Cryptocurrencies are still a relatively new concept. Although Satoshi Nakamoto invented it fifteen years ago, it is still a novelty for many people and businesses. It causes many to be skeptical and distant from using it.
However, in time, many are becoming more open to the concept and many are starting to realize the positive aspects of using and investing in cryptocurrencies. With the development of crypto, there is also a need for structured and well-defined laws that would constitute the rules for using cryptocurrencies. Let’s see how various countries worldwide cope with the task.
Why crypto regulations are important
Consumer care is one of the main reasons crypto regulations are needed. Customers need protection from fraud as the crypto market is full of fraudulent schemes. Preventing insider trading and market manipulation is essential to keeping fairness in any domain where cryptocurrencies are used. Taxation is also an important aspect as the government should decide on the amount of taxes cryptocurrency users should pay and whether that tax should be more, less, or equal to the one with fiat payment users.
Moreover, cryptocurrencies are used in various domains, one of the most popular being gambling. To be clear, when we say gambling, we mean online gambling. This is an area with the highest demand for using cryptocurrencies. There is a vast variety of online casinos and it is often very difficult to choose. Many people like to change things up and experiment with several online casinos and in that case, GameStop can be very frustrating and limiting. This is one of the reasons casinos not on Gamestop in the UK are very sought after since no limitations are being set on their gambling activities. Most importantly, all these casinos are licensed and reputable, therefore, customers can feel safe and protected while using their services.
United Kingdom
The British Parliament acknowledged cryptocurrencies as financial means in October 2022. A year later, the standing UK law concerning finances, called the Financial Services and Markets Bill, was changed to include cryptocurrencies. Essentially, the existing law was changed only as an extension to include crypto payments into the game. Of course, now some laws exist solely for regulating cryptocurrency. For instance, Know Your Client (KYC) law is one such example. KYC is significant as it provides adequate protection for people in making business deals. It enables one to verify the client’s identity and their financial profile. Anti-money laundering (AML) and the combating of the finance of terrorism (CTF) are also important acts in the world of using crypto.
All crypto exchanges must comply with the reporting obligations of the Office of Financial Sanctions Implementation (OFSI). Crypto companies must report any person or business that is under the suspicion of committing a financial sanctions offense.
Japan
Modern and high-tech as always, Japan does not disappoint, even now. They accepted cryptocurrencies as legal property under the Payment Services Act (PSA) and all crypto exchanges in Japan must register with the Financial Services Agency (FSA) and comply with AML/CFT obligations. FSA handles both crypto and yen transactions and people are free to buy and invest in cryptocurrencies. Sharing customer information between two crypto exchanges has become limited, this measure is taken to help prevent money laundering in the country. In 2020, Japan formed something called the Japanese Virtual Currency Exchange Association (JVCEA) where all crypto exchanges are members of the association.
China
China is one of the strictest countries when it comes to crypto regulations, possibly even the most strict. The People’s Bank of China (PBOC) banned crypto establishments from operating claiming they enable public financing without approval. China bans crypto exchange, trading, and mining. Chinese law became more strict in 2021 when they issued a statement banning crypto mining, a few months later in September, cryptocurrencies were completely banned.
Brazil
This country introduced crypto regulations quite recently, in 2023. At first, it was introduced as a bill near the end of 2022, after that, it was formed into a law that allows the use of cryptocurrencies as payment methods. Interestingly enough, Bitcoin is not legal tender in Brazil. Brazilian Central Bank was appointed to handle and supervise all crypto transactions. This was also declared in 2023. They also have a way of managing scams related to cryptocurrencies. The Crypto assets Act is a regulatory body in charge of scam prevention regarding virtual assets. It states clear rules of what constitutes criminal practice and how such behavior is penalized. The main focus is on fraud and money laundering.
The Central Bank governor stated he would like to impose stricter rules when it comes to digital currencies since their usage is becoming more and more widely used, i.e. there was a 45% rise in cryptocurrency imports in the first half of 2023 which roughly translates to 7.4 billion USD. The rise is partly happening due to people no longer only investing in cryptocurrencies, but they are starting to use them more as a payment method.
European Union
When it comes to the EU, crypto laws and regulations are quite advanced, and using crypto for investing and paying is encouraged. Of course, particular laws do differ from country to country, but the overall situation is favorable. However, taxation laws are quite drastically different. The rate fluctuates between zero and almost fifty percent, depending on each country itself. The fact that the EU has already had six Anti-Money Laundering Directives (AMLD) states that they have been actively involved in regulating the law about cryptocurrencies. Since 5AMLD and 6AMLD have come into effect, KYC and CFT obligations have become quite tightened making users safe and protected when using digital currencies. On top of that, the European Commission issued a statement of Markets in Crypto-Assets Regulation (MiCA), contributing to user protection by introducing new license agreements. MiCA was invented in 2022 and established in 2023. This caused crypto service to obtain an operating license. It is considered a tool to help the authorities track crypto payments in order to prevent fraud and usage of cryptocurrencies for terrorism-related activities.
Basically, any company that has a business of trading cryptocurrency will not be able to operate without a legitimate license. Moreover, starting in 2026, all service providers will be obligated to have the names of all senders and beneficiaries for each transaction, regardless of the amount. Also, any e-wallets that hold more than a thousand euros will need to succumb to a thorough verification process. One of the reasons for these strict regulations is the collapse of FTX in 2022, which was one of the largest crypto exchanges in the world. This made people feel they needed certain protection layers if and when such an event reoccurs.
South Korea
Many countries improved the laws and regulations regarding cryptocurrencies in 2023. As already stated, one of the reasons for the stricter laws must be the crash of FTX that happened a year before. This country made big improvements in crypto regulation when it issued the Virtual Asset Users Protection Act. Record keeping to increase transparency is one of the main objectives of the act. It is planned that the financial authorities of South Korea publish a detailed guide for listing digital assets in 2024.
India
Similar to China, India also had an official ban on cryptocurrencies until 2020, however, it was lifted. It would naturally follow that some law would be passed after the ban was lifted and it was planned to issue a Cryptocurrency and Regulation of Official Digital Currency Bill, however, it faced many delays and the situation was left unmanaged for some time. The aim of the bill would also be for the Reserve Bank Of India to create an official digital currency.
Singapore
Just like the UK, Singapore treats crypto as property, but not legal tender, as regulated by the Monetary Authority of Singapore (MAS). They announced the regulation of stablecoin issues in the country which would require all issuers to honor certain criteria. The ones that manage to fulfill the conditions would be granted the label “MAS-regulated stablecoin”. This will represent a certain guarantee for consumers in the sense of security.
An interesting fact about Singapore is that long-term capital gains are not taxed here. This makes it a very attractive destination for all crypto-related activities. However, the country does tax companies that use crypto transactions, treating their gains as income.
Australia
Cryptocurrency is considered legal property in Australia and, therefore, is subject to taxes. Cryptocurrency exchanges are allowed to operate having registered at the Australian Transaction Reports and Analysis Centre (AUSTRAC) and having met certain other legal requirements. In 2019, a legal constraint was introduced banning privacy coins, which are cryptocurrencies that keep anonymity while transactions flow through the network. In 2021 the Australian treasury announced a regulatory framework that would help both users and the government keep better track of all crypto-related activities. However, it was moved to be released in 2024. If the framework is approved, there will be a year-long trial period for transition. There were also plans to launch a central bank digital currency (CBDC), however, no news have been published regarding these plans.
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