The rise of cryptocurrencies from mere speculative investments to deployment in different spheres of our lives has forced Government authorities around the world to take definite regulatory actions on cryptocurrencies. Some have taken protective measures for their citizens while others have stifled its growth.
In this guide, we look at some of the legislative postures and activities of different countries on exchange and coin regulation.
United States of America
The U.S. does not consider cryptocurrencies as legal tender but treats it as property for tax purposes. Simply put, the land of the free is slowly allowing cryptocurrencies to thrive, albeit under some regulations.
In 2022, for instance, the government announced a new framework that empowered market regulators such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to oversee the crypto sector.
The SEC has been actively regulating the industry which was evident in the lawsuits against crypto-centric businesses and projects, like Ripple, CoinBase, and Binance. However, recent court decisions, such as the partial victory for Ripple against the SEC and the approval of Bitcoin spot ETFs in January 2024, indicate that the U.S. is still evolving.
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United Kingdom
In the UK, cryptocurrencies are not accepted as legal tender but are also considered as property. When it comes to regulations the UK is very proactive, mandating cryptocurrencies to work within its existing financial framework under the June 2023, Financial Services and Markets Act. Moreso, Crypto businesses must comply with Know Your Customer (KYC), Anti-money Laundering AML, and Countering the Finance of Terrorism (CFT) requirements.
For future regulations, a discussion paper (DP23/4) has been released about regulating stablecoins as a result of their growing use in crypto trading, lending, and borrowing. Unlike cryptocurrencies, which are more decentralized and risky, stablecoins offer more stability, making them appealing.
The FCA aims to apply the same regulations to stablecoins as to other financial products, with adjustments to account for the unique risks of crypto. They are also working on new rules to prevent market abuse in crypto and stricter guidelines for social media crypto ads, particularly targeting ‘influencers’ and celebrity endorsements.
Canada
Canada has been proactive in crypto usage and regulations. White it is not the country’s legal tender, they can be used for daily transactions. On regulations, the country was the first to approve a Bitcoin exchange-traded fund (ETF).
However, Cryptocurrency exchanges and dealers must register with provincial regulators. Canada classifies all crypto investment firms as money service businesses (MSBs) and requires them to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Australia
In Australia, Cryptocurrency exchanges are legal but must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet specific AML/CTF obligations.
In 2019, the Australian Securities and Investments Commission (ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and banned exchanges from offering privacy coins.
In 2024, crypto users and exchanges can expect more regulations as the Australian government has announced plans to introduce a comprehensive regulatory framework with a draft set to come out soon.
China
China has taken a harsh stance on cryptocurrencies. In September 2021, the country banned all cryptocurrency transactions and mining activities. The People’s Bank of China (PBOC) prohibits crypto enterprises from operating in the country, stating that they facilitate public financing without approval.
The position taken by the Chinese in 2021 caused major crypto sell-offs and forced exchanges to move to jurisdictions with favorable terms of business.
While there are no signs of China lifting the ban on cryptocurrencies, some speculate that it could be around the corner. This is a result of the Chinese Central Bank working on the e-CNY digital currency and announcing pilot tests in 2021.
Singapore
Trading and exchanges are legal but regulated in Singapore making the island a crypto-friendly jurisdiction. The Monetary Authority of Singapore (MAS) licenses and regulates exchanges under the Payment Services Act (PSA).
While the country is crypto-friendly, MAS in 2022, issued guidance warning digital payment token (DPT) providers against advertising their services to the public.
India
India’s stance on cryptocurrencies remains ambiguous. While the country has not officially legalized or banned cryptocurrencies, it has imposed a 30% tax on all crypto investments and a 1% tax deduction at source (TDS) on crypto trades.
The Indian government has been considering a bill that could potentially prohibit all private cryptocurrencies, but it has not been voted on yet.
Japan
Similar to Singapore, Japan is quite favorable to crypto trading and exchanges. The country recognizes cryptocurrencies as legal property under the Payment Services Act (PSA) and Crypto exchanges must register with the Financial Services Agency (FSA) and comply with AML/CFT obligations.
Japan established the Japanese Virtual Currency Exchange Association (JVCEA) in 2020, and all crypto exchanges are required to be members.
In 2022, Japan announced plans to introduce remittance rules to prevent money laundering through cryptocurrency exchanges. This legislation by the FSA would likely mandate reports of suspicious activities by crypto service providers and require new security protocols.
South Korea
In 2023, South Korea’s National Assembly passed the Protection of Virtual Asset Users Act and officially appointed the Financial Services Commission as a regulator for virtual assets. This body determines what is legal or illegal.
In 2017, the country banned the usage of private accounts to trade and imposed reporting of accounts held by exchanges on banks.
The country requires these exchanges and other virtual asset service providers to register with the Korea Financial Intelligence Unit (KFIU) for the operation of exchanges.
The future agenda of the South Korean government is to develop regulatory frameworks to balance innovation with consumer protection in the cryptocurrency space.
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Switzerland
In Switzerland, cryptocurrencies are recognized as assets and are subject to the Swiss wealth tax. Cryptocurrency exchanges are also legal but must obtain a license from the Swiss Financial Market Supervisory Authority (FINMA) to operate.
