An Overview of Crypto Regulations Around the World

Crypto regulations around the world may vary due to legal systems, economic priorities, political climates, and the need for consumer protection.

author avatar
Jay Crypto

Blogger

Last updated May 30, 2023 at 04:49 PM

Posted May 30, 2023 at 01:39 PM

Crypto Regulations

In the span of a few years, cryptocurrencies have grown from digital novelties to trillion-dollar assets, disrupting the traditional financial system. As the popularity and usage of cryptocurrencies increase, governments around the world are trying their best to somehow govern these digital assets. While some countries have accepted cryptocurrencies as a new paradigm of economic transactions, other countries have banned them considering them a threat to traditional financial systems and stability. in the past few months, there have been a number of important regulatory changes.

Last month, the European Parliament approved MiCA, a set of comprehensive regulations for digital assets which focuses on protecting investors and financial stability as well as allowing innovation in the crypto sector. Later, Ukraine announced that it will follow the same rules while South Korea carried on with its own crypto-related rules and regulations.

Crypto regulations around the world

Let's take a look at how the world's largest countries have established their regulatory frameworks to govern cryptocurrencies.

I. United States

The United States has adopted a hot and cold strategy in regulating crypto; different financial agencies such as the Department of Treasury, Securities and Exchange Commission, the Internal Revenue Service, and the Financial Crimes Enforcement Network are figuring out how to govern cryptocurrencies. So far, the government finds itself divided into two extremes: some people in Congress want the crypto industry to thrive and grow freely without any restrictions; other congressmen want it to be properly regulated and monitored like any other financial asset.

The United States government has also allowed each state to set its own crypto-related rules and regulations. For example, Wyoming is considered the most favorable state for crypto lovers while New York is known for the strictest rules for the cryptocurrency market in the country.

II. India

India has a population of over 1.3 billion, and 11.5% of its residents own cryptocurrencies. With more than 157.6 million crypto holders, India is at the top of the list in terms of most crypto holders in the world.

crypto regulations around the world

India has not only refused to regulate crypto but once banned it completely. The Reserve Bank of India (RBI), the country's central bank, imposed restrictions on banks and financial institutions dealing with cryptocurrencies. While the Supreme Court of India lifted the ban in 2020, the government still holds a hard stance toward the cryptocurrency market. The government and the central bank consistently warn the public to avoid crypto trading and they have even issued warnings of imprisonment of 10 years for the individuals involved in crypto trading and transactions.

III. Canada

Cryptocurrencies are legal in Canada but they do not qualify as legal tender. However, all trading platforms, individuals, and businesses must comply with rules and regulations. Canada became the first country to approve a Bitcoin exchange-traded fund (ETF), allowing traders to trade on the Toronto Stock Exchange. In 2014 the Canadian government declared that cryptocurrencies like Bitcoin should be treated as commodities for tax purposes. The regulatory landscape further developed in 2017 when the Canadian Securities Administrators (CSA) released guidelines classifying certain types of crypto tokens as securities, subjecting them to securities laws.

IV. El Salvador

El Salvador has established itself as the first country to accept Bitcoin as legal tender with no cryptocurrency tax and is planning to develop a "Bitcoin City" powered by geothermal energy in an effort to draw in global investment. However, this decision is continuously criticized by financial institutions such as the IMF and World Bank due to the volatile and unstable nature of cryptocurrencies and their impact on the environment. Nayib Bukele, a business owner and president of El Salvador, believes that adopting cryptocurrencies can attract foreign investment, boost economic growth, and facilitate remittances from Salvadorans living abroad.

V. Japan

Japan is another country with a clear and strict regulatory framework for cryptocurrencies. All the crypto exchanges must comply with and follow the traditional AML/CFT and other regulations. Cryptocurrencies are regulated under the Payment Service Act (PSA) which defines crypto as crypto assets (not virtual currency) used for paying unspecified persons. Japan formed the Japanese Virtual Currency Exchange Association (JVCEA) in 2020 and required every exchange to be a member of it. From the taxation point of view, Japan considers profits generated from crypto as miscellaneous income and taxes it accordingly.

VI. Australia

Cryptocurrencies and crypto exchanges are legal in Australia and are subject to Capital Gains Tax (CGT) under the category of legal property. All the exchanges are allowed to operate freely in the country after registering themselves with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and following some standard rules.

VII. Singapore

Cryptocurrency is legal in Singapore; however, it is not considered legal tender. Cryptocurrencies are regulated by Monetary Authority of Singapore (MAS) and all crypto transactions and exchanges operate under the Payment Service Act (PSA) of 2019. It is mandatory for all exchanges to implement AML and KYC verifications to prevent illicit activities such as money laundering, terrorist financing, and other financial crimes.

Countries where crypto is illegal

There are some countries where crypto is totally illegal and governments have imposed strict bans and regulations to restrict the use, trading, or ownership of cryptocurrencies.

I. Afghanistan

Afghanistan had no clear crypto-related rules and regulations. However, when the Taliban took control over the country in 2021, they completely banned all crypto activities.

II. Algeria

In 2018, The Algerian Ministry of Finance took a firm stance against crypto and banned crypto trading and holding.

III. Bolivia

In 2014, the Central Bank of Bolivia declared crypto illegal.

IV. Egypt

The Central Bank of Egypt issued a ban on cryptocurrencies in 2018, stating that cryptocurrencies are a risk to Egypt's financial stability due to their unregulated nature.

V. China

China banned cryptocurrencies in 2021 to prevent financial crimes and maintain financial stability.

Conclusion

Regulating cryptocurrencies is a slow and controversial process and many countries are still finding ways to regulate them. While over-regulation of crypto can lead to certain drawbacks, crypto regulations are also somewhat necessary to prevent illicit activities such as money laundering, scams, extortion, and tax evasion.

Share on

  • Copy link

Tags