Short Overview of What to Expect
As you can probably figure out that the wild nature and volatility of cryptocurrencies will not go unnoticed, and countries are doing their best to implement laws and regulations to keep them in check. Below, we have made a short table of some of the world countries along with their standing on three major factors concerning the cryptocurrency market there. We will give you the situation regarding Initial Coin Offerings (ICO), Crypto Exchanges and digital currency legality in each location. It is noteworthy, that most countries in the world allow ICOs no matter the regulation they apply to them. A large number don’t have a firm law regarding crypto coins and assets as well, because they are not considered a legal tender. We will be going over each country and its specifics in the coming sections.
|Country||ICO Regulation||Exchanges Regulation||Cryptocurrencies Legality|
|United States||Legal; Regulated||Legal; Regulated Individually by State||Legal; Not Considered Legal Tender|
|Canada||Legal; Regulated||Legal; Regulated||Legal; Not Considered Legal Tender|
|United Kingdom||Legal; Rarely Regulated||Legal; Regulated||Legal; Not Considered Legal Tender|
|European Union||Legal; Regulated Individually by Jurisdiction||Legal; Regulated||Legal; Not Considered Legal Tender|
|Malta||Legal; Regulated (if not Utility Token)||Legal; Regulated||Legal; Not Considered Legal Tender|
|Switzerland||Legal; Not Regulated (financial laws may apply)||Legal; Not Regulated (financial laws may apply)||Legal; Not Considered Legal Tender|
|India||Legal; Regulated||Legal; RBI Banking Ban; Regulated||Legal; Not Considered a Legal Tender|
|South Korea||Illegal; Regulated||Legal; Regulated||Legal; Not Considered a Legal Tender|
|Japan||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|Australia||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|Singapore||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|Latin America||Depends on Territory||Depends on Territory||Depends on Territory|
|Estonia||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|Gibraltar||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|Luxembourg||Legal; Regulated||Legal; Regulated||Legal; Not a Legal Tender|
|China||Illegal; Banned||Legal; Strictly Regulated||Legal; Not Considered a Legal Tender|
Ever since the large boom in the crypto market in 2017 countries have started to tighten the leash around the necks of Bitcoin and the other altcoins within their local markets. They understand the risk that digital assets that cannot be traced pose. From our research, this is especially true on the level of national security as the use of cryptocurrency has the potential to fund terrorist organisations. Another use that crypto coins like Bitcoin have is online gambling. Many countries are noticing an increase in online casinos that accept such digital currencies, but we will talk about that later. If you are interested in what regulations are in place for that market, then check out our worldwide gambling laws article. Now, let’s dive deeper into the methods and laws the world uses.
United States of America
The United States is known as one of the world leaders when it comes to adoption and use of cryptocurrencies and blockchain technologies. It is most certainly a great environment for investors as they can purchase not only Bitcoin but over 40 other altcoins and digital assets. Let’s start by talking the assets themselves – they are not considered a legal tender but are allowed in the country in general. They are something like a grey area right now, so there are no strict regulations for cryptocurrencies. The IRS considers them as a property with value, meaning that taxes unfortunately apply.
Crypto exchanges are considered as money transmitters because tokens are also considered as currency substitutes. Of course, the way they are regulated depends on the state (jurisdiction) and the Securities and Exchange Commission (SEC). The way companies and projects gain funding through Initial Coin Offerings (ICOs) is also legal in the country, but it can be strictly regulated depending on the jurisdiction it is held at or marketed for. The US SEC ruled that ICOs will be treated as the sale of security, unlike crowdselling.
The situation is the opposite when it comes to the northern neighbour of the United States – Canada. Due to the cryptocurrency boom and the advent of ICOs, the securities law has seen more activity than ever before. The government recognises digital assets as commodities and not as a legal tender, hence they need to be reported to the CRA and taxed. Although initial coin offerings remain legal, there are serious regulations surrounding them.
Any issuer selling tokens during such an offering will have a very rough time arguing that they are in fact selling utilities, commodities or licenses of a platform or product that is yet to be developed. Of course, there can be a relief from the securities regulators if the issued coins/assets are treated as securities.
The situation with cryptocurrency exchanges in Canada is more interesting as they are considered legal but are going through string monitoring. This is due to the Anti-Money Laundering Regime that was passed in 2014, making entities trading in virtual currency register with the Financial Transactions and Reports Analysis Centre of Canada. This also affects cryptocurrency exchanges outside of the country leading to many of them removing the Canadian Dollar from their list of accepted fiat currency.
Although there are no specific laws passed for cryptocurrencies, meaning there is no regulation, they are not considered a legal tender. According to the HMRC, crypto assets are unique and can’t be compared to conventional investments or payments. This means that the way they are taxed really comes down to the activity and party involved. It is worthy to note that virtual currencies are subject to capital gains tax. Since there are no universal criteria in place yet by the FCA, ICOs will be reviewed on a case by case basis. All companies that are involved in virtual currencies and cryptocurrency exchanges have to register with the Financial Conduct Authority (FCA) or obtain an e-license if possible.