On the regulatory front, Switzerland introduced the Blockchain Act in 2020 which further defined the legalities of cryptocurrency exchanges in Swiss law. The following year, the country implemented the Distributed Ledger Technology (DLT) Act, introducing a new license category for cryptocurrency trading venues.
Switzerland’s government has indicated its intention to continue working towards a regulatory environment that is friendly to cryptocurrencies.
Malta
Malta has positioned itself as a global leader in crypto regulation. In 2018, Malta introduced the Virtual Financial Assets Act (VFA). The VFA is a regulatory framework for cryptocurrencies and addresses AML/CFT concerns.
Also, the Malta Digital Innovation Authority was established to create crypto policies and enforce ethical standards for crypto usage and blockchain technology.
Malta’s progressive approach has attracted many cryptocurrency businesses to the country, solidifying its reputation as a “Blockchain Island.”
Africa
Cryptocurrency is gaining popularity in Africa, but governments are scrambling to keep up. Some have outrightly banned the use of crypto, and others are still uncertain of their stand.
In a 2022 IMF report, about 20% of sub-Saharan countries have clamped down on cryptocurrencies. These countries are Ethiopia, Lesotho, Cameroon, Tanzania, Sierra-leone and the Republic of Congo.
While these restrictions range from implicit bans to explicit, there is no doubt that crypto usage in Africa is on the rise. Countries like South Africa, Nigeria, and Kenya recorded $20 billion in transactions in 2021.
South Africa has taken a proactive approach to regulating cryptocurrencies. The country officially recognized cryptocurrencies as financial products in 2022, and in mid-2024, they have already issued 138 crypto licenses.
Nigeria, another major player in Africa’s crypto scene, has taken a different path. While they published guidelines for crypto in 2022, they haven’t quite figured out how to license these digital currencies yet.
Instead, they’ve opted for a more reactive approach, cracking down on crypto exchanges when issues arise. This has led to legal tussles with some exchanges like Binance.
The European Union (EU)
Cryptocurrencies are generally considered legal across the EU, but regulations in the EU are made with individual member states implementing their own rules. So, the laws differ for exchanges and trading by member states.
Exchanges are not highly regulated but are required to register with the regulators in certain regions like the Italian Ministry of Finance or the German Financial Supervisory Advisor.
The Sixth Anti-Money Laundering Directive (6AMLD) was created in December 2020 to tighten cryptocurrency regulations. It made cybercrimes, such as hacking and online fraud forms of money laundering.
Luxembourg
While cryptocurrencies are not legal tender in Luxembourg, the government has acknowledged their potential as a means of payment for goods and services.
The Commission de Surveillance du Secteur Financier (CSSF) regulates cryptocurrency exchanges and New crypto businesses must obtain a payment institution license to begin trading.
In 2019, Luxembourg passed legislation giving blockchain technology transactions the same legal status as those executed using traditional methods.
Latin America
The regulation of cryptocurrencies in Latin America differs from country to country. In Mexico, Brazil, Chile, Argentina, and Venezuela, cryptocurrencies are accepted. The level of adoption in these countries moves down to retail outlets and merchants.
However, countries like Bolivia are not so welcoming of cryptocurrencies or exchanges. Similarly, Ecuador has issued a ban on all cryptocurrencies except for the government-issued SDE token.
When it comes to legal tender, El Salvador has set the pace, making Bitcoin a legal tender of the country in 2021. Expectedly, the nation came under a lot of criticism but that hasn’t deterred them. The Government has issued a digital wallet app for seamless transactions.
Many Latin American countries have raised concerns about the financial and economic risks of cryptocurrencies, especially the laundering risks. At this time, plans for future regulations have not been revealed.
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Conclusion
As the cryptocurrency market continues to mature, we can expect further regulatory developments that would help balance innovation with consumer protection and financial stability.
Frequently Asked Questions
Cryptocurrency regulation refers to the laws, rules, and guidelines set by governments and financial authorities to oversee the usage, trading, and creation of digital currencies. These regulations aim to bring order to the crypto world much like our traditional financial systems. They can cover various aspects, from how exchanges operate to how crypto gains are taxed.
First, governments want to protect consumers from potential scams, and also to prevent illegal activities like money laundering and terrorism financing. As crypto becomes more mainstream, governments want to ensure it also doesn’t destabilize their financial systems or undermine their monetary policies.
Several countries have embraced cryptocurrencies with open arms. Switzerland has earned a reputation as a “Crypto Valley” due to its favorable regulations. Malta has also positioned itself as a crypto hub. Singapore and Japan have created clear regulatory frameworks that allow crypto businesses to thrive while maintaining oversight. El Salvador took a bold step by making Bitcoin legal tender, showcasing its crypto-friendly stance.
Yes, some countries have taken a harsh stance against cryptocurrencies. China is the most notable example, having banned all cryptocurrency transactions and mining activities in September 2021. Other countries with strict bans include Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia. However, the crypto landscape is constantly evolving so these positions may change over time.
