The tremendous growth of cryptocurrency in the world can be traced to the fact that in the past four years, cryptocurrency has been ubiquitous, prompting more national and regional authorities to deal with its regulation. Various jurisdictions handle the regulation of cryptocurrencies differently which makes the scope of information and innovation in crypto regulation really broad and deep.
One of the common clarifications that can be seen to be addressed by various nations regarding cryptocurrency seems to be the fact that, unlike other currencies, crypto currency is not issued and guaranteed by the government. Thus most governments warn the citizens who invest in cryptocurrencies to do so at their own personal risk and that no legal recourse is available to them in the event of loss.
Another one of the most common issue addressed by most governments is the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism. Some nations have taken strict action against this problem and have included cryptocurrency markets in their laws on money laundering, counterterrorism, and organized crime.
These laws also mandate that banks and other financial institutions that support these markets carry out all necessary due diligence. For instance, Australia, and Canada, have enacted laws to bring cryptocurrency transactions and institutions that facilitate them under the scope of money laundering and counter-terrorist financing laws.
Some countries have adopted measures to impose restrictions on crypto trading. Countries like China, Bangladesh, Qatar, Bolivia, etc. have also banned cryptocurrency. Which means trading of cryptocurrency in these countries is illegal.
BELOW MENTIONED ARE THE MAJOR COUNTRIES THAT HAVE A REGULATED CRYPTO FRAMEWORK:
In the United Kingdom, businesses and entities involved in the trading of cryptocurrency must register with the UK’s Financial Conduct Authority. The businesses involved in cryptocurrency can apply for ‘Authorized Payment Institutions’ license. All the regulated crypto-asset businesses have to comply with anti-money laundering (AML)/combating the financing of terrorism (CFT) measures under UK law.
Also, No value-added tax (VAT), is applicable across the country on the purchase of various cryptocurrencies. If the investors incur any profit or loss in relation to their crypto assets, lossesprofits or loss are subjected to capital gains tax.
A self-regulatory trade organization called CryptoUK is working to raise industry standards in the U.K. for Bitcoin by implementing a code of conductseveraldes a number of specialized clauses about data security, personal privacy, and anti-money laundering.
Singapore has a very structured regulatory system when it comes to Cryptocurrency. Trading in cryptocurrency is regulated by the Monetary Authority of Singapore (MAS) under Singapore’s Payment Services Act, 2020. On August 1, 2017, the Monetary Authority of Singapore (MAS) issued a statement clarifying that issuing of dig ryptocurrency cyrptocurrency in Singapore is to be regulated by the MAS, if those virtual currencies or tokens, fall within the ambit of “securities” regulated as per the security laws.
In 2018, a new regulatory framework was finalized by the governthe ment which concerned service of payment and it included cryptocurrency. Businesses involved in cryptocurrency have to obtain a license for the exchange of virtual currencies including buying and selling of the same.
As there is no such thing as a capital gains tax in Singapore, businesses and individuals that purchase and profit from the increase in the value of their cryptocurrency holdings in Singapore do nosalesy tax on their sale. (if profit is gotten from trading virtual assets regularly via the course of normal business activity, this is taxable).
Indonesia is an interesting example when it comes to the regulation of cryptocurrencies. Initially on January 13, 2018, Indonesia’s central bank issued a statement banning buying selling, or general trading of cryptocurrency. It was not accepted as a legitimate instrument of payment in the country.
The consensus was that it was “very dangerous,” “prone to bubble risks,” and “susceptible to being exploited for money laundering and terrorism financing”. However, in 2019, the Indonesian government released a set of regulations concerning the trading of crypto assets as commodities under the supervision of its Commodity Futures Trading Regulatory Agency. It was mandated that any entity or business involved in trading of crypto need to comply with the rules of CFT.
Canada is very open and positive towards the concept of cryptocurrency. It also sees crypto as an alternative form of payment in the future. In Canada, cryptocurrencies are classified as commodities, which means crypto transactions are legal and are termed as barter trade.
In 2018, the Canadian Securities Administrators (CSA) issued a notice wherein it clarified that when it comes to businesses involved in crypto offerings and tokens, the securities law requirements will be applicable. Again in January 2020, another notice was released which focused on the situations where securities law would apply to platforms facilitating trading of crypto-assets.
The Canadian government is pretty strict when it comes to Anti-money laundering laws. From 01 June 2020, Canada’s money laundering law requires all businesses dealing in virtual currency to register with the Financial Transactions and Reports Analysis Centre of Canada (‘FINTRAC’).
United States of America
US has a very positive and acceptable approach with regards to cryptocurrencies. It is one of the leading countries to adopt regulation of cryptocurrencies. Cryptocurrencies have been classified as MSB (Money Services Business) by the US government. People of US have the choice of trading into around 45 types of digital assets across the country.
Cryptocurrency exchanges are legal in the United States and fall under the regulatory scope of the Bank Secrecy Act (BSA). The cryptocurrency has been categorized as “money transmitters” by the country’s Financial Crimes Enforcement Network (FinCEN). Similarly, the Internal Revenue Service (IRS) has also identified and accepted crypto assets and thus crypto currencies are taxable entities in the U.S.
Recently, a Joint Economic Report (JER) was released by the U.S. government which indicated that approximately within the next one year, the country will move towards a more streamlined regulatory approach to crypto. For individuals in charge of overseeing cryptocurrency exchanges, digital assets, DTLs, and crypto payments as well as on specific private digital wallets, FinCEN proposed a new data collecting requirement in December 2020.
If the regulation were to be put into effect, it would also mandate that exchanges submit suspicious activity reports (SAR/CTR) for transactions that exceed the current $10,000 threshold and that non-registered financial institutions or owners of MSB wallets identify themselves when sending $3,000 or more in a single or series of linked transactions.
European Union (EU)
The 5th Anti-Money Laundering and Counter-Terrorist Financing Directive, or “5AMLD,” went into effect on January 10, 2020. It was enacted by the EU to promote global security, the integrity of the financial system, and sustainable growth. As expected, it widened the regulatory scope to include cryptocurrency and the entities that deal with it by defining “virtual currency” and “virtual asset service providers” in new ways (or VASPs).
The same AML/CFT (Anti-Money Laundering/ Combating the Financing of Terrorism), KYC (know-your-customer), and data-sharing regulations that apply to banks, for example, must be followed by crypto firms. AMLD introduced a legal definition of cryptocurrency and brought both cryptocurrencies and cryptocurrency exchanges under the scope of existing AML/CFT regulations.
Financial authorities required Bitcoin service providers to register with them under 5AMLD, and financial intelligence units (FIU) were given the authority to request the identities and addresses of cryptocurrency owners.
In September 2020, The EU Commission introduced a directive approach on ‘Markets in Crypto-assets’ to regulate trading in crypto-assets and support digital finance in all EU states.
When MiCA is complete and adopted throughout the EU, it will bring standard definitions to the market for digital assets for items like crypto assets, token types (asset-referenced, significant asset-referenced, electronic money, utility), crypto asset services, and service providers that were previously lacking and hampered national policymaking. The government is cautious of the illegal activities that could boom in the virtual market and have therefore adopted measures accordingly.
All EU states have to follow directives that have strict rules to combat money laundering. The EU has also unveiled an action plan to stop the financing of terrorism and money laundering.