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Crypto Regulations Globally: Where We Are And Where We Are Going

Recent regulatory developments suggest a willingness to give regulatory certainty in this area. These developments include the publication of the EU’s Markets in Crypto-Assets (MiCA) provisional agreement and the US’s Framework for International Engagement on Digital Assets.

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Regulations on cryptocurrencies and exchanges

Financial regulation’s primary goals are to promote financial stability, transparency, investor and consumer protection, and a level playing field for all market participants. Because so many activities in this developing industry are unregulated, policymakers find it difficult to keep an eye on hazards. These dangers to financial stability could quickly spread throughout several nations.

According to Anton Palovaara, founder, and chief editor at end-user-focused Tradingbrowser.com, there has been an emergence of numerous other blockchain initiatives over the years and many of them are crypto exchange operators. These initiatives draw millions of investors to the trading of digital assets, leading to several boom and bust cycles in the cryptocurrency market.

How the major countries comply

Blockchain introduced cryptocurrencies as a means of payment, and the trade and investment worlds have been benefactors ever since. 

The cross-sectoral and international scope of crypto restricts the utility of national strategies. Nations are taking various approaches, and the rules and regulations may prevent national policies from fully addressing every aspect of these assets.

United Kingdom

The UK does not accept cryptocurrencies as currency. However, exchanges are legal with FCA registration requirements. Cryptocurrencies cannot be compared to traditional investments or payments due to their unique identity. Their taxability is dependent on the actions and parties involved. Cryptocurrency gains or losses, however, are subject to capital gains tax.

The UK government aims to continue considering a broader regulatory approach to crypto assets in HM Treasury recommendations released in 2021. Consequently, the government has proposals for legislation to combat misleading crypto asset promotions as of January 2022. The aim is to bring cryptocurrency ads into line with mainstream financial advertising,

United States

The use of cryptocurrencies in the USA is not legal tender. Nevertheless, exchanges are allowed. However, state regulations may differ. The US is making headway in creating federal cryptocurrency legislation, although finding a consistent legal approach at the state level is challenging.

According to the US Treasury, cryptocurrency rules are vital to combat domestic and international criminal activity. To impose data collection obligations on cryptocurrency exchanges and wallets, FINCEN proposed new law in December 2020. The rule was to compel wallet owners to provide identification. This identification was when transmitting more than $3,000 in a single transaction. Also, exchanges were mandated to file suspicious activity reports (SAR) for transactions over $10,000 by the fall of 2022.

Japan

The country recognizes cryptocurrencies as property and is lawful. Japan has the most progressive cryptocurrency regulations in the world. The Payment Services Act recognizes Bitcoin and other digital currencies as legal property (PSA).

Japanese Exchanges are legal, but one needs to register with the Financial Services Agency. Cryptocurrency exchange laws are progressive in the country. Although there are still favorable conditions for cryptocurrencies in Japan, the FSA is beginning to focus more on further regulation due to mounting AML worries.

Europe

The EU has legalized cryptocurrencies. However, the Union does not allow member nations to create their own. Exchange rules differ between member states. Cryptocurrency taxation varies as well. Similarly, nations impose capital gains tax rates ranging from 0 to 50% on cryptocurrencies’ profits.

Exchanges must register with their authorities in some member nations. These include Italy’s Ministry of Finance, Germany’s BaFin, and France’s Autorité des Marchés Financiers (AMF). These regulators’ authorizations and licenses enable passport exchanges to function under a single system throughout the bloc.

The European Commission released a set of legislative recommendations in July 2021 that would affect virtual asset service providers (VASP) all over the Union. The proposals demand gathering data on the senders and receivers of bitcoin transfers. These regulations would expand the scope of the transfer of money rules (TFR) to include all VASPs in the EU.

China

Exchanges are illegal in China since cryptocurrencies are not recognized as legal cash in the country. In 2013, the People’s Bank of China (PBOC) outlawed financial institutions’ handling of Bitcoin transactions. The PBOC took this prohibition further by outlawing ICOs and domestic cryptocurrency exchanges in 2017.

There are ways around the exchanges by accessing specific foreign platforms and websites that China’s internet firewall misses. Recent statements by government officials favoring blockchain technology have led to speculation that China plans to become a leader in the digital currency area.

There is no sign that China intends to lift or loosen its prohibition on cryptocurrencies anytime soon. China’s central bank has been working to introduce an official digital currency for years. In September 2021, the bank did e-CNY digital money pilot tests in several cities. It will be possible to pay for goods, bills, transportation fares, and tolls using the e-CNY token in the future.

Australia

The country recognizes cryptocurrencies as property, and are lawful. Similarly, exchanges are legal, but one must register with AUSTRAC. The nation has progressively implemented cryptocurrency legislation. Australia’s government declared cryptocurrencies lawful in 2017, citing Bitcoin and other cryptocurrencies with similar properties.

The proposed framework reflects an effort to place Australia at the forefront of the international drive to rein in digital companies. It would allow consumers to safely buy and sell crypto assets in a regulated environment. Australia stated in December 2021 that it would create a new licensing system exclusively for bitcoin exchanges, with a 2022 comment period.

Singapore

The city-state has a friendlier stance in comparison to some of its neighbors. In Singapore, cryptocurrencies are not legal tender. Exchanges are legal but one must register with the Singapore Monetary Authority.

Despite cryptocurrencies not being regarded as legal cash, Singapore’s tax administration views Bitcoins as goods. Thus, they must charge Goods and Services Tax on them. The Monetary Authority of Singapore (MAS) made it clear in 2017 that it did not have the authority to regulate virtual currencies. In turn, the administration would do so if digital tokens were deemed securities.

To further align its viewpoint, MAS will probably issue further regulations. New financial sector rules with stricter AML/CFT requirements for bitcoin service providers. Also, better technological risk management standards in financial institutions may be among these legislations.

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