The most commonly asked question about cryptocurrency trading by a user is whether it is legal in my country or not. Since cryptocurrency is not controlled by any central authority, it’s hard to bring it under a predetermined set of rules and regulations. The rules are still undefined and keep on changing according to government policies adopted by the ruling parties of particular countries. The implementations and modifications are done on several parameters. For instance, cryptocurrency is banned in some countries, in some banks are restricted to associate with the exchanges, in some the income through trading is taxable, and so on. Hence, we thought of making a repository of cryptocurrency laws across the world. The information below-mentioned is as of June 2020.
*Disclaimer – We have collated the information from various online resources and don’t claim 100% authenticity of the data. Kindly note that laws are subjected to change anytime and please feel free to reach out to us to update information on the blog if found inaccurate.
ASIA + OCEANIA
Cryptocurrency is not considered as legal tender, but running of exchanges is legal in India. The chairman of the Central Board of Direct Taxation has said that anyone making profits from Bitcoin will have to pay taxes on them. However, there’s still a lack of clarity over the tax status of cryptocurrencies. In April 2018, the Reserve Bank of India (RBI) banned banks and any regulated financial institutions from dealing with or settling virtual currencies. The ban was quashed by the Supreme Court of India on March 4, 2020, stating it as unconstitutional.
Cryptocurrency is legal in China, but not deemed as a legal tender. The China-based exchanges are banned by the government; no exchanges are operational within China and many big Chinese exchanges have relocated their operations overseas. The government has also imposed a banking ban. However, the citizens can buy cryptocurrency through international exchanges. Recently, China has passed a civil code protecting cryptocurrency inheritance. It will come into force from Jan 1st, 2021.
Cryptocurrency is legal and is treated as property. Cryptocurrency exchanges are legal provided they should be registered with the Financial Services Agency (FSA). The National Tax Agency in December 2017 passed an order stating that gains on cryptocurrencies should be categorized as miscellaneous income and will come under tax bracket.
The country has a banking ban but mining is legal as it is viewed as an entrepreneurial activity. The activity will fall under taxation if the energy consumption limits set by the government are exceeded by the miner for three months consecutively. Recently, Russian lawmakers proposed a law that criminalizes buying bitcoin with cash. The offenders will have to face 7 years of imprisonment.
Cryptocurrency exchanges are legal in South Korea and they must be registered with the Financial Supervisory Service (FSS). At present, cryptocurrencies are neither regarded as currency nor as an asset. Hence, they don’t fall under the taxation regulations. However, the Ministry of Strategy and Finance has given hints that they are considering imposing a tax on income from crypto in 2020. In 2017, the government prohibited cryptocurrency trading through anonymous accounts and banned local institutions from hosting trades of Bitcoin Futures. In 2019, the National Assembly introduced a bill categorizing virtual currencies as digital assets. The bill will put cryptocurrency under the legal framework and will also adhere to AML/CFT regulations. The bill is in review by the judiciary committee and a final decision is expected to roll out soon.
Cryptocurrencies are legal and they are treated as property and profits derived from the same are taxable. The exchanges are legal and need to be registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC). The exchanges should also implement ‘know your customer’ policies to comply with anti-money laundering legislation. If exchanges found not adhering to these rules, then they are subjected to criminal charges and heavy penalties.
Cryptocurrencies are legal to hold and trade, but are banned as a payment tool. In January 2018, Bank Indonesia released a statement warning against trading of cryptocurrencies. It further adds that ownership of the same is highly risky, vulnerable to bubble risks and susceptible to be used for money laundering and terrorism financing. The statement was supported by the finance ministry.
There is no official statement by the government stating the legality of trading cryptocurrencies. However, the Saudi Arabian Monetary Authority (SAMA) has strictly warned from using cryptocurrencies as it is high risk and its dealers will not be guaranteed any protection or rights. Recently, it was reported by several news publications that SAMA has transferred funds to local banks using blockchain technology. The news has sent a positive note and crypto advocates are hoping that the government will take a welcoming approach in the coming days.
Cryptocurrency exchanges are legal and must be registered with the Monetary Authority of Singapore (MAS). Cryptocurrencies are treated as goods and hence it’s taxable under Goods and Services tax. In January 2018, MAS issued a press release warning the public of the risks of crypto speculation and stated that cryptocurrencies are subject to the same AML and CFT measures as traditional, fiat currencies. In 2019, the Payment Services Act 2019 (PSA) was passed, which officially brings exchanges and other cryptocurrency businesses under the regulatory authority of the MAS.
