Cryptocurrency Regulations: The Rules Across the Globe

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Some countries prohibit cryptocurrencies from being mined like Iran, North Korea, and Russia. However, China has allowed mining cryptocurrency, but only for approved entities; otherwise, it is prohibited. It is a way to prevent currency manipulation and money laundering through the exchange of coins such as bitcoin. It can also be used to provide an additional means of payment outside of fiat currencies. Cryptocurrencies are a decentralized form of currency, and this is what makes them attractive to some organizations like banks. They cannot be controlled by any central authority, so many countries prohibit the mining of cryptocurrencies for this reason.

Cryptocurrencies are a new and exciting form of digital currency, with the total market valuation exceeding $200 billion. Cryptocurrency is growing in popularity and use by people all over the world, but there can be significant regulatory differences from country to country. In this article, we will look at how different countries regulate cryptocurrencies across five key areas: exchanges, ICOs, mining operations, wallets, and trading platforms.

Exchanges are online services that allow users to trade cryptocurrencies for other cryptocurrencies or government-issued currencies like USD, EUR, and GBP. These exchanges are required to register with the government and comply with certain anti-money laundering (AML) and know-your-customer (KYC) regulations. Countries like Japan and Australia have more lax exchanges regulations than the EU which requires customers to verify their identity when using an exchange.

ICO is an acronym for Initial Coin Offering. ICOs are crowdsourced fundraising methods where companies issue new coins or tokens to finance the creation of their projects. This funding can be done through blockchain technology, which allows users to lock away a certain amount of coins to purchase their own tokens. However, this method can be controversial as many see it as a way for hedge funds and other wealthy investors to exploit the public’s hunger for new investment opportunities and reap huge rewards. Singapore, China, and South Korea have banned ICOs in some form or another.

Some countries prohibit cryptocurrencies from being mined like Iran, North Korea, and Russia. However, China has allowed mining cryptocurrency, but only for approved entities; otherwise, it is prohibited. It is a way to prevent currency manipulation and money laundering through the exchange of coins such as bitcoin. It can also be used to provide an additional means of payment outside of fiat currencies. Cryptocurrencies are a decentralized form of currency, and this is what makes them attractive to some organizations like banks. They cannot be controlled by any central authority, so many countries prohibit the mining of cryptocurrencies for this reason.

The European Union is a prime example of regulating digital currencies with its fifth Anti-Money Laundering Directive (AMLD5) which came into effect on June 9th, 2017. The AMLD5 forces cryptocurrency wallets to disclose users’ identities including names, addresses, and national identity numbers. A cryptocurrency wallet is an encrypted digital file that stores users’ cryptocurrency. Users with less than EUR 100,000 in cryptocurrency or foreign currency must also disclose their identities. Exchanges and crypto-to-crypto and crypto-to-fiat exchanges (“altcoins”) are also affected by the AMLD5.

Understanding the Law: US Crypto Regulation and Taxation

Cryptocurrencies are not legal tender in the US, however, their exchanges do fall under federal regulation. Cryptocurrency tokens are defined as “other value that substitutes for currency” by FinCEN and are subject to “anti-money laundering (AML) regulations.” Cryptocurrency income (or losses) is considered taxable by the IRS.

The IRS has stated that bitcoin is a form of property and not currency, therefore the income earned from selling bitcoin is taxable as capital gains. Participating in any Bitcoin-related business or activity in the US is considered illegal money transmitting operation. If money is transmitted to another party without being registered with FinCEN, it will be considered a violation of the Bank Secrecy Act (BSA). Businesses using Bitcoin are required to register with FinCEN and are subject to regulation by state and federal law.

FinCEN considers virtual currencies to be covered under the Bank Secrecy Act (BSA). The Treasury and Fed are required to collect information on virtual currencies. In addition, FinCEN “is responsible for issuing specific guidance relating to anti-money laundering.”

Virtual currency exchangers and administrators are required to register with FinCEN as “money transmitters.” This is due to FinCEN’s guidance or interpretations of the BSA in 2011. The regulations are detailed in the Code of Federal Regulations (CFR) and the Financial Crimes Enforcement Network (FinCEN).

In order to register with FinCEN, an individual or a company must meet certain criteria. First, they must be a US citizen or resident. They must also have their own office separate from their principal place of business as well as a chief compliance officer who is responsible for implementing FinCEN regulations. FinCEN registration also requires the person registering to have an anti-money laundering program in place. This AML program requires that the business must assess their risk of money laundering, including but not limited to:

FinCEN and other federal agencies can review this information at any time. FinCEN can inspect a registered virtual currency administrator’s financial books or records if they have reason to believe that the business is failing to comply with BSA requirements. They will request this documentation if they suspect a violation of the BSA has occurred.

The Legal Status of Cryptocurrencies in Canada

Canada has been fairly proactive in its treatment of digital, virtual, and cryptocurrencies: it was the first country to approve AML-related regulation of cryptocurrency service providers, primarily regulating them under provincial securities laws as money service businesses (MSBs) in order to protect the public. Cryptocurrencies are not legal tender in Canada but can be used to buy goods and services online or in stores that accept them.

According to the Financial Transactions and Reports Analysis Centre of Canada, close to $1 million CAD worth of cryptocurrency transactions take place in Canada every day on average. As such, it has a lot of potential for the development of an ecosystem.

In a 2014 survey by Ernst & Young into virtual currencies in Canada, only five percent of Canadian adults had ever heard about Bitcoin but over half knew about Litecoin, Dogecoin, Ethereum, and Dash.

Currently, the Canadian Securities Administrators (CSA) have stated that cryptocurrency exchanges are not recognized as Canadian exchanges for the purposes of trading securities. However, there is a new initiative taking place known as the “CSE-CESG Joint Working Group”, that brings together Canada’s principal securities regulators (i.e., the British Columbia Securities Commission (BCSC), Alberta Securities Commission (ASC), Ontario Securities Commission (OSC)) and the CSA to provide guidance on how to better serve the needs of businesses in the cryptocurrency space.

New legislation has been introduced by the government of Canada which is currently being considered by parliament. The proposed bill, Bill C-31 (to be known as the “Cryptocurrency Consumer Protection Act”) would regulate cryptocurrencies as a consumer financial product, something that would make them subject to existing securities regulations. Even if this does not come into force, it will still provide some degree of guidance as to how the government sees cryptocurrencies and their associated risks over the coming years.

Due to the anonymity and borderless nature of cryptocurrencies, Canadian banks are beginning to enforce new “know your customer” regulations which are making it more difficult for exchanges and digital currency businesses to obtain business accounts. This has also led to them being disallowed from using existing prepaid credit card programs. In addition, the Canadian government has been looking into the potential of Blockchain technology for e-government services and may be considering a digital $100 note, although this plan is still in its early stages.

About the author

Anwesha Mukherjee

Anwesha Mukherjee is a Digital Media Publisher and freelance writer. She has been working in the publishing industry for over 6 years now, holding various positions at different publishing houses across India. Her work experience includes managing marketing campaigns, content development and website maintenance for various industries including healthcare, IT, finance and education.

She also offers ghostwriting services to help aspiring authors get their book published while maintaining creative control over the project.

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Anwesha Mukherjee

Anwesha Mukherjee is a Digital Media Publisher and freelance writer. She has been working in the publishing industry for over 6 years now, holding various positions at different publishing houses across India. Her work experience includes managing marketing campaigns, content development and website maintenance for various industries including healthcare, IT, finance and education.

She also offers ghostwriting services to help aspiring authors get their book published while maintaining creative control over the project.

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