By Hitesh Malviya
Bitcoin is, of course, the world’s biggest cryptocurrency for which legality varies greatly across region, and many are still unsure or working through legal issues. Despite the many alternatives available, Bitcoin dominates the world of cryptocurrency, attracting investors from around the world. So its legal status understandably draws considerable curiosity.
Most major international economies are still highly skeptical about cryptocurrencies. Since Bitcoin and others of its ilk have gradually started winning institutional endorsements, the regulatory hassles for cryptocurrencies have also increased.
Regulators and government in many nations are still opposed to this ‘asset class’ and have explicitly outlawed it. Some others have embraced it and agreed that Bitcoin regulation would beneficial for them. Be it for mining of cryptos, their use as legal tender or as property, the rules are different across different regions.
If you look closely though, a pattern emerges if seen from the perspectives of developed, developing and under-developed economies. Let’s have a look how crypto currencies are regulated across different parts of the world.
- European Union: Bitcoin is legal almost everywhere in the European Union. While the EU has not passed clear legislation about Bitcoin’s status as a currency, it has clarified that VAT/GST does not apply in the conversion of conventional (fiat) currency to Bitcoin. Transactions involving Bitcoins for products and services are subject to VAT/GST and other taxes (such as income-tax).
Cryptocurrencies and crypto assets are categorised as qualified financial instruments (QFI) in the EU. Under the EU law, banks, credit unions and investment companies are not prohibited from owning crypto assets or cryptocurrencies, gaining exposure to them, or providing services in them. Not surprisingly, the EU leads the world outside of the US in trading volume in Bitcoin on online exchanges at $204.1 million.
Currently, the best and the most popular exchanges for Bitcoin in the EU are Coinbase, Kraken, Binance and more. These exchanges aren’t native to the EU though. So, we’re going to see them show up in many other markets too.
- USA: Bitcoin is legal in the US. Bitcoin got listed as a convertible decentralized cryptocurrency by the US Treasury in 2013. In September 2015, the Commodity Futures Trading Commission (CFTC) identified Bitcoin as a commodity. Bitcoin gets taxed as a property by the IRS. In 2018, Bitcoin was discussed in a US Supreme Court opinion (Wisconsin Central Ltd. v. US) concerning changing the meaning of money. A federal judge ruled in September 2016 that Bitcoins are funds within the simple sense of that word.
Cryptocurrency exchanges are regulated in the same way as conventional AML/CFT facilitators, financial firms, and capital transmitters in the US, and are subject to the same rules, including those outlined in the Bank Secrecy Act amendments of 2021. (which has established its own version of the Travel Rule).
The USA is outshining the rest of the world in Bitcoin trading volumes on online exchanges at $1.5 billion. Coinbase, which recently went for the first-ever crypto exchange IPO in the world, and Finance, are the most popular Bitcoin exchanges in the US.
- South Korea: Bitcoin is legal in South Korea. However, cryptocurrency trading is restricted for minors as well as other outsiders. Adults in South Korea can transact on registered exchanges using their actual names and accounts at a bank in which the exchange also has an account. Both the bank and the exchange are in charge of checking the customer’s identity and implementing other anti-money laundering laws.
Bitcoin transaction volume has increased massively in recent times in South Korea. The best platforms for Bitcoin exchange in terms of popularity, potential, market opportunities are UPBit, Bithumb, Coinone.
- Japan: The Payment Services Act acknowledges Bitcoin and other digital currencies as legal property in Japan, which is considered to have globally the most dynamic regulatory climate for cryptocurrencies.
Cryptocurrency is defined as a property value under the Payment Services Act. The Act also specifies that cryptocurrency is restricted to property values electronically stored in electronic devices and not intended to be used as a legal tender. Japan’s Bitcoin trading volume on online exchanges is estimated at $6.6 million.
Coinmama, CEX.io, Coincheck are very popular choices in Bitcoin exchanges there. Businesses that deal with cryptocurrency must be authorised, has to maintain records, implement security protocols, and protect customers. The law on cryptocurrency transactions must adhere to anti-money laundering regulations as well as guidelines for users and investors.
- India: As of now,Bitcoin is not illegal in India. Due to the recent evolution of cryptocurrency, lawmakers and authorities seem to have recognised the opportunity to adopt the new technology early. But the relationship has not been without its ups & downs. From the famous ‘RBI ban’ in 2018, to the news about an imminent law to ban cryptos in 2021 which hasn’t materialized so far, India has had its share of ups and downs around Bitcoin regulation.
There’s no denying though, that India’s climate around cryptocurrencies is becoming progressively stringent. Many cryptocurrency services and revolutionary technologies are finding it hard to run without a clear regulation. The Indian government has announced that it is willing to investigate the use of blockchain technology to improve the country’s financial services sector. That suggest Bitcoin regulation is likely around the corner.
With around $64 million trading volume for Bitcoin, India has a pretty solid user base. Some of the best crypto exchanges in the country are WazirX, CoinDCX, Unocoin.
- China: China doesn’t consider cryptocurrencies as legal tender. Furthermore, its banking sector does not acknowledge them or provide services related to them. For the sake of investor security and financial risk management, the government has enacted a number of regulatory measures to clamp down on activities involving cryptocurrencies.
The declaration that initial coin offerings are illegal is one of the steps taken by the country. China has a pretty solid trading volume of $198 million. Coinmama, CEX.io, BTCC are very famous exchanges in this country.
Bitcoin Regulation Moving Forward
Even with positive developments in the understanding of blockchain by many government bodies around the world, Bitcoin regulation still has a long way to go. Since Bitcoin is still in its early stages, it is too early to say whether it will have its way in the future or face regulatory challenges to its existence in the coming years.
Hitesh Malviya is founder of itsblockchain.com. Views are his own)