As the market rests momentarily after oscillating between red and green, there yet remains to be seen a universal, comprehensive set of regulations regarding cryptocurrencies. Amidst talks of bans, restrictions and electricity subsidies to miners, there seems to be no consensus amongst governments over one consolidated position on the fate of decentralised digital currencies and thus legality of Bitcoin, as well as other cryptos plus ICOs, needs to be assessed on a region to region basis. Let’s take a look at the policies or a lack thereof in various countries:
While the SEC suspended licenses of three ICOs recently, policy regarding the fate of cryptos still waits to be enacted upon, with only concrete news regarding regulations being that there will some very soon. Concurrently, these are the official stances of various authorities on crypto assets:
- The SEC has not approved any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies for listing or trading. SEC has not registered any initial coin offerings to date.
- The CFTC has designated bitcoin as a commodity and announced that fraud and manipulation involving bitcoin traded in interstate commerce and the regulation of commodity futures tied directly to bitcoin are under its authority.
- The IRS has ruled that bitcoin and other cryptocurrencies are viewed as property, and not currency, for tax purposes. Although some exchanges may properly issue a Form 1099, individuals remain responsible for keeping account of gains and paying taxes on them. Transactions in cryptocurrencies generate either short-term or long-term capital gains or losses and must be filed as such.
China has been taking ever-increasing actions to clamp down on all things cryptocurrency. Starting off by banning ICOs, China ordered a bank account freeze associated with exchanges, kicked out bitcoin miners, and instituted a nationwide ban on internet and mobile access to all things related to cryptocurrency trading. Essentially foreign Exchanges have ceased services in China and the official policy, simply put is to “ban all crypto-related commercial business including banning and blocking both domestic and offshore cryptocurrency trading platform websites.”
South Korea wants to bring cryptocurrency into the light and regulate it rather than banning it outright. A self-regulation process has begun to take place with the largest cryptocurrency exchanges joining together to form the Korean Blockchain Association (KBA) which was launched on January 26th. These moves are important for the long-term success of cryptocurrency following illegal trading rumours.
On April 1, 2017, Japan’s Financial Services Agency enacted a new law authorizing the use of digital currency as a method of payment. The Virtual Currency Act described and identified what a virtual currency is, clarified that bitcoin is considered an asset and that bitcoin can be considered a payment method. The act, however, did not declare bitcoin as a legal currency. On Sept. 29, 2017, the Financial Services Agency (FSA) of Japan granted its first licenses for digital currency exchanges to 11 companies. Post the Coincheck hack, however, there will likely be significant additional regulation in Japan soon.
The Financial Consumer Agency in Canada does not consider cryptocurrencies to be “legal tender,” excluding all but Canadian banknotes and coins from that definition. However, the country has a very open stance regarding crypto regulations. After weeks of hearings, which included testimony from experts like Andreas Antonopoulos, the Canadian Parliament approved Bill C-31 on June 19, 2014, the world’s first national law on digital currencies. The Canadian government has been communicative in its regulatory stances on cryptocurrency ever since: the Canadian Securities Administrators (CSA) sent out a regulatory notice on August 24, 2017, confirming “the potential applicability of Canadian securities laws to cryptocurrencies and related trading and marketplace operations and to provide market participants with guidance on analysing these requirements.” If you want a clear and concise interpretation of this notice, check out this article.
Venezuela is hosting the ICO for its new crypto token, “petro” at the time of this article being written. Given the economic sanctions, it is under by the United States, turning to its oil backed crypto is seen as a move to skirt the sanction and turn its economy around.
As stated by the Finance Minister Arun Jaitley, India does not recognise cryptocurrencies as legal tender. The recent release on unregulated deposits tightens the noose around crypto assets traders/exchanges and further engulfs the cryptocurrency scenario in the country in clouds of suspense. However, there are no regulations that formally ban cryptos or classify them as a security, asset, commodity or a new type of financial instrument. Given the lack of classification, taxation has yet to be done formally although Income Tax issued notices to many traders who had had capital gains trading in cryptos over the past year.
Despite the continued issuance of warning about crypto to investors, the union has not come out with formal regulations on crypto assets and ICOs. It can be expected that stricter regulations could follow in the future, although as of the moment, nothing concrete can be fathomed.
For a comprehensive breakdown of the legal status of Bitcoin and other cryptos, check out bitlegal.io