Around the world in Blockchain Regulations
Cryptocurrencies are the most famous applications of the promising blockchain technology, and these disintermediated digital currencies have put significant power in the hands of the people. However, the central banks, regulators, and governments around the world aren’t always equally enthused about crypto assets.
Around the world, the legal status of cryptocurrencies, and the regulatory framework around them varies. Since blockchain is the underlying technology, the regulatory status of cryptocurrencies in a country also has a direct bearing on the progress of the technology there. In this article we look at the legal status of, and the regulations around cryptocurrencies and blockchain in a several countries.
A note about the legality of cryptocurrency in a country: When we mention that the cryptocurrencies aren’t legal in a country, it doesn’t necessarily mean that the lawmakers or the government have explicitly banned them. It simply means that no law exists in that country that legally recognizes these crypto assets.
Africa
Most countries in Africa are still mulling over cryptocurrency and blockchain related regulations.
South Africa
Cryptocurrencies are legal in South Africa, however, since South African law only recognizes currencies that exist in a physical form as legal tenders, cryptocurrencies aren’t legal tenders here — they are only a store of value. Payment transactions using cryptocurrencies aren’t legally recognized.
Cryptocurrencies are currently unregulated in South Africa. The South African Reserve Bank (SARB), i.e. the central bank in the country, is still formulating policies with regards to digital currencies, however, they have published a whitepaper that clarifies that cryptocurrencies are recognized as stores of value, and can be used for trading, and in exchanges. They can be converted to legal tenders.
Any earnings from cryptocurrencies are taxable in South Africa, and the public trading in crypto assets are advised to consult competent and registered tax professionals to ensure compliance with the tax laws of the land.
The SARB cautions the citizens that they should trade in virtual currencies at their own risk while the South African government and SARB actively analyze and test several regulations.
The country is keen to explore blockchain technology, and has already hosted a Blockchain Africa Conference. The most popular crypto exchange is Luno, and the second largest grocery retailer in the country, ‘Pick n Pay’, has piloted accepting Bitcoin payments.
Summary: Legal as a store of value, but not as a tender; Unregulated.
Kenya
The Central Bank of Kenya (CBK) had issued a notice in 2015 stating that the cryptocurrencies aren’t recognized as legal tenders, and they aren’t regulated. The CBK had also asked the banks in the country to deny banking services to crypto start-ups.
However, crypto trading continues in the country, and has only increased over the last few years. Besides, the Capital Markets Authority (CMA), the financial market regulator in the country, is working with the FinTech and crypto start-ups to discuss appropriate regulations. Additionally, the Kenyan government and the World Bank plan to using blockchain for selling government bonds.
Summary: Not legal as a tender; Unregulated.
Nigeria
Quite like Kenya, the Central Bank of Nigeria (CBN) doesn’t consider cryptocurrencies as legal tenders, and have issued an advisory to the citizens of the country warning them about the speculative nature of cryptocurrencies like Bitcoin. However, the CBN is now researching blockchain technology, and has allocated resources to come out with a whitepaper on cryptocurrency and blockchain.
Summary: Not legal as a tender; Unregulated.
South America
Legal status of cryptocurrencies differs from country to country in this continent.
Chile
The government here encourages cryptocurrencies, and has helped set up the first Bitcoin exchange to pesos, in 2015. They plan to position their country as a Latin American blockchain hub.
Summary status: Legal, blockchain is encouraged.
Ecuador
While Ecuador decided to issue their own state-sponsored cryptocurrency in early 2018, within just two weeks of the launch, the project was stopped. The country has explicitly banned all other cryptocurrencies, and doesn’t support or regulate them.
Summary status: State-sponsored cryptocurrency was legal, but isn’t functioning; all other crypto assets are banned.
Argentina
The parliament in Argentina considers cryptocurrencies as properties, and not as legal tenders.
Summary: Not legal as a tender.
Bolivia
The country has explicitly banned cryptocurrencies, due to concerns that crypto assets will encourage tax evasion and money laundering. The country is also apprehensive of the potential of the digital currencies for creating monetary instability due to their speculative nature.
Summary status: Illegal.
Brazil
The government of this country doesn’t acknowledge cryptocurrencies as legal tenders, rather these are treated as ‘commodities’, and the traders will need to pay 15% capital gains tax beyond a threshold.
Summary status: Illegal.
