Crypto Platforms — Legal Regulations in Europe and CIS Countries
From Ancient Roman Law to Magna Carta to Cryptocoins. Who knew that the law had such a long way to go?
Structure and clear legal regulations are what law is admired and appreciated for by many. However, the emergence of the cryptocurrency market has rattled the foundation of the legal system and left it unshielded to the realities of the crypto world. While technology runs halfway around the globe, the legal system is putting on its running shoes.
It is a Red Queen contest: everyone has to keep running fast just to keep standing still. In this review, we will focus on the state of the legal regulations of the cryptocurrency exchanges and platforms in European and CIS countries.
EUROPE
The European Union’s main concern is that cryptocurrency will be used to finance illicit activities, such as terrorism and money laundering. That is why it will require cryptocurrency platforms to conduct proper due diligence on customers and report any suspicious transactions. This protocol is also known as Know Your Client (KYC). The EU wants to implement measures to ensure compliance with KYC and AML, as well as other measures to control the cryptocurrency market including platforms and exchanges next year. There is no deadline, but the directive is more likely to be turned into a national law in 2020. As of the current regulations, the European Union prohibits its members to introduce its own cryptocurrency. It also gives de facto legality to a crypto-fiat and a fiat-crypto exchange. According to the recent data, about 4 percent of cryptocurrencies’ daily volume is traded in Euro.
Although the United Kingdom wants to withdraw from the EU, its plan matches the EU’s grand strategy. For example, the Treasury of the UK stated that the UK officials are “working to address concerns about the use of cryptocurrencies by negotiating to bring virtual currency exchange platforms and some wallet providers within anti-money laundering and counter-terrorist financing regulation.”
Switzerland has kept a progressive attitude towards a cryptocurrency regulation and its government has more liberal views towards the crypto market compared to the EU. Jörg Gasser, who is a state secretary at the Swiss finance ministry, said that they want to achieve a healthy steady growth of the ICO market while keeping intact the integrity of the traditional financial markets. Furthermore, the Swiss has set up an ICO team to develop legal regulations that are compatible with both the traditional financial institutions and the emerging cryptomarkets.
Belgium regulates cryptocurrency the same way it regulates digital currency. Germany is close to granting tokens the same status as it has granted to private money, and Sweden equals cryptocurrency to traditional fiat money.
Furthermore, France and Germany will collaborate on a proposal how to most effectively regulate the bitcoin cryptocurrency market. Central Bank in France called Bitcoin a highly speculative coin that is prone to high market volatility. They decided that the virtual exchanges and wallets shall be under the “Anti-Money Laundering Directive”. The directive will grant jurisdiction to the authorities to investigate individuals, exchanges and wallets. The authorities have liberty to choose their own cases to investigate.
Estonian government, however, has one of the most comprehensive and favourable regulations of the cryptocurrency sphere. Companies that deal with virtual currencies need to apply for one of the two types of license depending on the type of an exchange and features of an electronic wallet they offer. The operating licenses are issued by the Estonian Financial Intelligence Unit. Crypto companies will be regarded Financial Institutions in all the relevant respects and tax purposes. Taxation of virtual currency transactions will depend on the nature of the transaction itself. Furthermore, there is a legal framework put into place that regulates exchanges of fiat to crypto, crypto to crypto, and crypto to fiat. Legal regulations also oversee activities of the firms authorised to conduct virtual currency exchanges in Estonia. Interestingly enough, the framework allows companies and ICOs registered in Estonia to provide services in other countries and still be regulated by the Estonian legislation.
CIS COUNTRIES
CIS countries are not that tech savvy or legally advanced as European countries, however, there is nothing more inspiring than creating rules for a new game in town.
In Tajikistan, for example, a usage of cryptocurrency is not regulated by government and government condemns its use. The government considers cryptocurrency an incentive for terrorist activities as well as drugs and money laundering due to the anonymity of the users.
According to Moldavian official regulations, business owners can receive payments only in national currency, however, there are ways to pay with bitcoins by relying on a third party to exchange bitcoins to Leus. There are no regulations that control bitcoins or exchanges, and thus, they are neither legally allowed nor prohibited.
In Kyrgyzstan, its national bank warns people about the risks of using cryptocurrency instead of offering them regulations and guidance. The main concern is that cryptocurrency cannot be regulated by government and government cannot enforce vendors and sellers to accept cryptocurrency as a valid payment option. However, although usage of cryptocurrency is not regulated, it is not punishable under the law either.
Armenian government wants to legalize mining and introduce a lenient legislation to regulate mining. Before and up to December 31, 2023 mining activity will not be taxable. Furthermore, people who are in the cryptocurrency mining business will be granted privileges and can access tax, duty and other exemptions.
Belarus has legalized bitcoins, mining activities and considers buying bitcoins not a business activity and does not require tokens to be declared as a taxable income. Belarus introduced The Digital Economy Development Ordinance that will be a comprehensive regulation for blockchain based businesses, ICOs and smart contracts at national level.
In Russia, a legislation is being proposed that can control and legalize cryptocurrency with a few limitations and exceptions. More detailed information will be available before March 2018. However, many analysts predict that cryptocoins will be considered finance assets. As of today status of cryptocoins is in a “legal vacuum”.
In October, members of Ukrainian parliament proposed a legislation in regards to legalization of a cryptocurrency in the country. If passed, this new legislation would introduce incentives for miners, tax exemptions for encrypted income and mining profits in the country.
Kazakhstan turned out to be quite a forward-looking player. Although there is no legislation at the moment, some financial experts consider that the country will follow China and try to issue its own cryptocurrency. International financial centre ‘Astana’ located in Kazakhstan together with Deloitte will collaborate to develop ecosystem of blockchain solutions in CIS countries. Astana wants to create the most beneficial legal jurisdiction for fintech solutions that will employ advanced mechanisms and utilize an open ecosystem. It wants to create a legislation and create platforms that will accommodate the needs of players from different levels and areas of expertise. Its regulations will be based on a British legal model and principles of the international market.
What Did We Learn?
Both European and CIS countries have valid concerns about money laundering, risks relating to funding illicit activities using cryptocurrencies and a danger of a clients’ veil of anonymity. Many countries are moving forward quite judiciously, others tread carefully. However, once the toothpaste is out of the tube, you cannot put it back in.
All that national governments can do is try to understand and mitigate the effects and consequences of the crypto finance activities and try to reconcile them with a traditional way of doing business.
For better or worse, technology will take its course and the legal system needs to run a little faster if it wants to catch up, because if you are not at the table, then you are on the menu.
Follow us on other social media:
Facebook https://www.facebook.com/ternionofficial/
Telegram Chat — https://t.me/TernionOfficial
Telegram Channel for announcements — https://t.me/TernionAnnouncements
Twitter — https://twitter.com/ternionofficial
LinkedIn — https://www.linkedin.com/company/ternionofficial/
