Bitcoin has not only set the pattern for cryptocurrencies, but it has also become the ultimate cryptocurrency standard. Despite its volatility, Bitcoin has been labeled the best-performing asset class of the decade. Its returns surpassed all other assets by a factor of 10, with gains of more than 800%.
Many cryptocurrency enthusiasts believe that these investments will result in the creation of a new generation of digital currency millionaires (or billionaires). The blockchain technology behind Bitcoin and other cryptocurrencies has been identified as a game changer for a wide range of sectors, from shipping to healthcare to entertainment. Distributed ledgers enable previously unimaginable sorts of business opportunities by eliminating middlemen. Investing in Bitcoin is an opportunity for those who believe in the power of cryptocurrency and Blockchain technology. But how can we assure that these technologies are not abused? This is where crypto regulations come into play. Let’s take a deeper dive into cryptocurrency regulations and how they vary around the world.
Regulation is the enforcement of rules by the government or important agencies, including penalties for violation. When these regulations are applied to cryptocurrencies, they turn into crypto regulations. The goal of cryptocurrency regulation is to safeguard investors, prohibit fraudulent activity in the crypto arena, offer worthwhile guidance on how companies can function in the ecosystem, and handle problems associated with cryptocurrencies. Regardless of the widespread adoption of cryptocurrencies by several investors, some remain unconvinced about crypto investments.
However, during a recent analysis, crypto experts concluded that cryptocurrency regulation will increase trust in crypto for those who are pessimistic about it. Several countries have taken steps to regulate the use of cryptocurrencies, which is considered a crucial step for expanding the crypto economy. If a balanced regulatory structure is in place, cryptocurrencies and other digital assets can begin to achieve widespread acceptance. Let’s take a look at how these cryptocurrency regulations vary around the globe.
With the ever-changing crypto landscape, it is crucial to remain up-to-date. To help you steer through various cryptocurrency regulations across the globe, we have put together a list of countries along with their latest crypto regulations. Let’s check them out.
In India, cryptocurrencies are unregulated, but the government declared in Budget 2022 a flat 30% tax on earnings from cryptocurrency transactions, as well as a 1% tax deducted source (TDS). According to reports, India's finance ministry is working on a complete goods and services tax (GST) regime that could apply to cryptocurrency transactions. Also, the Indian government intends to resolve its position on the legality of cryptocurrency by the first quarter of next year in order to become Financial Action Task Force (FATF) compliant.
In 2013, the People's Bank of China (PBOC) prohibited financial institutions from conducting Bitcoin transactions, and in 2017, it went even further by prohibiting ICOs and domestic cryptocurrency exchanges. Although local cryptocurrency exchanges are prohibited in China, workarounds are feasible by using international platforms and websites that are not blocked by China's internet firewall. There is no sign that China wants to abolish or relax its cryptocurrency prohibition anytime soon, but recent remarks by government officials embracing blockchain technology have fueled speculation that China aspires to become a leader in the digital currency sector.
The Government of Estonia does not recognize cryptocurrencies as legal money, but rather as "value represented in digital form." As a result, it defines them as digital assets for tax reasons yet exempts them from VAT. In Estonia, cryptocurrency exchanges are legal and operate within a well-defined regulatory framework that incorporates stringent reporting and KYC requirements. Cryptocurrency exchanges must get two licenses from the Financial Intelligence Unit of Estonia under current legislation: the Virtual Currency Exchange Service License and the Virtual Currency Wallet Service License.
In South Korea, cryptocurrencies are not regarded as legal cash, and exchanges, while legal, are subject to a stringent regulatory system. Crypto taxation is quite vague because they are deemed neither currency nor a financial asset. Due to this, cryptocurrency transactions are tax-free, ‘as of now’. The South Korean government presented laws in March 2021 requiring cryptocurrency investors to use the exact name on their digital wallet accounts as they do on their bank accounts. Also, cryptocurrency exchanges are required to share information with banks to verify the user’s identity.
Although cryptocurrency is not a legal currency in Canada, it can be used to purchase goods and services online or in facilities that accept it. Canada has taken a somewhat aggressive approach to cryptocurrency regulation, largely regulating them under provincial securities laws. Since 2013, the Canada Revenue Agency has taxed cryptocurrencies, and these crypto transactions are subject to Canadian tax rules. Following a 2019 modification to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), crypto exchanges in Canada are generally regulated in the same way as financial organizations, with the exact due diligence and reporting prerequisites.
