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Investopedia has surveyed the regulation of the crypto sector worldwide and presented the current scenario in 11 countries and regions. The report was released on the 20th of this month, with the latest updates to date.
In short, the analysis shows that while cryptocurrencies are assuming an increasingly significant place in the global investment landscape, each country takes different approaches when it comes to regulating crypto assets. Or at least tries to, because there are still many open questions.
The report highlights that, despite cryptocurrencies having existed since 2009, governments and regulators are still working to define how to manage their use globally. In other words, regulation is still being researched, developed and implemented around the world.
There is consensus that consumers and businesses must be protected from fraudulent activity. Consequently, preventive measures must be implemented to combat the illicit use of cryptocurrencies. Many countries are making progress in this regard, but it is a slow and, in many cases, controversial process.
Australia
According to Investopedia’s survey, Australia classifies cryptocurrencies as legal property and subjects them to capital gains taxes.
The country allows exchanges to operate in the country, as long as they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and comply with anti-money laundering and anti-terrorism regulations.
Exchanges cannot, however, offer privacy coins, that is, cryptocurrencies that preserve anonymity and do not make the money flows on their networks clear.
Canada
Cryptocurrency is not legal in Canada, but the country has been more proactive than others when it comes to regulating crypto assets. Canada was the first country to approve a Bitcoin ETF, with several trading on the Toronto Stock Exchange.
Cryptocurrency trading platforms must register with regional regulators in the country. Canada classifies crypto investment companies as money services businesses and requires them to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
China
Crypto companies are not allowed to operate in the People’s Republic of China. According to the People’s Bank of China (PBOC), such operations facilitate public financing without approval.
In addition, China banned Bitcoin mining in May 2021. And in September of the same year, cryptocurrencies were banned entirely.
South Korea
Cryptocurrency exchanges and other virtual asset service providers must register with the Korea Financial Intelligence Unit (KFIU), a division of the Financial Services Commission (FSC).
All privacy cryptocurrencies have been banned in the country.
In 2023, the Act on the Protection of Virtual Asset Users came into force, which appointed the FSC as the regulatory body for this sector.
United States
According to Investopedia, the United States announced a new framework in 2022 that paved the way for greater regulation of the industry. The regulatory bodies are the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The ongoing clash between regulators, investors, traders and the crypto industry shows that the country is still evolving in this process. Two important milestones were the approvals of the first spot ETFs for Bitcoin (in January) and Ethereum (in July).
However, recently, SEC Chairman Gary Gensler noted that while certain spot ETFs have been approved, Bitcoin has not been approved or endorsed. “As I have stated before, most crypto assets are investment contracts and therefore subject to the federal securities laws,” he emphasized.
According to him, “the approvals do not signal a willingness to enact listing standards for crypto-asset securities. Furthermore, they also indicate nothing regarding the status of other crypto-assets under the federal securities laws or the current state of non-compliance of certain crypto-asset market participants with the federal securities laws.”
India
According to Investopedia’s report, India neither legalizes nor penalizes the use of crypto assets. Meanwhile, there is no regulation.
The country’s Finance Act, 2022, defined virtual digital assets as property and set out tax requirements for levying taxes on income derived from them.
Japan
The country recognizes cryptocurrencies as legal property under the Payment Services Act (PSA). Crypto exchanges are allowed to operate in the country as long as they register with the Financial Services Agency (FSA) and comply with anti-money laundering and counter-terrorism obligations.
There is an association of crypto exchanges in the country, of which all are members. The country treats trading profits generated from cryptocurrencies as income, and taxes investors according to the type of income.
There is a prospect of regulating the sector in order to implement rules that prevent exchanges from being used to launder money.
United Kingdom
In 2022, the British Parliament recognized cryptoassets as regulated financial instruments.
While investors do pay taxes on capital gains resulting from crypto transactions, the rates depend on the type of activity and those involved in the trades.
There are specific requirements for cryptocurrencies, linked to KYC and anti-money laundering and counter-terrorism protocols. And trading crypto derivatives is prohibited.
This September, the UK Parliament introduced the Property (Digital Assets, etc.) Bill. The bill aims to clarify the legal status of crypto assets, including cryptocurrencies, non-fungible tokens (NFTs), and other tokenized assets.
This bill represents the first time in British history that digital assets will be formally recognised as personal property under English and Welsh law.
Singapore
As in the UK, cryptocurrencies are classified as property but not legal tender. The Monetary Authority of Singapore (MAS) licenses and regulates exchanges under the Payment Services Act (PSA).
In part, the country is considered a safe haven for cryptocurrencies because long-term capital gains are not taxed. However, the country does tax companies that regularly trade in cryptocurrencies, considering the gains as income.
Stablecoins need to be approved by MAS to receive a seal that distinguishes them from unregulated stablecoins.
Token providers must not advertise their services to the public.
European Union
According to Investopedia’s survey, cryptocurrencies are legal in much of the European Union. However, exchange governance depends on each member country. In addition, taxation also varies according to each country, ranging from 0% to 48%.
New anti-money laundering directives have recently come into force, making KYC/CFT obligations more stringent.
MiCA (Markets in Crypto-Assets Regulation) sets guidelines for crypto industry activity, introduces new licensing requirements, and increases consumer protections. It came into force in 2023 and helps regulators monitor (and prevent) the use of crypto assets for money laundering and terrorism.
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