As cryptocurrencies become ubiquitous, more and more states and regional entities develop legal frameworks for digital assets. Some countries are working on their own regulations, while others turn to FATF (Financial Action Task Force) in search of regulatory guidance. As of November 2020, there are countries with more or less elaborate virtual assets legislation on every continent. Bitcoin regulations are bound up with international AML and CFT laws and reflect the state’s policy on exchanges, ICOs, taxation, mining, trading, digital assets’ status, and more.
Quick footnote. Sure enough, the crypto industry is not limited to Bitcoin, but when it comes to state regulations, people use the terms “Bitcoin” and “crypto” interchangeably. Why does it happen? Well, Bitcoin is still by far the most popular and acknowledged digital coin in the world. It so happens that if Bitcoin is legal on the state level, other currencies are considered to be legal by default. We live at the dawn of the blockchain-related fintech industry and can only hope for more straightforward and clear compliance in years to come.
That said, let’s kick off with crypto regulations in different countries by region.
Europe and Bitcoin Law
The European Union has one of the most elaborate legal frameworks for crypto in the world. Storing, trading, selling, and buying crypto is legal in the EU; however, taxation and exchanges regulations vary from country to country. The Fifth Anti-Money Laundering Directive (introduced in January 2020) brought European crypto industry under strict AML legislation.
Some of the EU members have peculiar local cryptocurrency regulations. For instance, Malta is a very progressive country in terms of Bitcoin law: digital coins are recognized as “a medium of exchange, a unit of account, or a store of value” on a state level. There is no special taxation policy for crypto in Malta, and VAT is not applicable to exchange transactions. Estonia also proved to be a country of innovative approach, recognizing crypto as “a value represented in digital form” and licensing exchanges under strict AML and KYC rules.
As for non-EU members, some of them tread in the EU’s footsteps. The United Kingdom hasn’t deemed crypto a legal tender yet, but the government regulates exchanges: they are required to register with the FCA. Digital assets are partly taxed in the UK, depending on the types of activities and investments. Belarus is another state that welcomes crypto investors, allowing buying, selling, and mining crypto on its territory. However, there is no legal framework for ICOs and crypto exchanges.
Gibraltar (technically not a country but a British overseas territory) elaborated progressive crypto regulations in 2018 — a Digital Ledger Technology Regulatory Framework. It obliges exchanges to register with the Gibraltar Financial Services Commission and meet basic AML requirements. Bitcoin regulations in Russia are a bit confusing but worth mentioning as it is a perfect example of a somewhat chaotic current legislative situation in the industry. Russian parliament passed the law “On Digital Financial Assets” in July 2020, causing a controversial effect: on the one hand, the law gives crypto a legal definition and status, but on the other hand, prohibits using it as a legal tender.
Switzerland adopted a relatively straightforward and investor-friendly crypto policy. Exchanges are fully legal and subject to licencing by FINMA; digital coins are recognized as assets and taxed accordingly. FINMA also issued legal guidelines for ICOs.
The Americas’ Crypto Regulations
Since federal and state authorities in the USA treat crypto differently, there are a lot of uncertainties in the cryptocurrency regulation field. Though digital coins are not considered legal tender, exchanges are recognized by FinCEN as “money transmitters”, but stay in the legal grey area. Meanwhile, the IRS treats crypto as property and taxes it respectively. As if it was not enough, SEC identifies crypto assets as securities. So, it is legal Wild West there in terms of Bitcoin law.
Things are not looking brighter in Canada: the crypto industry is underregulated, leaving room for maneuvering. Exchanges are technically legal and are required to comply with AML rules. Mexico, on the contrary, got serious about crypto regulations and elaborated a decent framework under Central Bank’s supervision. Digital coins were defined as “virtual assets” and required to abide by strict AML laws.
In South America, coherent legislation on crypto is scarce. Digital coins are considered assets in most countries on the continent, except for Bolivia. Within its borders, crypto is completely banned. Ecuador doesn’t authorize Bitcoin or altcoin usage either. Still, its government hasn’t completely banned crypto transactions online yet.
Other countries haven’t given any specific legal recognition to crypto.
Asia and Australia
Even though China is the world’s financial behemoth, storing and trading cryptocurrency is completely banned in the country. Meanwhile, Hong Kong, China’s pain in the neck, grabbed the opportunity to become regional crypto power and started creating a solid legal framework and a licensing system for exchanges. In Singapore, digital coins are not a legal tender, but the cryptocurrency regulations are pretty elaborate. The state recognizes crypto as goods and charges a local VAT analogue, Goods and Services Tax. Exchanges are legal and regulated by the Monetary Authority of Singapore.
Japan has undoubtedly the most nuanced and well-thought crypto legislation in Asia. The state recognizes digital assets as property and taxes them as a “miscellaneous income” (15%-55% rates). Exchanges have to undergo a registration process with Japan’s Financial Services Agency. It imposes rigorous AML/SFT rules on them and demands high-level cybersecurity.
Tensions run high in India, where crypto operations had been banned by Indian Reserve Bank, and then reinstated by the Supreme Court just recently, in March 2020. India’s cryptocurrency regulations are unclear: while crypto is technically illegal, there are a number of working exchanges in the country. South Korea has a favourable climate for crypto — digital financial assets are legal and tax-free at the moment. Australia elaborated a comprehensible virtual asset regulatory policy, declaring exchanges legal and treating crypto as property (subject to Capital Gain Tax).
Bitcoin Regulations in Africa
Africa is yet to join the international crypto legislation club: the overwhelming majority of countries on the continent have next to no legal guidance on crypto. Out of 54 independent states, only a handful has coherent Bitcoin regulations; crypto is completely banned in Morocco, Algeria, Libia, Namibia, Zambia, and Zimbabwe. In Egypt, a religious state legislator prohibited using Bitcoin under Islamic law.
South Africa doesn’t recognize crypto as a legal tender, but attempts to tax it as income and capital gain at the same time. The South African Reserve Bank’s instructions are scarce and controversial. A similar situation has come about in Nigeria, where the state legislators issued a set of legal guidelines for crypto-related projects only to warn the citizens against using crypto a couple of months later.
The lack of CFT and AML legislation in Africa combined with overall instability of African countries’ economies arouse concerns about the future of crypto in the region. Some major players on the digital assets market try to adopt crypto regulations of European or Asian countries; others turn to FATF for guidance. In any case, for now, African crypto industry is regulated from the outside. The rules are enforced mainly by the players themselves as compliance with international law gives them credibility.
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