
European Union. "Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and Amending Directive (EU) 2019/1937."
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