China is maybe the most hostile country for cryptocurrencies as the laws surrounding them are very strict. The government has completely banned initial coin offerings that are based on digital currency or assets (even securities). The whole idea of cryptocurrencies is met with scepticism in China, even though the government is a supporter of the technology behind them and the People’s Bank of China has its own digital currency project that is backed by fiat money. Financial institutions are banned from making cryptocurrency transactions and overall exchanges are also not legal in China. You can use digital currency but there are strict regulations and hassle around it.
As a whole, Europe is still a greyish area for cryptocurrencies as the legislation surrounding them is still developing. The most recent significant change that was made came with the finalisation of the Fifth Anti-Money Laundering Directive. It defines the virtual currency as a digital representation of value that is not issued or guaranteed by a central bank or a public authority. The directive continues that the digital assets are not necessarily attached to an established currency and do not possess the status of legal currency or money but is accepted as a means of exchange. In short, cryptocurrencies are still considered legal, but not as a legal tender. Initial Coin Offerings are also still legal, but their regulation has been left in the hands of each jurisdiction. Crypto exchanges are also considered legal, but further legislation might either change that status or apply further regulation.
Malta is famous for its progressive approach towards cryptocurrencies and the underlying technology, boasting as the leading country in crypto regulation. While not considered a legal tender, digital currencies are regulated and recognised as a medium of exchange, a unit of account or a store of value, if it’s not a utility token, of course. There are no specific tax regulations being applied to them and VAT is not charged as well. Both cryptocurrency exchanges and initial coin offerings are legal in Malta but are regulated mainly by the Virtual Financial Assets Act and three other bills. The Malta Digital Innovation Authority was also established and, in the future, will be the main governing authority regarding cryptocurrency policy and blockchain technology.
The Swiss government is notorious for being open-minded regarding the blockchain technology and cryptocurrencies alike for a long time. In Switzerland, while not considered a legal tender, cryptocurrencies are considered as assets that need to be declared on one’s annual returns and are subject to the country’s existing wealth tax scheme. Both initial coin offerings and exchanges are also legal, but financial laws may apply depending on the situation.
Much resembling the government of China, India’s outlook on cryptocurrencies is not that positive. Digital currencies are not considered a legal tender and are strictly regulated, making it very difficult for them to operate there. It was stated by the Central Board of Direct Taxation, that any person or organisation that makes profits from Bitcoin and other altcoins would have to pay taxes on them. The RBI has also made a banking ban on dealing with cryptocurrencies, making it extra hard for people to obtain them with fiat money. Both ICOs and exchanges are still legal in India, but regulations surrounding them are quite harsh.
South Korea is another country where regulations surrounding digital currencies are strict. There is a domestic ban on initial coin offerings, and it will not be lifted any time soon. The Financial Services Commission advised that ICO investment is a high-risk activity and reported that some ICOs were held abroad while illegally raising money from Korean investors. Cryptocurrencies and their exchanges, on the other hand, are not completely considered illegal but are still regulated, needing a government registration, and not considered a legal tender. On a more positive note, in July 2019, the city of Busan was declared as a regulation-free zone for blockchain technology development.
Digital currencies are legal and regulated in Japan, but not considered as a legal tender by the government. The crypto market there is still a grey area and future legislations are being decided. Initial coin offerings are also legal and regulated depending on the case. Japan’s Cryptocurrency Business Association (JCBA) has released earlier this year its recommendations for future ICO regulations as well as new laws surrounding crypto exchanges. There will be changes made to the Financial Instruments and Exchange Act and Payment Services Act, where there is an additional proposal, where crypto exchanges may be required to secure a source of funds in order to repay customers in the case of hacking attacks.
The country has been making progressive steps towards implementation of cryptocurrencies in the last two years. Back in 2017, the Australian government declared cryptocurrencies legal and stated that Bitcoin and the other altcoins should be treated as property and are subject to the Capital Gains Tax only. Exchanges are legal in the country and from a report made in 2018 by the Australian Transaction Reports and Analysis Centre, the more robust regulations surrounding cryptocurrency made exchanges operating there register with the government. Any unregistered exchanges will be facing criminal charges and financial penalties. ICOs are also legal but face the same strict regulations and will be subject to scrutiny under the general consumer law and the Corporations Act.
The city-state has taken a more friendly position towards cryptocurrencies compared to the rest of the world. Digital assets are not considered a legal tender but are still regulated and considered as “goods”, which means that the Goods and Services Tax applies to them. Both exchanges and trading of crypto are legal in the country as well. Although the Monetary Authority of Singapore (MAS) has taken a softer approach towards cryptocurrencies throughout the years, in 2018, MAS announced that further legislation will be made surrounding them and digital currencies will be meeting the same AML and CFT measures as fiat money.
Latin America has different viewpoints on cryptocurrencies depending on the territory, creating a vast legislative spectrum. In most counties like Mexico, Argentina, Brazil, Venezuela and Chile, digital currencies are widely accepted and considered legal. There, these cryptocurrencies are treated as assets and are subject to income tax or capital gains tax depending on the region. On the other end of the spectrum, Bolivia and Ecuador have issued a ban on cryptocurrencies, except for government-issued SDE tokens. There are not many regulations surrounding the crypto exchanges in Latin America and are considered legal, except for Bolivia and Ecuador as we mentioned earlier. Mexico is the only territory that has made changes to their anti-money laundering acts that require exchanges to register and report to the government. As far as we can tell, ICOs are also legal in most countries that are friendlier towards crypto assets.
