Peculiarities Of Cryptocurrency Regulation In The World. Part I
While the popularity of digital currencies reflects the attitude of society to the sphere, the cryptocurrency regulation shows the government's point of view. Cryptocurrency was created as a decentralized alternative to fiat currencies. At the same time, fiat money has existed for hundreds of years, and the issue of their legal regulation has long been resolved. Each country has a national currency — an official payment instrument, while the state of crypto assets still remains undefined.
Cryptocurrency market regulation is a difficult issue because it touches upon several aspects of the legal field. There are no international standards, and each country independently determines what cryptocurrency is — an income, an asset, a security or a currency.
This raises a number of questions:
- How will cryptocurrencies be taxed?
- What will be the mechanism of cryptocurrency transfer (including international money transactions) in the legal field?
- What forms of criminal punishment will be used in the crypto sector?
- How will crypto companies be licensed? In particular, crypto exchanges and companies that accept crypto investments since the regulation of ICO is also important.
At the moment, many governments demonstrate a positive attitude toward the crypto sphere, for example, the UK or Estonia. There are countries with the opposite approach, the most prominent examples are South Korea and China with its policy of prohibiting any kind of crypto activity. However, many regions are still cautious about everything related to cryptocurrencies, which is actually not bad. For instance, it is not yet clear how Russia is going to regulate the cryptocurrency market, but the current situation gives hope to local investors.
But today we will focus on the countries that are loyal to cryptocurrencies. Specifically, we will talk about the development of the cryptocurrency market in Japan, the United Kingdom, Switzerland, Estonia and Canada, which set an example for the whole world.
Top-5 countries with the soft regulation of cryptocurrency
Japan is one of the few countries that recognize cryptocurrencies as a means of payment along with fiat money. As a result, Japan takes the first place in the world by the daily volume of bitcoin transactions.
Japanese authorities recognized cryptocurrency as a means of payment in 2017, but some companies found the regulator's conditions too rigorous. For example, HitBTC, one of the largest crypto exchanges in terms of the daily trading volume, suspended activities in Japan.
A cryptocurrency exchange platform can be considered as legal only if it is registered with the Japanese Financial Services Agency and operates in accordance with its terms and conditions. The Japanese government is also working on the regulation of ICO projects. On the one hand, Japan has already created conditions for the full circulation of cryptocurrency, but on the other hand, some organizations cannot handle the strict regulation implemented by the Japanese system.
Switzerland has a reputation of the most crypto-friendly country in the world. Here, bitcoin is an official means of payment. Moreover, in the end of 2017, the president of the Swiss National Bank expressed the opinion that bitcoin was more than just the currency. The activities of cryptocurrency exchanges in the country are also permitted if a company is registered with the Swiss Financial Market Supervisory Authority (FINMA).
The loyalty of Swiss authorities contributed to the creation of Crypto Valley (in keeping with the name used for Silicon Valley in California), which is the second name of the Swiss city of Zug that has managed to become the European crypto capital.
The policy of the cryptocurrency regulation in Switzerland is clear enough, and it is definitely not as strict as the Japanese one.
The United Kingdom is a popular place for crowdfunding campaigns because of the lack of the cryptocurrency regulation rules. Bitcoin is not recognized as an official means of payment here, but crypto investors estimate the situation in the country as favorable.
Cryptocurrency exchanges are allowed to perform trading activities in the UK, if they are registered with the Financial Conduct Authority. The registration requires a company to comply with the policy to combat money laundering and the financing of terrorism.
However, Her Majesty's Treasury considers this measures as insufficient. The Ministry of Finance is concerned about the anonymity of users who use cryptocurrency platforms. Therefore, in the near future, there may be a tightening of the regulation policy for cryptocurrency traders and companies in order to minimize tax evasion.
Estonian authorities have created a favorable climate for everyone who wants to work in the crypto sphere.
This is facilitated by several factors:
- The absence of bureaucracy during the company registration.
- Low taxes.
- Opportunities for non-residents.
This means that anyone can register a company in Estonia and work in the cryptocurrency area with the loyal conditions of the taxation system. In late 2017, the Estonian government announced plans to issue its own national cryptocurrency Estcoin. This is a sign that Estonia is not going to oppose the progress unless it contributes to the economic growth.
In 2014, Canada was the first country to adopt the digital currency laws. Even though, cryptocurrency is not a legal means of payment here, the regulation in the country is quite clear and friendly to crypto and blockchain companies.
In the future, some Canadian laws, which are currently applicable to securities, will likely be applied to cryptocurrencies as well (this was the statement of the Canadian government in 2017). After that the situation may change, but so far, Canada is the third country that is loyal to the crypto sphere (after Estonia and Switzerland).
However, not all countries are that loyal. Even though, the world is heading to the digital progress, there are governments that do their best to hinder or delay the regulation of cryptocurrency.
Read about the cryptocurrency regulation in the USA, Russia, Australia, Singapore, South Korea and China in the Part II.