While there are no legislative regulations, the existing laws of Organised and Serious Crimes Ordinance sanction the authorities to take serious actions against unlawful acts involving cryptocurrencies like fraud or money laundering. On February 9, 2018, Hong Kong’s Securities and Futures Commission (SFC) alerted investors to the potential risks of dealing with cryptocurrency exchanges and investing in initial coin offerings (ICOs). Further, the alert stated that SFC has taken regulatory action against a number of cryptocurrency exchanges and issuers of ICOs. The SFC has warned cryptocurrency exchanges in Hong Kong or with connections to Hong Kong that they should not trade cryptocurrencies, which is characterized as ‘securities’ as defined in the Securities and Futures Ordinance, without a license.
The German Finance Ministry has treated Cryptocurrency as a ‘unit of account’ and stated that it can be used for trading in the country. It comes under the tax regulations and purchases made with it should additionally pay VAT as with euro transactions. Cryptocurrency stands as private money and the banks are allowed to sell and store them.
Cryptocurrency exchanges are legal if they are registered with the Financial Conduct Authority (FCA). Her Majesty’s Revenue and Customs (HMRC) has issued a brief on the tax treatment of cryptocurrencies, stating that their “unique identity” means they can’t be compared to conventional investments or payments, and their “taxability” depends on the activities and parties involved. Gains or losses on cryptocurrencies are, however, subject to capital gains tax.
The cryptocurrency exchange should be registered with Autorité des Marchés Financiers (AMF). AMF is the regulator of the crypto industry in France. Article 26 of the PACTE Bill is designed to regulate initial coin offerings (“ICOs”), also called initial token offerings.
The cryptocurrency exchange should be registered with the Ministry of Finance. The taxation status is still in ambiguity and a clear set of laws are yet to be implemented. The revenue department has classified Bitcoin as a foreign currency and the profit through foreign currency trading is taxable as per the law.
The central bank of Netherlands known as De Nederlandsche Bank, DNB has been studying the opportunities and scope of blockchain and cryptocurrencies. In January 2018, they issued a statement stating that, ‘cryptocurrency does not currently fulfill the role of money.’ The Netherlands supports European Union’s Fifth Anti-Money Laundering Directive (5AMLD) that brings cryptocurrency-fiat currency exchanges under the EU’s anti-money laundering legislation. Cryptocurrencies held by individuals are subjected to taxation under the clause of savings and investments.
There is currently no rule that specifically refers to cryptocurrencies and hence the status is considered legal. Cryptocurrency is not recognized under Turkish law and it is not considered to be electronic money. Turkey’s Financial Crimes Investigation Board (Masak) has filed a legislation draft in the parliament stating that illegal bets and games of chance will be treated as crimes. As crypto exchanges are used as a payment tool, Masak intends to check digital asset trading platforms and this can have several implications in the future.
Cryptocurrencies are legal and are accepted as payment in some contexts. The exchanges are legal and must obtain a license from the Swiss Financial Market Supervisory Authority (FINMA). Exchanges are regulated by the Swiss Federal Tax Administration (SFTA). Cryptocurrencies are treated as assets and must be declared in annual income tax returns. In 2019, it was officially announced that the Swiss government is considering legislation that would encourage innovation in blockchain technology.
Cryptocurrencies are not considered as a legal tender. The exchanges are legal and must register with the Financial Intelligence Unit (FIU). The regulatory framework includes strict reporting and KYC rules. Estonia is more crypto-friendly when compared to other EU member nations. The government regards cryptocurrencies as the ‘value represented in digital form’ and is treated as digital assets that fall under tax provisions. In January 2020, the government announced that virtual currency service providers will be treated the same as financial institutions under the Estonian Money Laundering and Terrorist Financing Prevention Act.
Cryptocurrency exchanges are legal and must be registered with Commission de Surveillance du Secteur Financier (CSSF). In August 2018, authorities issued advice on the tax treatment of cryptocurrencies which, in a business context, depends on the type of transaction involved. In early 2019, lawmakers passed legislation that gave transactions performed using blockchain technology the same legal status as those done using traditional methods.
Cryptocurrency exchanges are legal and must be registered under the Virtual Financial Assets Act (VFA). The country has a very positive approach to cryptocurrencies and they are recognized by the government as a medium of exchange, a unit of account, or a store of value. In 2018, the Maltese government introduced legislation to define a new regulatory framework for cryptocurrencies and address AML/CFT concerns. The Malta Digital Innovation Authority (MDIA) was also established which will be the government authority responsible for creating crypto policy, collaborating with other nations and organizations, and enforcing ethical standards for the use of crypto and blockchain technology.
The country has no specific laws or regulations on cryptocurrencies. In 2013, the Financial Supervisory Authority (FSA) issued a statement declaring that bitcoin is not a currency and stating that it will not regulate its use. In 2017, FSA released a report on ICOs (Initial Coin Offerings) in which it stated that cryptocurrencies that are solely used as a means of payment continue to not be regulated by the Authority. However, ICOs may be conducted in such a way as to fall under the purview of the Authority and thus would be subject to Danish regulation in terms of legislation on alternative investment funds, prospectuses, and money laundering. The Danish Tax Council in 2018 declared that losses on sales of bitcoins purchased as an investment are tax-deductible and that profits are subject to income taxation.
