A snapshot of current crypto regulations of all G20 member states
The eyes of the crypto world will be on the upcoming G20 meeting of finance ministers and central bank governors, taking place in Buenos Aires on the 19 and 20 March 2018. Governments and regulators around the world are battling to keep up with the recent surge in interest in blockchain and cryptocurrencies. Approaches range from those that are supportive, those taking a wait and see approach and those that want to shut things down.
A big week ahead for the crypto markets
As we ramp up to next week’s meeting we’re seeing a number of statements in the press from G20 governments. Japan is reportedly planning to use a G20 meeting next week to call for combined regulatory efforts to combat the use of cryptocurrencies in money laundering. Meanwhile the financial authorities of Korea are potentially preparing a plan to allow initial coin offerings (ICOs), for domestic investors, to advance blockchain-based technologies, according to sources familiar with the issue.
With the prospect of blockchain and crypto tech and regulation taking centre stage at an important G20 meeting it is clear that the industry is going mainstream. And as the outcomes of the meeting may reverberate through the crypto space (either positively or negatively) we thought it would be a good opportunity to review the current state of regulations for each of the G20 member states:
Argentina is hosting the G20 meeting and interestingly is one of the fastest nations to adopt Bitcoin. Currently the Argentinian regulators have taken a hands off approach and encouraged innovation. Indeed, Argentina’s biggest futures market has plans to offer Bitcoin futures.
Current status: No government regulation
Australia has no specific, wide ranging regulations but is investigating the most suitable approach. However, the Australian Transaction and Analysis Centre (AUSTRAC) has recently updated its AML laws to require greater transparency and recording of cryptocurrencies. Through the implementation of a new Digital Currency Exchange registry, exchanges dealing with digital currencies will be required to disclose specific details of all transactions made on its platforms.
Current status: No overarching government regulation but focus on creating greater transparency re AML and digital currency exchanges.
Brazil appears to have taken an initial hardline, banning investments in cryptocurrencies whilst attempting to work out the correct approach to wider regulation.
Current status: Financial assets not recognized, direct investment prohibited
Canada is another country that is positioning itself as a hub of blockchain innovation. Miners have flooded into Canada and the Central Bank of Canada is even considering the possibility of launching a state backed cryptocurrency. However, they remain vigilant about regulating illegal activities.
Current status: Cryptocurrency earnings liable for taxation
China has an interesting relationships with blockchain and cryptocurrencies. On the one hand it’s a hub of innovation, yet on the other hand it is one of the most strictly regulated and controlled markets. It will be very interesting to see the long term play from China unfolds.
Current status: Coin trading is prohibited and ICOs are prohibited
Currently, regulation is being discussed by individual member states on a country by country basis, but EU regulators have met to discuss the possibility of coordinating regulatory efforts across the European Union.
Current status: Agreed to more stringent rules to prevent money laundering and terrorist financing in Bitcoin and other virtual currency exchanges
France joined Germany in calling for international cooperation on crypto regulation. They have also developed a working group for cryptocurrency regulation with a particular focus on fighting tax evasion.
Current status: So far no regulation, but warnings about regulatory readiness (not disclosed in detail), and risk of speculation and manipulation.
Germany (along with France) are one of the key members pushing for crypto regulatory discussions at the G20 meeting. They appear to have a desire to help position Europe as a leading hub of blockchain and crypto development, but believe that regulation will have to be a coordinate international effort.
Current status: It is a legitimate financial instrument and may be taxable, but requires additional licenses and permits.
India is another country that has taken a rather negative view of cryptocurrencies, now going as far as suggesting that cryptocurrencies should be banned as they are potentially too hard to regulate. However, there is a lot of innovation in the space in India and the recent successful fundraise by Zebi and the partnership they have secured with state government shows that there is currently room to manoeuvre.
Current status: Not accepted as a means of payment, regulation of money laundering and illegal activities
Indonesia’s central bank has issued a fresh warning about trading in cryptocurrencies like Bitcoin, because of the risk of losses to the public and even a potential threat to the stability of the financial system. However, there is currently no formal regulation, although it is prohibited
Current status: No government regulation, but there is a ban on financial technology companies using cryptocurrencies for transactions
The Italian Ministry of Economics is working on a decree that aims to classify the use of cryptocurrencies in the country and to list service providers related to digital currencies. However, they have also noted that some central banks have / are considering launching cryptocurencies.
Current status: No government regulation [see article comments for more details from Alessandro Olivo]
In 2017 Japan recognised Bitcoin as legal tender, and is a country generally regarded as taking a leading position in the development of blockchain and crypto technology and regulation. As noted above they are keen to guard against the negative and criminal elements such as money laundering.
