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The State of Cryptocurrency Regulation Around the World

August 14, 2018


The State of Cryptocurrency Regulation Around the World

The State of Cryptocurrency Regulation Around the World

When Bitcoin and many other cryptocurrencies were introduced, they were touted as decentralized alternatives to the existing banking system. However, the conventional banking system has been in existence for hundreds of years, and different governments around the world heavily regulate it. Will the digital currencies be put through the same regulations? If cryptocurrencies are to be genuinely decentralized (i.e., without central authority), how will governments regulate the industry? If they can’t, what alternatives will they consider? What would be the effect of their actions on the cryptocurrency markets? To get more involved in these cryptocurrency markets, take a look at CredoEx, an cryptocurrency exchange which offers a set of cryptocurrencies with power, practical use cases. 

These and many other questions will be answered below. Here is an outline of the state of cryptocurrency regulation in 10 prominent countries:

Cryptocurrency regulations in the United States

Given its status as one of the most influential countries in the world, financially and otherwise, it comes as no surprise that the United States is a frontrunner in cryptocurrency-related activities (the U.S. handles the second largest volume of Bitcoin transactions worldwide, behind Japan). What may be surprising, however, is how relaxed the U.S. is towards cryptocurrencies—there are no laws that outwardly ban their use/exchange.

Yes, the SEC views some tokens as securities and insists on applying securities’ laws to them. Despite this, the use of cryptocurrencies in the country grows stronger and notable brands like Microsoft, Wikipedia, Reddit, Whole Foods, Intuit among many others accept Bitcoin as a means of payment.

Currently, the US Treasury Department is working on ways “to make sure that they (cryptocurrencies) are not used for illicit activities” and in this regard, strict regulations may be put in place sometime in the future (Source: CNBC). However, it is improbable that the use of cryptocurrencies will be banned in the United States.

Cryptocurrency regulations in Japan

Nearly half of the daily volume of Bitcoin transactions originate from Japan, making it the largest market for Bitcoin (and cryptocurrencies) in the world. Japan is one of the few countries in the world that accepts Bitcoin as a legal tender. While cryptocurrency activities in the country are well regulated, unlike most other countries, the regulations are delineated, applied across the nation, and the organizations that oversee cryptocurrency activities are highly effective.

Furthermore, cryptocurrency exchange platforms are legal in Japan, as long as they are registered with the Japanese Financial Services Agency and they operate in adherence to regulations. Japan makes it seem like they are liberal towards cryptocurrencies but in reality, what they did was create a system in which only genuine cryptocurrencies and exchanges can exist and thrive.

Cryptocurrency regulations in China

Some years ago, China had one of the biggest cryptocurrency markets in the world, was home to the most significant crypto exchanges, and had a large population of crypto traders. Sometime in late 2017; however, the Chinese government cracked down on ICOs, banning the fundraising practice and ensuring that new cryptocurrencies could no longer be launched in China. Platforms that allowed digital currencies to be traded and exchanged were also given weeks to shut down their operations and were subsequently kicked out.

These days, the trading of Bitcoin in China is illegal, and there is a ban to ensure that residents do not have internet access to anything that pertains to cryptocurrency trading. These actions make China the strictest country in the world as far as cryptocurrencies (and the regulations that govern them) are concerned.

Cryptocurrency regulations in Russia

Russia’s stand on cryptocurrencies is neither here nor there, creating uncertainty as to whether the country will regulate heavily as China did, remain relatively nonchalant like the United States, or set up clearly outlined regulations and policies like Japan. In late 2017, the President of the Central Bank of Russia, Elvira Nabiullina suggested that since the Russian Federation does not regard cryptocurrencies as a foreign currency and a means of payment, there should be no need to regulate it (Source: Bitcoin Magazine).

On the other hand, the Russian Deputy Minister of Finance around the same time, Alexei Moseev, asserted that payments in cryptocurrencies are not entirely legal, while at the same time admitting that since no regulations exist at the time, a legal loophole exists.

Based on further comments from the Russian President; however, it is likely that Russia will soon lay down laws that regulate cryptocurrency-related activities in the country.

