The demand for cryptocurrency has only gone up since it was introduced to the world. With over 1500 digital currencies and expanding uses of blockchain technology, global regulators are divided on how to keep up. Maximum currencies are not assisted by any central government, so each country has different codes.
“If it’s not growing, it’s going to die”. — Michael Eisner
Let’s take a broader look at the present state of attitudes guiding cryptocurrencies in major economies around the world. There are four crucial areas that the government has to consider:
- Taxation: Essentially, each government is considering desirable taxation spots for cryptocurrencies. The governments need to keep in mind the basis of value for taxation; regarded as income, asset, a commodity, security or a currency.
- Money transmission activities: The significance of KYC/AML procedures, legal conditions of international money transfer, etc should be considered along with money transmission activities.
- Regulation and licensing: Regulation and licensing enforced by regulators carrying out internationally agreed upon laws, and industry-specific regulatory bodies. If cryptocurrencies are assumed to be securities, then personal approvals can be enforced on exchanges, software providers plus the management of the coin itself.
- Criminal Laws: Criminal laws including those pertaining to crypto-jacking, theft, and fraud.
Cryptocurrencies are becoming increasingly popular and governments have started to accept it as a mode of payment for goods and services. However, the users face double taxation, which needs to be resolved. Let’s take a look at the condition of regulations in different countries starting with Russia.
Towards the end of January 2018, the Ministry of Finance was reportedly working on a bill to regulate the use of digital money and ICO’s in the country, instead of issuing a complete ban on them. Earlier, government decided to ban cryptocurrencies, but with the recent adaptation of the digital currencies by other countries, Russia changed its mind. Now Russia allows crypto-trading through legal exchanges and allows ICO’s to be regulated. President Putin stated that Russia can’t lag behind the rest of the world in blockchain technology.
Russia issued new rules for crypto-activity and the Finance Ministry and Central Bank of Russia agreed on all provisions, except for allowing crypto-trading in the country.
The final decision on cryptocurrency regulations was taken through a consensus. Now, the Central Bank will allow crypto-trading; thus, clearing the way for the implementation of new laws. However, crypto to crypto trading could be unregulated because it deals with anonymous transactions.
According to a report issued in March 2008 by the United States Joint Economic Committee, some U.S officially approved cryptocurrency and blockchain technology. The U.S handles the second largest volume of bitcoin, according to CryptoCompare. As of now, it is not illegal to possess cryptocurrencies in the state, you just need to pay capital gain tax. The Securities and Exchange Commission has indicated its views on digital currencies as security. Earlier in march, the agency said that it is planning to apply security rules to almost everything from exchanges to wallets. The agency has also focused on initial coin offerings. In June 2018, Director of SEC (Security and Exchange Commission) stated that the regulator is disappointed by the exchanges’ efforts to conform to the agency’s registration and self-reporting conditions. The SEC is yet to issue a notice about whether cryptocurrencies are to be treated as a currency or not.
ICO’s, through which money is raised, are classified as securities. This was done with the implication that SEC will seek to regulate the offering of the security. ICO’s now exclude US citizens and residents from purchasing tokens in order to escape the reach of US securities regulation.
Japan recognized cryptocurrency as a mode of payment in 2017. Japan has been very successful in the digital market with about 60% of the world’s trading volume. Keeping in mind the bankruptcy of Mt. Gox 2014, where almost $400Million was stolen, Japan has introduced a new legal system.
Earlier this year, $500million worth of digital tokens were stolen from Coincheck. Japan ordered Coincheck to improve its security. A new self regulatory organization was suggested by merging Japan cryptocurrency Business Association and the Blockchain Association.
Several exchanges suggest that Japan’s framework is too tough. HitBTC has announced suspension from Japan.
It has been analyzed now that Japan is planning to regulate ICO’s with rules to prevent money laundering, and restrict unfair trades.
The Korean Government made the use of digital currencies legal in 2017. South Korea is believed to be the 3rd largest market for cryptocurrency speculation all across the globe. Ofcourse the North Korean hackers tried to disrupt the providers, forcing the government to fight cyber attacks.
A bill has been issued which would regulate the Korean Financial Intelligence Unit to authorize the crypto exchanges the way it does with banks, which leads to the fact that the exchanges will have to obey by strict money laundering rules.
Australia legalized Bitcoin in 2017. By September the government realized that the users are already subjected to GST on almost everything and the digital currency implementation would mean double tax.
The Australian Taxation Office is trying its best to incorporate the treatment of cryptocurrencies in its own jurisdictions, identifying any concerns related to tax.
In April of 2018, Australian Transaction and Analysis Centre realized that the scams are increasing and tried to fix it by implementing new money laundering laws. Exchanges now need to register and within 6 months, comply with four principal rules which include reporting any transaction above $10k.
Trading bitcoin is illegal in China. In 2017, the China government banned ICO’s and shut down all exchanges. But crypto-activity has been going on through mining. Chinese are looking to end this practice but it has still not been stopped.
To summarize, the idea to treat the digital currency as a payment mode will be beneficial to the global economy. It is important to look out for financial market regulations and anti money laundering procedures. Cooperating with regulations around the world provides the chance to apply the decentralized nature of blockchain to a global economy.