Cryptocurrencies in Estonia are not considered a legal tender, but they are treated as “value represented in digital form”. This means that digital assets are subject to VAT and any other financial taxes that may apply. The main regulators of crypto assets in the country are the Financial Intelligence Unit of Estonia and the Anti Money Laundering and Terrorism Finance Act. Exchanges are also legal but after the changes in 2017, there are strict regulations surrounding them. They are required to register with the government and to obtain two licenses from the FIU – the Virtual Currency Exchange Service License, and the Virtual Currency Wallet Service License. There are no strict rules for ICOs.
While not considered a legal tender, cryptocurrencies are well regulated in Gibraltar. Same goes for crypto exchanges, which are legal to operate within the well-defined regulatory framework that the government have created. There are no taxes applied to digital currencies and exchanges are only required to pay a 10% corporate income tax, which is quite good. The Digital Ledger Technology Regulatory Framework was introduced back in 2018. According to it, all cryptocurrency exchanges working on the territory of the country need to register with the Gibraltar Financial Services Commission (GFSC). ICOs are legal in Gibraltar and the ones carried out within the DLT framework are being monitored.
The general direction that the Luxembourg government is taking towards cryptocurrencies is progressive. There are no specific regulation laws concerning digital assets, but they are not considered a legal tender. The Financial Minister has advised that due to the widespread use of cryptocurrencies should be accepted as means of payment for goods and services, but further changes will be coming in the future. Crypto exchanges are regulated by the Commission de Surveillance du Secteur Financier (CSSF) and both them and businesses dealing with cryptocurrency need to obtain official licenses. ICOs remain legal and don’t have specific regulations when it comes to digital assets, but the government are warning the public regarding the risk surrounding the cryptocurrencies.
As you can see that while there are different approaches towards the growing popularity of cryptocurrencies and some countries are even doing their best to adopt the technology behind them. There are two things that you can notice are shared between all governments, which are that digital assets are never treated as a legal tender and that exchanges are mostly legal, with some exceptions or strict regulations. The future for the cryptocurrencies in different countries can only be speculated about as while they are regulated and, in some places, banned, the world is starting to adopt the underlying blockchain technology.
Cryptocurrency Online Casinos
Except for carrying out financial transactions, cryptocurrencies like Bitcoin can be used for online gambling as well. Bitcoin casinos are becoming more and more popular around the world as an alternative way to gamble for players that wish to keep their financial information private. You can find any type of casino game from slots to table games that accepts numerous cryptocurrencies. If this piques your interest, you can check out our top UK Bitcoin casino sites and find your next favourite casino.
Of course, not only the UK is enjoying an increase in Bitcoin gambling popularity. There are many other countries around the world that are also experiencing an increase in crypto gambling activities and needs. The ones that we would like to bring to your attention are Canada and India. From our professional experience and research, we can advise that these two countries, along with the United Kingdom, are one of the top territories for Bitcoin casinos. If you are interested in that, then we are more than happy to invite you to see our Bitcoin casino gambling in India and Bitcoin online casinos in Canada articles.
With so much information and the dryness of the topic, you might have some questions. This is why we decided to create this section, where we will answer the top 5 questions that our readers may ask after reading the article.
What is cryptocurrency?
Cryptocurrencies are internet-based mediums of exchange, which are mostly using the blockchain (distributed ledger) technology. They use cryptographical functions to carry out financial transactions providing transparency, immutability and complete decentralization from any other authorities or banks. Some digital currencies can even offer security and anonymity.
What are cryptocurrency regulations and laws?
Due to the volatile nature and decentralization of cryptocurrencies, in order for countries to protect their economy, laws and regulations must be placed. With them, the risks of illegal activity, scams and tax avoidance can be lowered to a minimum. There are many risks that come with investing in cryptocurrencies as well as trading with them, hence why some countries like China are so restrictive in their laws.
How will regulation affect cryptocurrency?
There are a lot of speculations on how regulations will affect cryptocurrencies. The people that support digital assets and their decentralisation are against strict laws that may actually do the opposite and centralise the market. Only time will tell how the whole crypto sphere will change as countries are further adopting the technology and doing their best to monitor and control transactions.
What is the tax law for cryptocurrency?
Although not considered a legal tender in any part of the world, cryptocurrencies are accepted as some kind of assets or stores of value in many countries. Hence, some financial laws will apply to them, especially some form of taxation, such as VAT, corporate income tax or capital gains tax.
Why it's important for law enforcement to understand cryptocurrency?
Cryptocurrencies have fast transactions, anonymity and cryptography. Due to them, many countries fear that a malicious party can easily fund an illegal organisation, illegal operation or even a terrorist organisation. This is why in many territories around the world, there are anti-money laundering acts and government departments that monitor and do their best to prevent such events from happening.