Cryptocurrency laws and regulations

Although crypto assets have been around for more than ten years, efforts to regulate them have only recently risen to the top of the policy agenda. This is partial because cryptocurrency assets have only recently transitioned from niche products looking to become more widely used as speculative investments, hedges against weak currencies, and potential payment instruments.

Many people consider the emergence of crypto assets, like cryptocurrencies, to be a part of a more significant trend toward more diverse financial market infrastructures that increase choice and present fresh approaches to meet present and future payment needs.

Countries have adopted various approaches to regulating the asset class as cryptocurrency has become necessary in the global investment landscape. In the future, the degree and caliber of regulation in a particular jurisdiction will probably be correlated with the uptake of cryptocurrencies and stablecoins. Large economic regions like the EU and the US are taking steps to provide initial guidance as regulatory certainty affects economic behavior.

The crypto sphere is developing quickly. Given their limited resources and competing priorities, regulators struggle to build the talent and skills necessary to keep pace. Regulators find it challenging to keep track of thousands of actors who might not be subject to standard disclosure or reporting requirements due to the patchy nature of the data and the difficulty in monitoring the crypto markets.

1. Current Regulation By Country

1.1. Australia

In Australia, exchanges and cryptocurrencies are legal, and the nation has been forward-thinking in implementing regulations. Australia’s government formally legalized cryptocurrencies in 2017, stating that Bitcoin should be considered property and subject to Capital Gains Tax (CGT).

1. 2. Canada

Although it is not regarded as legal tender in Canada, the nation has been more proactive than others in regulating cryptocurrencies. Many of them are now traded on the Toronto Stock Exchange after Canada became the first nation to approve a Bitcoin exchange-traded fund (ETF).

The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) mandate that Canadian crypto trading platforms and dealers register with their respective provinces’ regulatory bodies.

1.3. China

In 2013, the People’s Bank of China outlawed financial institutions’ handling of Bitcoin transactions. In 2017, they took a step further by denying ICOs and domestic cryptocurrency exchanges. China does not view cryptocurrencies as legal tender and has strict cryptocurrency regulations. The Chinese government decided that cryptocurrencies have the status of a property to determine inheritances under an amendment to the Civil Code that will take effect in 2020.

China banned all domestic cryptocurrency mining in June 2021, followed by an outright ban on cryptocurrencies in September 2021. The new regulation effectively prohibited the use of all cryptocurrency exchanges (both foreign and domestic), resulting in a significant token sell-off.

1. 4. Japan

The Payment Services Act of Japan recognizes cryptocurrencies as legal property, taking a progressive approach to crypto regulations. In 2020, Japan established the Japanese Virtual Currency Exchange Association (JVCEA), which includes all crypto exchanges. Japan considers cryptocurrency trading gains “miscellaneous income” and taxes investors accordingly.

1. 5. Singapore

Cryptocurrency exchanges and trading are legal in Singapore, and the city-state has taken a more welcoming stance on the issue than some of its regional neighbors. Even though cryptocurrencies are not considered legal tender, Singapore’s tax authority considers Bitcoins as “goods” and thus applies Goods and Services Tax.

In 2017, the Monetary Authority of Singapore (MAS) clarified that, while its position was not to regulate virtual currencies, it would regulate the issue of digital tokens if those tokens were classified as “securities.”

1. 6. United States

In 2022, the United States announced a new framework allowing additional regulation. The new directive has given existing market regulators, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), more authority.

In the coming years, US regulators can expect to crack down hard on cryptocurrency to slow the continuous influx of new coins. The outcome of the SEC’s suit against Ripple Labs, as well as the SEC’s efforts to regulate cryptocurrency exchanges, will determine whether cryptocurrencies can be classified as securities.

1. 7. United Kingdom

The approach to cryptocurrency regulations in the United Kingdom has been measured. Although no cryptocurrency laws exist in the United Kingdom, cryptocurrencies are not considered legal tender, and exchanges must be registered.

The UK’s cryptocurrency regulations will likely remain largely consistent with the EU in the short term but will diverge from the bloc to some extent. HM Treasury guidance for 2021 emphasized the UK’s intention to consult on bringing specific cryptocurrencies under the scope of ‘financial promotions regulation,’ as well as to continue to consider a ‘broader regulatory approach’ to crypto assets.

A global regulatory framework will help bring order to markets, instill consumer confidence, define the boundaries of permissible, and provide a safe space for useful innovation to continue.