Cryptocurrency exchanges and trading are allowed in Singapore, and the city-state has adopted a more welcoming stance on the topic when compared to some of its regional neighbors. Despite the fact that cryptocurrencies are not legal money, Singapore's tax administration considers cryptos to be "goods" and hence imposes Goods and Services Tax (Singapore's equivalent of Value Added Tax). Singapore's financial regulatory authority, the Monetary Authority of Singapore (MAS), believes in regulating the cryptocurrency ecosystem to monitor any threats linked with crypto-related activities, such as money laundering and terrorist funding, while also ensuring that it does not hinder innovation.
In Australia, cryptocurrencies and exchanges are legal, and the country has been assertive in implementing cryptocurrency regulations. In 2017, the Australian government announced cryptocurrencies to be legal, particularly stating that Bitcoin (and cryptocurrencies with similar qualities) should be recognized as property and liable to Capital Gains Tax (CGT). Since 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has mandated Australian-based exchanges to register, identify and verify users, keep records, and adhere to government AML/CFT reporting duties. Unregistered cryptocurrency exchanges are punishable by both criminal and financial sanctions.
Japan now boasts the world's most advanced regulatory atmosphere for cryptocurrencies, and the Payment Services Act recognizes Bitcoin and other digital currencies as legal property (PSA). In December 2017, the National Tax Agency declared that cryptocurrency earnings should be classified as "miscellaneous income," and investors should be taxed accordingly. Japan's cryptocurrency exchange policies are equally progressive. Japan formed the Japanese Virtual Currency Exchange Association (JVCEA) and the Japan STO Association in 2020. The JVCEA includes all exchanges, whereas the Japan STO Association includes five major Japanese financial institutions. Both agencies collaborate to give guidance to unregulated exchanges and to encourage compliance.
The attitude to cryptocurrency rules in the United Kingdom has been cautious. Although there are no cryptocurrency regulations in the United Kingdom, cryptocurrencies are not regarded as legal cash, and exchanges must be registered. Cryptocurrency exchanges in the United Kingdom must register with the Financial Conduct Authority (FCA) and meet AML/CFT reporting requirements. While no unique provisions are made for exchanges, FCA emphasizes that firms engaged in crypto-related activities must comply with the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017(MLRs).
Although cryptocurrency regulations might vary around the world, the need for a cryptocurrency license remains mandatory for any business concerned with cryptos. Let’s look at why you need a cryptocurrency license.
If you intend to launch a cryptocurrency exchange or a cryptocurrency-related business, you will definitely need a cryptocurrency license in order to operate without facing any legal actions against you or your business. Even if your crypto firm is registered in a country where a crypto license is not mandatory, you will encounter some restrictions without a crypto license, especially if you are planning to establish a global presence. Furthermore, an unauthorized company will have difficulty opening an account with a foreign bank. A license will increase your company's trustworthiness in the eyes of your partners, financial regulators as well as users. A licensed cryptocurrency company can freely trade crypto for fiat currency, exchange one cryptocurrency for another, manage clients' digital money, perform transfers from one crypto wallet to another, accept crypto payments for products and services, function as a middleman, and the list goes on.
Crypto regulations and licensing vary from one country to another. Each country has its own standards for licensing cryptocurrency operations. Different nations have different state financial obligations and application processing timeframes. Let’s take a look at the steps involved in the process of applying for a crypto license.
Step 1: Choose a country and establish your company there.
Step 2: Open a business account with a reputed bank.
Step 3: Examine the relevant documents to prepare the paperwork.
Step 4: The regulatory authorities examine if the company meets the required standards.
Step 5: Pay all obligatory taxes and fees.
Step 6: Get your crypto license, which allows your trading platform to provide cryptocurrency-related services.
Depending on the country, application timelines vary from two to six months. When deciding where you want your cryptocurrency firm to be registered, you must carefully examine the country's AML regulations.
No matter how much of an experienced or professional trader one is, developing cryptocurrency-related solutions that wholly align with any given country’s cryptocurrency regulations and licensing requirements is quite an intricate process and requires a profound understanding of cryptocurrency as well as legal conditions related to it. This is where we come in. As a highly acclaimed crypto exchange development company, Clarisco offers end-to-end crypto-based solutions and services. Get an all-inclusive solution that includes a crypto exchange license, which will expand the prospects for your crypto trading platform. Experience the vast world of cryptos with our ground-breaking crypto solutions today.