Cryptocurrency regulations in Switzerland

In a general sense, Switzerland has a reputation of being forward-thinking and revolutionary. This attitude extends to cryptocurrencies, and the Swiss government is arguably the most crypto-friendly in the world. Bitcoin is regarded as legal tender, and as long as they are registered with the Swiss Financial Market Supervisory Authority, cryptocurrency exchanges can operate legally in Switzerland.

This has made the country a hotbed for cryptocurrency and blockchain-based companies, and some miles south of Switzerland’s largest city, the town of Zug has been nicknamed “Crypto Valley,” a cryptocurrency version of America’s Silicon Valley.

The regulations and policies that govern the use and exchange of cryptocurrencies in Switzerland are very clear (as clear as in Japan, but not as strict) and late last year, the President of the Swiss National Bank said that he regards Bitcoin as more of an investment than a currency.

Cryptocurrency regulations in Singapore

Over the past few years, Singapore has grown to become a favorite destination for cryptocurrency companies looking to launch their ICOs. Nearly 300 ICOs have been launched from this country with relative success—11 ICOs launched there were able to raise funds in excess of $10 million.

Despite all of this, Singapore does not regard cryptocurrencies as legal tender, and the Monetary Authority of Singapore warns that the public should “act with extreme caution and understand the significant risks they take on if they choose to invest in cryptocurrencies” (Source: MAS Official Release). Exchanges that intend to operate in the country need to register with/adhere to the regulations provided by the MAS (Monetary Authority of Singapore).

Cryptocurrency regulations in the United Kingdom

Cryptocurrencies are not legal tender in the UK, and while cryptocurrency exchanges are allowed to operate, they must first register with the Financial Conduct Authority and are subject to the same anti-money-laundering and counter-terrorism standards that traditional financial institutions are. This has not reduced the acceptance and use of digital currencies in the nation, however, and the UK remains a favored destination for new ICOs looking to launch their projects.

In the future, Her Majesty’s Treasury, the United Kingdom’s finance ministry, has plans to end the anonymity enjoyed by cryptocurrency traders in the UK, claiming that it allows some people to get away with tax evasion and money laundering practices.

Cryptocurrency regulations in Estonia

In some ways, Estonia is leveraging cryptocurrencies more than any other country in the world, and it is believed that digital currencies contributed significantly to the country’s booming economy. Cryptocurrency companies are not subject to regulations, and while exchanges have to be registered, the process is quite quick and straightforward. Combine this with low taxes and the fact that non-residents can open a business in the country, and it becomes clear why many new ICOs are cropping up in Estonia.

As a matter of fact, in late 2017, Estonia announced plans to launch their state-sponsored ICO, Estcoin, becoming the second country to do so (after Venezuela).

Cryptocurrency regulations in Canada

After Estonia and Switzerland, Canada has the most cryptocurrency-friendly regulations and policies. While digital currencies are not regarded as legal tender in the country, Canada’s crypto regulations are simple, transparent, and very easy to understand. In June 2014, Canada became the first country to pass a law on digital currencies.

In August 2017, the Canadian Securities Administrators announced plans to (potentially) apply the same laws enforced to Canadian securities to cryptocurrencies and “provide market participants with guidance on analyzing these requirements.”

Cryptocurrency regulations in South Korea

When China banned cryptocurrency exchanges and prohibited the launching of ICOs in 2017, South Korea provided refuge to the traders and the exchanges. However, the respite was only temporary; by late 2017, the South Korean government had banned local firms from trading Bitcoin futures. Some months later, in January 2018, the country rolled out regulations that caused widespread panic and kick-started a massive sell off in the cryptocurrency markets. One of the rules was: anonymous accounts could no longer trade cryptocurrencies.

As it stands, exchanges can still operate in South Korea, but they must be registered with South Korea’s Financial Services Commission and adhere to their regulations.

The Takeaway

Most countries do not have an official stance on Bitcoin. As the years go by, new regulations may start to appear. On average, more countries are accepting of cryptocurrencies than there are countries that oppose it. This bodes well for the future growth and continued acceptance of the industry, and in the years to come, with more people adopting cryptocurrencies as a viable payment system, governments may begin to see the potential it possesses. To see an example of cryptocurrencies being adopted for a practical use case, take a look at BitBounce, a service that lets you charge people you don’t a fee to email you.