Sweden doesn’t have specific laws and regulations for cryptocurrencies and is another most favorable country for businesses among EU member nations. The Swedish Financial Supervisory Authority has legitimized the fast-growing industry by publicly proclaiming cryptocurrencies as a means of payment. For certain businesses interacting with fiat (mainly exchanges) the current regulation dictates that an application for approval/license must be filed and all the AML/CTF and KYC regulations applicable to traditional financial service providers must be followed.
The Financial Supervisory Authority (Fin-FSA) is the registration and supervisory authority for cryptocurrency exchanges. As per the rule by Fin-FSA, only exchanges meeting statutory requirements will be able to carry on their activities in Finland. Exchanges who do not comply with statutory requirements will be prohibited from continuing their business activities.
Cryptocurrency exchanges are legal and must be registered with the Gibraltar Financial Services Commission (GFSC). The exchanges are mandatorily required to follow the principles of the DLT framework, which include a strong focus on the detection and disclosure of money laundering and terrorist financing. Further, they are subjected to pay a 10% corporate income tax.
Slovenia treats cryptocurrencies as virtual currencies, meaning that they are neither financial instruments nor monetary assets under the Slovenian law on payment services and systems. The country updated its anti-money laundering law by explicitly referring to cryptocurrencies. The law defines all crypto-exchanges and brokers engaged in trade with cryptocurrencies as financial institutions for anti-money laundering purposes. Thus, such entities have to follow the transparency rules and compliance procedures applicable to financial institutions. The income obtained by individuals in the form of cryptocurrencies is subject to personal income tax.
In 2017, the National Bank of Georgia announced that cryptocurrency is not a legal tender and is not regulated by any law. The bank also urged people to be careful in dealing with cryptocurrencies and be aware of the potential risks involved before investing in it. The traders are not subjected to pay income tax for the same.
In March 2018, the Presidential Decree on the development of the digital economy came into effect. This provision permits the buying, selling, exchanging, and mining cryptocurrency. The tax and currency regulations are extended only to legal entities operating from High Technologies Park, which is a special economic zone. The income generated through mining and trading cryptocurrencies is tax-free until 2023.
In May 2019, the government reported that it passed a motion to implement a new law on the ‘Blockchain Act’. The Blockchain Act allows every possible asset, including real estate, bonds & securities, to be tokenized, digitalized, and listed on a cryptocurrency exchange. The same year in the month of October, the legislature voted unanimously to approve the ‘Token and Trustworthy Technology Service Providers Act.’ With this law, Liechtenstein became the first country to comprehensively regulate the token economy.
Cryptocurrencies are not considered as a legal tender, but exchanges are legal and the rules for the same vary from state to state. Cryptocurrencies are treated as property for U.S. federal tax purposes. The Securities and Exchange Commission (SEC) in March 2018, mentioned that the board considers cryptocurrencies to be securities and will apply securities laws comprehensively for digital wallets and exchanges. The Commodities Futures Trading Commission (CFTC), described bitcoin as a commodity and allowed cryptocurrency derivatives to trade publicly. Recently, a lawmaker named Paul Gosar had introduced the ‘Crypto-Currency Act of 2020.’
Cryptocurrency is not a legal tender but the exchanges are legal and they have to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The Canada Revenue Agency (CRA) has treated cryptocurrencies as property for taxation purposes. The Canadian government has brought entities dealing in virtual currencies under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The Canadian Securities Administrators (CSA) in August 2017, declared that securities laws are applicable to cryptocurrencies. In January 2018, Bank of Canada characterized them ‘technically’ as securities.
In March 2018, the Fintech law defined cryptocurrencies as the representation of the electronically registered value used by the general public as a means of payment for all types of legal transactions made only by electronic means. Mexico has also enacted a law that states that financial institutions dealing with cryptocurrencies should report transactions if the amount exceeds a certain limit. This rule is to comply with anti-money laundering laws.
There is no specific legislation which governs the crypto industry in Bermuda. In 2017, the government launched a task force to advance the regulatory environment and develop Bermuda as a destination for utility tokens, tokenized securities, cryptocurrencies, and coin offerings. The task force was assigned to create a cryptocurrency association with a defined code of conduct and rules of operation. The Bermuda-based token issuers must join and comply with the code of conduct of the Bermuda Crypto Association, which includes measures to ensure enhanced business transparency, KYC, and AML.
Cryptocurrencies are legal as there is no regulation that restricts the ownership of the same by a person or an entity. There are no licensing requirements in Brazil in order to issue own or transact with cryptocurrencies. However, the Central Bank of Brazil issues notice at regular intervals discouraging the use of cryptocurrencies due to operational risks. Cryptocurrencies are treated as financial assets and hence must be declared in IT returns like other assets.