Middle East
Except for UAE, most countries in this region have no regulatory policy available for cryptocurrencies:
UAE
Cryptocurrencies transactions are allowed in Dubai, and one can buy luxury apartments with Bitcoin. Dubai plans to become the first blockchain-powered government by 2020. The DubaiCoin crypto exchange was established in 2016.
In the Abu Dhabi Global Market, i.e. the financial free market zone of the capital Abu Dhabi, there are guidelines for Initial Coin Offerings (ICOs) and using digital currencies.
However, elsewhere in the country, ICOs aren’t encouraged by the Securities and Commodities Authority, i.e. the country’s market regulator. The Central Bank advises citizens to seek out legal advice if they plan to deal in cryptocurrencies. The central bank is currently formulating regulations in this regard.
Summary status: Legal in Dubai and free market zone in Abu Dhabi; not legal and regulated elsewhere.
Saudi Arabia, Oman, Qatar
Cryptocurrencies have no legal status in these countries, nor are there any regulatory framework to deal with them.
Summary: Not legal as a tender.
Asia
Most of the cryptocurrency trading in the world take place in Asia, and there are wide variances in terms of the legal status of cryptocurrencies, and innovations around blockchain.
Russia
In 2016, Russian government agencies termed cryptocurrencies as “not illegal”. However, in 2017, the Governor of the Central Bank stated that the country doesn’t want to regulate cryptocurrencies as a mode of payment. Crypto market sites were blocked, cryptocurrencies were considered as ‘currency surrogate’ and hence illegal. However, the national parliament is now working on legislating a regulatory framework for cryptocurrencies, with a deadline of July 1st, 2018 to pass the legislation. Reportedly, a consensus emerged on ICOs, which are likely to be allowed in a regulated manner. However, it’s not clear whether regulatory framework is being formulated for general crypto trading, because the central bank is wary about the risks inherent in crypto market. Russian technology enthusiasts and entrepreneurs have made a significant mark in the development of numerous cryptocurrency projects and blockchain technology in general,
Summary: Not legal as a tender, however regulations are underway, large concentration of blockchain-savvy techies drive innovation.
India
The Reserve Bank of India (RBI), i.e. the central bank of the country, has repeatedly warned the citizens that cryptocurrencies aren’t legal tenders, and anyone trading in them must do so at their own risk in view of the speculative nature of the market. In February 2018, the Government of India (GoI) declared in the parliament that they will take every necessary step to stop crypto assets being used to fund criminal activities and terrorism, and will not allow the digital currencies to become part of the payment system. RBI has barred the banks in the country from servicing crypto exchanges. There are concerns that crypto exchanges and traders in cryptocurrencies evade tax, and there have been tax raids on some of the cryptocurrencies. While RBI and GoI remain unsupportive of cryptocurrencies, they are very keen on exploring blockchain. GoI and multiple state governments are busy with pilot projects with this technology, with the objective of improving delivery of governance and rooting out corruption. RBI is mulling over issuing their own cryptocurrency, however, more details are awaited on this plan.
Summary: Not legal tender, banking service denied to the crypto exchanges, high interest on blockchain.
China
There was significant activity in China on the crypto and blockchain front, however, the country has since then stringently banned all ICOs, and are trying to ban crypto mining. While individuals can trade in cryptocurrencies, financial firms are barred from dealing in crypto assets. There has been crackdown on crypto exchanges in 2017, because the government is concerned that cryptocurrencies will be used by criminals to fund their illegal activities. While the future of cryptocurrencies in China isn’t clear, the country has a tech savvy blockchain developer community, and the Chinese blockchain entrepreneurs have successfully launched famous blockchain and crypto projects.
Summary: Not legal tender; crackdown on exchanges and crypto mining.
Japan
Cryptocurrencies are legal tenders in Japan, and blockchain technology is welcome, too. Japan accounts for a very large share of global Bitcoin trade. Japan’s Financial Service Agency (FSA) mandates strict anti-money laundering protocol on the exchanges, but if an exchange plays by the rules, the government encourages it. Recent instances of hacking involving crypto exchanges have made Japanese regulators scrutinize crypto exchanges more closely, and some were asked to halt business for a specified amount of time, while others were asked to improve internal controls. This clearly indicates that an effective regulatory mechanism exists, and the crypto market can grow significantly in Japan, provided the players comply with the rules.
Summary status: Legal tender; effective regulations exist; blockchain technology is encouraged.
