Middlemen, banks, government regulations are some of the entities that Bitcoin set out to evade from the very beginning. However, after a decade of growing popularity, cryptocurrency is fast becoming a concern for many governments. Ironically, as the world of cryptocurrency develops, governments have stepped in to regulate this new system of transaction.
If you’re interested in investing in cryptocurrency and blockchain businesses, you’ll definitely need to know about some of these regulations. Here’s a quick guide on different government regulations for cryptocurrency around the world.
Laws governing cryptocurrency varies and it really depends on which state we’re looking at. Additionally, federal authorities in different states also have varying definitions of “cryptocurrency”. In general, cryptocurrencies are not considered legal tender. However, cryptocurrency exchanges are legal and regulations for the exchanges vary by state. In March 2018, the Securities and Exchange Commission (SEC) stated that it’s looking to create security laws for digital wallets and exchanges. It’s fair to say that at this moment, cryptocurrency is still in the grey area of US legislations. In 2014, the IRS regards cryptocurrency as a property and has issued a tax guidance.
India takes a cautious stance towards cryptocurrency. Although regulatory framework has not been enacted yet, the Reserve Bank of India (RBI) has issued a notification that prohibits banks, lenders and other financial institutions from “dealing with virtual currencies”. In 2018, the Hindustani Times reported that the government is in the process of coming up with laws to regulate cryptocurrency trading in India and has “formed a committee to fast track the process”. While the government takes precaution against cryptocurrency, it “will explore the use of blockchain technology proactively for ushering in [the] digital economy” At the moment, crypto currency is still not legal tender in India.
In South Korea, the government takes a rather accepting approach towards cryptocurrency. As of January 2018, cryptocurrencies can be traded from “real-name bank accounts” and cryptocurrency dealers are required to have contracts with banks in regards to trade. To make a deposit into the e-wallet, a crypto-trader must first have an account in the same bank as the cryptocurrency dealer. The bank will then verify the identity of the trader before the trader reports his/her bank account to the dealer. In February 2018, Choe Heung-sik, the chief of South Korea’s Financial Supervisory Service, stated that the government supports “normal” cryptocurrency trading and encouraged financial institutions to facilitate transactions.
The European Union (EU) has come up with quite a number of guidelines regarding cryptocurrency. In 2016, the EU has proposed to bring wallet providers and virtual currency exchange platforms within the Anti-Money Laundering Directive framework. The proposal defines virtual currencies as a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.”
To take advantage of the technological opportunities of blockchain and fin-tech, the EU has come up with an action plan that seeks to advance its economy further. Currently, the EU is working towards a consistent regulatory framework for all its members.
China has chosen to take a stronger stance against cryptocurrency. Chinese regulators do not recognise virtual currencies as tools for retail payments, coins and credit cards. The banking system also does not accept any virtual currencies or provide any relevant services. Additionally, ICOs, irregular sale and circulation of tokens is illegal in China.
In New Zealand, ICOs and tokens that are not financial products and “will still be subject to general consumer protection laws in New Zealand, for example prohibitions against misleading and deceptive conduct and fraud or other criminal conduct.” The Financial Markets Authority (FMA) stated that businesses based in New Zealand, which provide “financial services” related to cryptocurrencies need to copy with the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
In a report in January 2018, the Inland Revenue Department (IRD) stated that people should “treat money made buying and selling cryptocurrencies in the same, or similar, way they would money made buying and selling gold. That is, pay tax on the profit made by selling a currency, only if that currency was bought with the intention of resale.”
At the moment, governments are still coping with the rise of cryptocurrency and most of them are taking a more precautionary stance towards it. Not many countries embrace cryptocurrency as readily as South Korea, however, most governments are interested in the potential of blockchain, cloud servers and FinTech. Since cryptocurrency is still relatively new, it would take a while before consistent and clear regulations are applied.
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