Cryptocurrency was once little known and considered involved in illegal funding activities. Now, cryptocurrencies have gained global popularity, more and more people invest and trade in cryptocurrencies. As cryptocurrencies gain popularity, the legal regulations related to them also attract attention.
While most countries ban cryptocurrency mining due to energy consumption concerns, countries’ behavior towards cryptocurrencies is generally different. For example, El Salvador accepts bitcoin as legal tender, while China bans private cryptocurrencies.
In this article, the author presents the legal framework of some countries in the world for cryptocurrencies, exchanges, and regulations in the future.
|US||Not considered fiat money||Legal|
|Canada||Not considered fiat money||Legal, must be registered|
|Singapore||Not considered fiat money||Legal, must be registered|
|Australia||Hợp pháp, Xem là tài sản||Legal, must be registered|
|Japan||Hợp pháp, Xem là tài sản||Legal, must be registered|
|Korea||Not considered fiat money||Legal, must be registered|
|China||Not considered fiat money||Illegal|
|India||Not considered fiat money||Legal regulations are under review|
|UK||Not considered fiat money||Legal, must be registered|
|Switzerland||Legitimate, considered a payment in some cases||Legal, must be registered|
|EU||Legal||Regulations vary between countries|
|Malta||Not considered fiat money||Legal, must be registered|
|Estonia||Not considered fiat money||Legal, must be registered|
|Gibraltar||Not considered fiat money||Legal, must be registered|
|Luxembourg||Not considered fiat money||Legal, must be registered|
|Latin America||Regulations vary between countries||Regulations vary between countries|
In the US, cryptocurrencies are not considered legal tender. Cryptocurrency exchanges are licensed, and each state has different regulations.
Although the legal regulations vary from state to state, the United States has made great strides in developing federal cryptocurrency legislation. The Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrencies as fiat money. Instead, it considers cryptocurrency exchanges as a place for money transfers on a crypto-token basis and as “a substitute for money.”
The IRS does not consider cryptocurrency legal tender but defines it as “a digital form that has value and functions as a medium of exchange, a measure of value, and/or a means of exchange.” store of value” and issued tax guidance accordingly.
Cryptocurrency exchanges are legal in the US and are covered by the Bank Secrecy Act (BSA). In practice, cryptocurrency trading service providers must register with FinCEN, implement an anti-money laundering/terrorist financing (AML/CFT) program, store transaction histories, and submit reports to the competent authorities.
Meanwhile, the US Securities and Exchange Commission (SEC) considers cryptocurrencies securities and comprehensively applies securities laws to exchanges and digital wallets. In contrast, the Commodity Futures Trading Commission (CFTC) views bitcoin as a commodity and allows cryptocurrency derivatives contracts to be traded.
In June 2019, FINCEN required cryptocurrency exchanges to comply with the “Travel rule” and collect and share information about the originators and beneficiaries of cryptocurrency transactions. FinCEN treats cryptocurrency exchanges like traditional money transfer companies and applies the same regulations, including those in the Bank Secrecy Act – an updated version of the “Travel rules.” In October 2020, FINCEN regulated the “Travel rule,” which indicates that cryptocurrency exchanges will be subject to new compliance regulations.
The US Treasury Department has emphasized the need to establish regulations for cryptocurrencies in the future. In December 2020, FINCEN proposed a new cryptocurrency regulation regarding data collection for wallets and exchanges.
The regulation is expected to be implemented in the fall of 2022. It will require exchanges to submit suspicious activity reports (SARs) for transactions over $10,000 and require wallet owners to identify themselves when depositing more than $3,000 in one transaction.
The Department of Justice continues working with the SEC and CFTC to develop future cryptocurrency regulations that will provide more effective consumer protection and streamlined regulation. In 2021, the US Government turned its attention to stablecoins to address the potential dangers associated with the growth of these tokens’ value and recommended the need for new legislation.
Congress also debates crypto service providers in 2021, with new rules in the government’s infrastructure bill. Under the new regulations, exchanges are considered brokers and are subject to relevant AML/CFT reporting and recordkeeping obligations.
In China, cryptocurrencies are not considered legal tender. Cryptocurrency exchanges are illegal.
The People’s Bank of China (PBoC) banned financial institutions from handling bitcoin transactions in 2013 and banned initial coin offerings (ICOs) and cryptocurrency exchanges in the country in 2017. According to the 2020 Amendment of the Civil Code, the government considers cryptocurrencies as property to determine inheritance. In June 2021, China banned all cryptocurrency mining, followed by a complete ban on cryptocurrencies in September 2021. The new regulation has banned the use of all cryptocurrency exchanges (foreign and domestic).
So far, there is no sign that China will lift or relax the ban on cryptocurrencies. However, the Chinese Government’s support for blockchain technology shows that China desires to take the lead in developing the cryptocurrency space. In September 2021, China launched a digital yuan for future payments.
The UK has a rather specific approach to cryptocurrencies. Although the UK does not have a particular law on cryptocurrencies, cryptocurrencies are not considered fiat money, and legal exchanges must be registered with the FCA.
The HMRC has issued a summary of the tax treatment for cryptocurrencies, where they are identified as having a unique identity. So they cannot be compared to conventional investments or payments. The “taxability” of cryptocurrencies depends on the activities and stakeholders. However, gains or losses on cryptocurrencies are subject to capital gains tax.
After leaving the European Union (EU) in 2020, the UK will translate 5AMLD and 6AMLD regulations related to cryptocurrencies into domestic law. Accordingly, exchanges must be registered with the FCA and comply with AML/CFT regulations. In general, the UK crypto regulations will not differ much from the EU countries in the short term, but there will be a specific difference. For example, in January 2022, the UK Government considered classifying cryptocurrencies as a form of digital asset and subject to regulations related to “financial promotion.”
In Vietnam, the Government has assigned the Ministry of Finance to preside over developing a legal framework for virtual assets and virtual currency. Therefore, it is essential to learn the regulations related to cryptocurrencies and cryptocurrency exchanges and the expected future regulations of countries to have appropriate behavior for Vietnam.
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