Current status: liable for taxation, payment instrument recognition
Mexican lawmakers have passed a cryptocurrency regulation bill. The framework states that cryptocurrencies are not legal tender and that cryptocurrencies such as Bitcoin should be considered a commodity, not a currency. In addition, the bill also seeks to put the operation of cryptocurrency exchanges under oversight of the country’s central bank.
Current status: Bill passed stating cryptocurrencies are not legal tender and should be treated as commodities and related taxes. Central bank oversight of exchanges.
Russia is finalising federal law surrounding cryptocurrencies and ICOs and is taking a view that regulation is the answer, rather than an outright ban. The law covers regulation of the creation, issuance, storage, and circulation of cryptocurrencies.
Current status: Cryptocurrency and ICO regulation legislation in place, restrictions on ICO investments and advertising, room for regulated exchanges.
Saudi Arabia is taking a fairly relaxed view on cryptocurrency regulation, suggesting that they are working on regulation but that an outright ban is highly unlikely. In fact, Saudi Arabia and Dubai are working on a pilot program to test how a new digital currency could be used to facilitate cross-border payments suggesting a positive approach to the potential of blockchain and cryptocurrencies. Meanwhile a company owned by a member the Dubai Royal Family has just partnered with Jibrel Network on their jCash cryptocurrency showing further signs of top-down support in the Persian Gulf region.
Current status: Potential for some general regulations to be introduced, ban / prohibition unlikely
South Africa is looking at regulating cryptocurrencies and the central bank even published a white paper on digital currencies as far back as 2014. Whilst currently looking into regulation, the use of cryptocurrencies in South Africa is currently “not illegal” and are subject to taxation law.
Current status: No government regulation but regulation is planned
South Korea is a major market for cryptocurrencies, and in January accounted for up to 15% of Bitcoin trading. Due to major interest from their citizens, the government was compelled to act and initially clamped down on anonymous cryptocurrency trading. Anonymous trading is now banned but they are opening up regulations for KYC based trading and as noted previously they are are considering reintroducing ICOs under new, regulated conditions.
Current status: No anonymous account transactions (real name system), tax preparation in progress, potentially introducing ICO regulation.
There is currently no government regulation. In fact, politicians in Turkey are reportedly looking to launch a national cryptocurrency. Ahmet Kenan Tanrikulu, the deputy chair of Turkey’s Nationalist Movement Party and the country’s former Industry Minister, has drafted a report to propose a state-backed cryptocurrency dubbed “Turkcoin.”
Current status: No government regulation
So far the UK has taken a wait and see approach to cryptocurrency regulation. However, we have recently seen the governor of the Bank of England, Mark Carney, calling for a crack down. He noted that cryptocurrencies do not yet pose a risk to current financial systems, but essentially wants “to hold the crypto-asset ecosystem to the same standards as the rest of the financial system” to protect businesses and individuals and guard against illegal activities.
Current status: No government regulation
The CFTC and SEC senate hearing on 7 February 2018 was largely received in a positive light with CFTC Chairman, Christopher Giancarlo appearing particularly supportive, and becoming somewhat of a cult hero in crypto Twitter circles. The market is still digesting today’s US House Capital Markets, Securities, and Investment Subcommittee hearing, although there is a sense that no major strides forward were made in the debate.
Current status: ICO prohibited, money laundering and illegal act regulations enacted, cryptographic exchange tradition license scheme in force
Our view on the current regulatory landscape
It was inevitable that the rapid growth of the blockchain and cryptocurrency would bring it to the attention of governments and regulators. How these regulators react will have an important impact on where the industry goes from here. However, we believe that a focus on regulation is a very important step in the evolution and development of the industry.
Regulators are gaining more and more experience of regulating rapidly evolving tech markets and generally appear to be learning from the successes and failures of the past. Too hands off and the market runs wild and scares off institutional money. Too strict and you risk killing the market and hampering growth. It appears that most regulators are taking a sensible approach of attempting to remain hands off whilst working with the industry to foster development, shape the most appropriate set of regulations to protect businesses and individuals and allow the market to flourish.
It is vital that all businesses and individuals are aware of current regulations in their own country and any markets in which they operate and we advise paying close attention to the G20 meeting next week as well as reading into and taking appropriate legal advice to make sure that you and / or your business remain fully compliant in a rapidly evolving landscape.
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Disclaimer: Torque Capital Partners and its affiliates do not provide investment, legal or accounting advice. This material and opinion above has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, investment, legal or accounting advice.