Cryptocurrency and Blockchain Regulations around the World (Part 2)
In part 1 of this article, we told you about the state of cryptocurrency regulations and taxation in South Korea, Malta, Singapore, and Japan. In the second part, we are going to cover:
- United States of America
- United Kingdom
United States of America
USA has an interesting internal dynamic wherein each individual state seems to be vying for the title of being the most “crypto friendly.” Ohio and Wyoming have taken the forefront when it comes to this. However, for the country as a whole, the federal authorities are confused as to how cryptocurrencies should be defined.
Since the laws governing exchanges vary state-by-state, the federal authorities find it hard to establish a consistent legal approach to cryptocurrency. The Financial Crimes Enforcement Network (FinCEN) doesn’t consider cryptocurrencies to be legal tender but as “value that substitutes for currency.” As such, they consider exchanges to be “money transmitters.” The IRS treats cryptocurrency as “property.”
Regulatory bodies like the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) have cracked down hard on Initial Coin Offerings (ICOs). They have built strict regulations to determine whether a token classifies as security or not.
Taxation: This article provides a detailed breakdown of cryptocurrency tax in the US.
France wants to become one of the leading blockchain countries in the EU. As such, their stance towards cryptocurrency regulations is quite linear in hopes to attract foreign investors to Paris. Bruno Le Maire, the French Minister of Finance, stated that the French blockchain and crypto sectors had full support from the government, adding, “France will not miss the Blockchain revolution.”
One of the most important crypto figureheads, Jean-Pierre Landau aka “Monsieur Bitcoin,” created a working group on January 15, 2018, to help regulate the crypto ecosystem to build a fraud-free and dynamic environment that is investor friendly. As a result, a new ICO framework to help describe tokens and define their rules of conduct for ICOs has been implemented.
Taxation: The French National Assembly recently rejected some crypto-friendly tax amendments. However, the National Assembly does want to reduce crypto tax from 36.2% (19% income tax and 17.2% social contributions) to a flat 30%.
Cryptocurrencies are not considered legal tender in India. The Reserve Bank of India, the country’s central banking institution, passed this circular regarding cryptocurrencies:
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity, and money laundering, among others.
The Reserve Bank of India (RBI) has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. The RBI has banned cryptocurrency exchanges in India.
Taxation: For a trader, earnings from virtual currencies are treated as income from a business. For individual investors, the tax treatment of cryptocurrency continues to operate in the grey zone and is open for interpretation.
Canada has been pretty hands-on with their treatment of of cryptocurrencies. However, according to the Financial Consumer Agency of Canada, “only the Canadian dollar is considered official currency in Canada.” This is why Canada doesn’t treat cryptos as legal tender in Canada. Having said that, the Canada Revenue Agency has taxed them since 2013. While exchanges are legal, the governing regulations varies from province-to-province. At the federal level, Canada treats cryptocurrencies as securities.
Taxation: Canada’s tax laws and rules also apply to cryptocurrencies, and are subject to the Income Tax Act. The Canada Revenue Agency (CRA) “has characterized cryptocurrency as a commodity and not a government-issued currency.” The use of cryptocurrency to pay for goods or services is “treated as a barter transaction.” According to the Financial Consumer Agency, any purchases made via cryptocurrency must be included in the seller’s income for tax purposes. Goods and Services tax also applies to any goods or services bought using cryptocurrency.
Poland’s financial regulator, the Komisja Nadzoru Finansowego (KNF), assured investors back in June 2018, that there isn’t any ban on virtual currency trading. However, KNF plans to regulate cryptocurrencies to prevent money laundering, tax evasion, and terrorist financing by classifying crypto exchanges as “obligated institutions.” The KNF have, however, banned ICOs.
Poland’s largest cryptocurrency exchange platform, BitBay, terminated all activities in the country and moved to Malta. They accused banks in the country of being unwilling to support its business.
Taxation: Crypto-to-crypto transactions performed on the stock exchange or individually are tax-free, however, income derived from selling services, property, and goods are open for taxation purposes. When it comes to crypto miners, those who work for themselves won’t be charged those who work for themselves won’t be charged. On the other hand, miners who work for a company or other individuals are required to pay taxes.
Mongolia has plans to become a cryptocurrency hub. Firstly, with its cool weather and low electricity costs, it has become a choice destination for crypto miners. Miners need cool weather to avoid overheating their mining rigs.
Secondly, the country has announced a partnership with Terra, a blockchain payment system that is backed by exchanges such as Binance and Houbi. This partnership will lead to a peer-to-peer payment system to allow transfer among users of different banks and a mobile payment system.
Montsame, the Bank of Mongolia issued its first-ever digital currency license to Mobicom, the largest mobile phone provider in Mongolia, to issue a virtual currency named “Candy.” Its value is pegged to Mongolia’s fiat currency, the tugrik.
The United Kingdom does not consider cryptocurrencies legal tender. Crypto exchanges in the UK need to register with the Financial Conduct Authority (FCA). FCA stressed that entities which took place in crypto-related activities which fall under existing financial regulations for derivatives (like futures and options) require authorization. FCA is also working with the Bank of England and the Uk Treasury to develop a strategy for dealing with cryptocurrency risks.
Taxation: Her Majesty’s Revenue and Customs (HMRC) has released a detailed report on how it sees crypto assets and how individuals may be taxed on their holdings. The report states that a token is taxed based on its use-case rather than its definition. Investors will need to pay capital gains tax when they sell their coins. Individuals who receive crypto from employers, clients, mining, transaction fees, or airdrops will have to pay income tax and national insurance contributions.
This two-parter should give you a good idea of crypto regulations and taxations around the world. Please keep in mind that the data presented here may be outdated within the next 4–5 months, given how fickle government regulations can be. We advice you to do your own research to get a clearer picture.