Singapore
Singapore is actively trying to promote itself as a destination of choice for crypto and blockchain start-ups, with friendly tax regime and effective regulation of crypto and blockchain space. The Monetary Authority of Singapore plans to tokenize the country’s currency. There is a significant focus on, and funds allocated by government to, incorporate blockchain in governance delivery and financial services.
Summary status: Legal tender; effective regulations exist; blockchain technology is encouraged.
Australia
Cryptocurrencies receive governmental support, or at the very least not discouraged in this continent.
Australia
The government is positive towards cryptocurrencies. Trade, use, and mining of cryptocurrencies are legal in the country, and taxation guidelines to help citizens are in progress.
Summary status: Legal tender; effective regulations exist.
New Zealand
The financial regulator in the country, the New Zealand Financial Market Authority (FMA), considers cryptocurrencies as securities. ICO-derived tokens are to be treated as securities too. The FMA has published guidelines for blockchain and crypto start-ups, and is open to introducing policies that would be helpful for the industry.
Summary status: Not legal tender, but considered legal as securities; effective regulations exist.
Europe
Several countries have policies and regulatory frameworks significantly supportive of crypto and blockchain start-ups.
Switzerland
A lakeside town called Zug in Switzerland is now termed ‘Crypto Valley”, owing to the huge amount of investment it attracts in the blockchain space. It’s home to many prominent blockchain start-ups.
Crypto businesses in the country are subject to anti-money laundering laws. The parliament and the government have evaluated the legal status of cryptocurrencies, and the Swiss Federal Council consider that the digital currencies aren’t in any legal vacuum. Cryptocurrencies are accepted in some payment transactions, for e.g. city fees in Zug can be paid with Bitcoins.
Summary status: Legal tender; effective regulations exist; blockchain technology is significantly encouraged.
Estonia
The country doesn’t restrict, control, or regulate use of cryptocurrencies. The Ministry of Finance in Estonia doesn’t see any legal impediment to use of cryptocurrencies in payment transactions.
One of the most helpful countries to blockchain entrepreneurs, Estonia’s e-residency program is attracting crypto and blockchain entrepreneurs from several countries to set up their businesses there. The process to set up business in Estonia is easy, and the government assists the entrepreneurs significantly. The legal and tax regimes for crypto and blockchain start-ups are conducive for the growth of this sector.
The country is working on their government-backed cryptocurrency, ESTcoin.
Summary status: Legal tender; effective regulations exist; blockchain technology is significantly encouraged.
United Kingdom
The country considers cryptocurrencies are legal tenders, and the government is of the view that no additional law is required to allow their use. For the most part, crypto assets are treated as foreign currencies.
The government is focusing significantly on using blockchain, to combat fraud and corruption. The country also recognizes the promise of blockchain in reducing cost of paperwork. Innovate UK, the technology development agency of the government, is soliciting proposals for new blockchain projects, and have funded start-ups to develop cross-border financial transaction solutions. The agency is considering use of blockchain in emerging health technologies as well.
Summary status: Legal tender; effective regulations exist; blockchain technology is significantly encouraged.
North America
Crypto and blockchain sector faces friendly to neutral regulatory regime in North America.
USA
While dealing in cryptocurrencies are legal in the USA, and there are Bitcoin ATMs easily within reach of large city dwellers, different regulatory and government agencies interpret crypto assets differently, for e.g.:
· The U.S. Treasury classifies cryptocurrencies as convertible decentralized virtual currency;
· The Commodity Futures Trading Commission (CFTC) classifies them as commodity;
· IRS taxes cryptocurrencies as properties;
· Earlier in 2018, the US Securities and Exchanges Commission (SEC) has communicated to the crypto exchanges that they will come under SEC purview.
· A federal judge had ruled in 2016 that cryptocurrencies are funds.
The country has one of the strongest crypto and blockchain start-up ecosystems. The following states have the friendliest regulatory framework for this space: Texas, Kansas, Tennessee, South Carolina, and Montana.
Summary status: Legal tender; effective regulations exist; blockchain technology is significantly encouraged.
Canada
The regulatory body Financial Consumer Agency in Canada doesn’t consider cryptocurrencies as legal tenders. Digital currencies are considered as ‘barter goods’ and it’s legal to trade.
Summary status: Not legal tender, but it’s legal to trade in cryptocurrencies.
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