Cryptocurrency Regulations in 2019

cryptocurrency-regulations-in-2019

The whole idea of cryptocurrencies was that they get to operate outside the scope of national regulation. The truth of the matter is that the transaction volumes, valuations, and user bases react on the basis of news regarding regulatory actions. The extent of this reaction is determined by how massive the regulatory action was.

Scope of Regulations

The idea that cryptos can be or ought to be regulated is met with mixed reactions. Even for those who finally manage to come up with some regulatory system, there are still numerous discrepancies.
As of 2019, the discussion around regulating cryptocurrencies is centered on several domains:

  • Taxation
  • Annual reports
  • Local bank processing
  • Legal medium of exchange
  • Actual crypto definition

It is not possible to discuss any of these regulatory frameworks from a general point of view. That is why this article looks at them within the scope of countries known to be friendly, neutral, and hostile to cryptos.

Crypto Regulations by Country

Cryptocurrencies are meant to operate globally. That is, one should be able to make Bitcoin payment from one country to another without any hindrances. However, each country is unique in its own way. For that reason, they individually come up with regulations that continue to define how cryptos are being used.

(1) The United States

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One cannot deny the fact that the United States is a global leader when it comes to the adoption and use of cryptos. As at the moment, the country allows investors to buy Bitcoin, Ethereum, and more than 40 other cryptos.

The country’s Financial Crimes Enforcement Framework defines cryptos as money transmitters. This means they are bound by specific laws. Similarly, the IRS defines cryptos as property with value, which essentially means that it is taxable.

Within the United States, each state has differing laws impacting cryptos. Even at the national level, regulators are yet to arrive at a common ground on the manner in which cryptos ought to be treated.

For instance, the Securities and Exchange Commission maintains that cryptos are securities. On the other hand, the Commodity Futures Trading Commission classifies digital assets as commodities.

It is apparent that the confusion revolving around crypto regulation in the U.S. is not one that will be settled any time soon. With this realization, the Congress published a Joint Economic Report which indicates that the country seeks to streamline the regulatory approach towards crypto.

(2) Canada

cryptocurrency-regulations-in-canada

Canada is another country that takes the center-stage when it comes to the cryptocurrency user base. There are more crypto startups in the country even as an increased number of businesses accept mainly Bitcoin as a means of payment. Ether is also quickly catching up.

The extent to which Canada has embraced cryptos can be seen in the way its two major cities, Toronto and Vancouver, are regarded as Bitcoin hubs. As at the moment, Canada relies on counter-terrorism financing and Anti-Money Laundering laws to govern the usage of this relatively young asset.

Any company that handles digital currencies in the country is required to be registered by the FINTRAC. This registration ensures that FINTRAC will be up to speed with financial transactions done in cryptos and also receive required reports.

Any client that is not registered with FINTRAC cannot open a bank account. Banks have a directive that bars them from doing so. Violation of this regulation is tantamount to fines or revocation of the bank’s operating license.

Quebec’s financial regulator uses the Money Services Business Act to govern the usage of local ATMs and exchanges. This Act makes it mandatory for money transmitters to verify the identity of their clients and to also keep well-maintained records of their client’s activities.

The impact of such a regulation is that there is no exchange in Canada which does not ask for your verification when you want to use cryptos. That is quite a setback on cryptos considering the element of anonymity is interfered with.

(3) The United Kingdom

cryptocurrency-regulations-in-the-united-kingdom

The impact of the United Kingdom when it comes to crypto adoption and usage cannot be underestimated. The regions seem to have taken the wait-and-see approach towards cryptos. Whereas exchanges are not banned, they are still not verified as a legal tender.

Another important point to note is that the U.K. does not impose a value-added tax (VAT) on different exchanges throughout the region. Instead, a surcharge is subjected to goods bought in exchange for ETH, BTC, and related cryptos.

Capital gains tax is applicable to any profits or losses that investors incur in relation to their crypto holdings.

As the U.K. decides to take a neutral stand on cryptos, some people find that to be quite a dangerous approach. That is why CryptoUK, a self-regulatory trade association, was set up to improve and come up with more appealing industry standards.

The trade association seeks to implement a code of conduct which covers several niche provisions that touch on data security, individual privacy, and AML.

(4) China

Everyone who has been in this industry for long enough will tell you of how hostile China has been towards cryptos. It is illegal to conduct any crypto activities within the country’s borders.

Furthermore, there is access restriction on all local and international crypto exchange platforms. The People’s Bank of China issued a directive to local financial institutions requiring them not to recognize digital currencies as a tool for retail payments.

(5) India

Saying that India does not support cryptocurrencies is an understatement. The country is extremely hostile towards the crypto industry. This hostility started about two years ago and has grown to unprecedented levels. The Reserve Bank of India released a circular in 2018 in which it warned private banks not to process any crypto-related transaction.

(6) Switzerland

cryptocurrency-regulations-in-switzerland

Even as some countries decide to be neutral and hostile in equal measure, Switzerland sets itself apart by being very crypto-friendly. Ever since Bitcoin was introduced in 2009, the country expressed its intention to be open to the idea of crypto/blockchain.

The local regime has several financial incentives for startups seeking to base their operations on cryptos. Some of these include low tax rates and at times, tax exemptions.

The finance regulator in Switzerland maintains that these digital assets do not require a declaration of annual returns. Thanks to such favorable approaches, it is estimated that the country’s crypto industry could be worth $44 billion.

Conclusion

Cryptocurrencies are not supposed to be regulated. They are supposed to bring democracy to monetary exchanges. Incorporating regulation to their overall operations interferes with this initial intent. However, governments are too frightened by what cryptos would mean to their country’s economic status that they would rather participate.

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