Crypto Regulations Around the World

Cryptocurrency has grown from being ‘a yet another investment option’ to a sound payment system in less than a decade. Governments around the world are catching up, too. Countries are exploring ways to regulate cryptocurrencies such that they positively affect their economy. In this blog, we have highlighted cryptocurrency regulations across the world’s top countries.

• United States crypto regulations

Current status: Legal; regulations of cryptocurrency vary state-wise.

General regulations

The US has a love-hate relationship with cryptocurrencies. While some people in Congress see crypto as the future of fiat money, skeptics look at it as a currency that facilitates money laundering, is vulnerable to scams, and can be used for cybercrimes.

Here, each government agency looks at crypto-assets differently. While the Securities and Exchange Commission (SEC) is considered the most powerful regulator across the US, FinCEN (the Federal Reserve Board) and Commodity Futures Trading Commission (CFTC) have their own set of guidelines regulating cryptocurrency assets.

The SEC looks at cryptocurrencies as securities, whereas according to CFTC, Bitcoin is a commodity. Last but not least, the Treasury considers it a currency.

To streamline the regulations, Biden’s administration released an executive order in March 2022 directing the agencies to unify their regulatory efforts to protect consumers, investors, and businesses in the United States.

Later, in January 2023, the government also released a roadmap to mitigate cryptocurrencies’ risks, thus encouraging agencies to “ramp up enforcement” and “issue new guidance” wherever necessary. Furthermore, it also asked Congress to “step up its efforts” and “expand regulators’ powers” to prevent misuse of customers’ assets.

After this, regulators in the US released a joint statement that highlighted the risks of crypto assets to the banks. While the statement itself does not restrict banks from offering crypto services, it states that “issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public and/or decentralized network or similar, is highly likely to be inconsistent with safe and sound banking practices.”

Holding and investing in cryptocurrencies in the US is completely legal; however, the regulations are still evolving. The government is regulating crypto platforms and exchanges instead of directly regulating the currencies.

Taxes on crypto

The Internal Revenue Service (IRS) considers cryptocurrencies as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” and has released guidelines on how crypto will be taxed.

Taxes levied on crypto investments can range from 0% to 37%, depending on your trades. Here’s a comprehensive guide on reporting taxes on your crypto investments. Every taxpayer is required to disclose their yearly cryptocurrency activity on their tax returns.

• United Kingdom cryptocurrency regulations

Current Status: Legal; the regulations are evolving.

The UK’s crypto regulations have constantly evolved since Rishi Saunak became prime minister in October 2022. It was a notable event for the UK crypto community due to his perspective on crypto earlier the same year.

When he served as the chancellor of the exchequer (i.e., finance minister) — Saunak proposed a radical plan to make the UK a global technology hub for crypto enthusiasts.

He proposed to regulate stablecoins, making them a viable alternative to existing payment forms across the country.

“It’s my ambition to make the U.K. a global hub for crypto asset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country.” — Sunak (when he announced the plan, Source)

General regulations

There are no specific guidelines for regulating cryptocurrencies in the UK. The country views crypto assets as property, and all exchanges must register with the UK Financial Conduct Authority (FCA) unless they have applied for an e-money license.

The FCA has bound crypto firms to comply with KYC, AML, and CFT reporting obligations to ensure customers’ funds are safe. It also developed rules to cover Virtual Asset Service Providers (VASPs) while encouraging innovation and development. Moreover, FCA has completely banned the trading of crypto derivatives.

Taxes on crypto

In the UK, cryptocurrencies are not considered legal tender, and all such investments are taxable. If your capital gains are over £12,300, you will be required to pay 10% or 20% tax, depending on your investment type. Moreover, taxes between 20% to 45% will be applied to any additional income from crypto. The exact amount may vary, depending on the transaction type.

• Canada crypto policy

Current Status: Legal; Crypto is heavily regulated, and all the exchanges should comply with AML/CFT.

The Canadian government has been very proactive when it comes to setting up a regulatory framework for cryptocurrencies. In 2014, they became the first country to amend their Proceeds of Crime and Terrorist Financing Act (PCA) to include persons and entities dealing in crypto. Here, crypto is not a legal tender; however, it can be used to buy goods and services online and at the stores that accept it.

General regulations

In August 2022, Canada’s Office of the Superintendent of Financial Institutions (OSFI) — their banking and insurance regulator, issued federal rules for crypto. They have embraced a centralized approach to a decentralized currency. Every crypto business in Canada has to abide by the government’s Anti-Money Laundering Laws (AML). The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is constantly working to improve crypto regulations in the country.

Tax regulations

The Canada Revenue Agency (CRA), a federal agency akin to the IRS in the United States, views cryptocurrencies as a commodity. And hence, citizens are required to report their capital gains on their income statement. Here, crypto is taxed at the same rate as the Federal and Provincial Income Tax rates. However, only half of the capital gain is subjected to taxes. The taxes here may range from 15% to 33%, depending on your transactions and total income.

• El Salvador cryptocurrency regulation

Current status: Bitcoin is considered as legal tender. Very lenient regulations.

Being one of the earliest adopters of cryptocurrencies, El Salvador has relatively lenient laws for regulating crypto. Their president, Nayib Bukele, made headlines in June 2021 when he announced that the country would adopt Bitcoin as a legal tender. He claimed that crypto will not only boost economic growth but also facilitate financial inclusion and foster innovation.

General regulations

Since Bitcoin’s adoption as a legal tender, the country has embraced the currency, allowing all their citizens to use crypto without any restrictions. They are also planning to build a city powered by geothermal energy to attract Bitcoin mining.

The International Monetary Fund (IMF) has requested them to step back, citing concerns about El Salvador’s financial stability. Despite many government agencies and financial institutions considering their move to legal tender status a risky experiment, El Salvador’s enthusiasm toward Bitcoin remains unaffected.

Taxes on crypto

Rightly known as crypto heaven, El Salvador doesn’t impose any taxes on cryptocurrency. All crypto transactions are tax-free. The government made this move to attract more foreign investment, combat hyperinflation, and lessen dependence on the US dollar. Thus, if you are running a crypto business or heavily investing in virtual currencies, El Salvador is a tax heaven.

• China crypto regulations

Current Status: Considered illegal. No crypto mining activities/trading allowed.

The People’s Bank of China — the country’s central bank — banned financial institutions from dealing in crypto in 2013. They later extended this ban to crypto exchanges and ICOs, removing Bitcoin completely from their economy.

China was also once an epicenter of Bitcoin mining, primarily due to the low electricity costs and easy availability of mining rigs. It was estimated that China accounted for more than 65% of global Bitcoin mining operations at its peak.

Bitcoin mining in China was still considered legal until China’s Financial Stability and Development Committee, the financial regulatory agency, announced they would “crack down on bitcoin mining and trading behavior, and resolutely prevent the transfer of individual risks to the society.”

That brought the country’s Bitcoin activities to a screeching halt. Since then, no Bitcoin trading or mining activities have been recorded anywhere in China.