Who limits and stimulates the crypto-market?

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grafika Joanna Rybak

Top 10 crypto regulations.

The world is changing and we are changing with it — the Romans used to say two thousand years ago. Although cryptocurrency from the perspective of the Roman Empire is just a donkey, it has already lived to see a number of legal solutions to regulate its trading.

Probably, if it weren’t for the state’s tax bans, it wouldn’t be so urgent, but precisely because the turnover on cryptocurrencies is breaking records, governments have taken to regulating this financial sphere hard.

For this reason, among others, we at ccFOUND decided to take a look at the new regulations in order to have at least a preliminary idea in which country cryptocurrencies are liked the most and in which the least.

If you are interested in the cryptocurrencies investments and you want to stay aware of the legal framework, just see below which state is most friendly for cryptocurrencies and which is most restricted.

Japan has a very progressive regulatory climate. Bitcoin and other cryptocurrencies are legal property. Law provides support to still unlicensed exchanges in terms of compliance. Japan, as an environment for cryptocurrencies has the growing AML concern. In December 2021 law was adopted to regulate issuers of stable coins in order to address risks to customers and limit opportunities to use tokens for money laundering and suspicious activity.

In Switzerland exchanges are legal and the country has adopted a remarkably progressive way towards cryptocurrency regulations. In 2021 Swiss Federal Council adapted financial regulations to address illegal use of cryptocurrencies. They consider cryptocurrencies to be assets as subject to the wealth tax and must be annually declared on the tax returns.

Gibraltar. The crypto-regulations global leader. Cryptocurrency there, is legal and operates within a regulatory framework. Although cryptocurrency is not considered legal tender the exchanges pay 12, 5% income tax only, as other corporations. It is to support innovations in products for the crypto-economy. Gibraltar has long enjoyed the reputation of a low taxation territory and so does want to impose tax on capital gains or dividends from the cryptocurrency. In 2021 Gibraltar further defined the standards for exchanges in coordination with UK and the EU standards. The state policy is attracting investors who are seeking to take advantage of a friendly regulatory environment. In 2022 blockchain firm Valereum declared opening of cryptocurrency exchange by acquisition of 90% stake in Gibraltar Stock Exchange GSE, which paved a way for a fully regulated dealing for fiat as well as for the cryptocurrencies.

In Malta, the MDIA is the state regulatory creating crypto policy, enforcing ethical standards for the use of crypto- and blockchain technology, but with a free market approach. Malta is very progressive in the cryptomarket development, positioning itself as a global leader. While cryptocurrencies are not legal tender in Malta, they are recognized as exchange assets and accounts. There is no VAT applicable to transactions exchanging fiat currency for crypto. Cryptocurrencies are free of other taxation and limits. They are also focused on AI development in the blockchain technology and they may implement specific guidelines for security token offerings. With those strategies in mind, additional Maltese regulations are likely in the near future.

Another country leading the market is Estonia. Cryptocurrency regulations, in comparison to other EU member-states, are very friendly to the users. Estonia’s government does not accept cryptocurrencies as legal tender too, but regards them as “value represented in digital form”. Cryptocurrency exchanges are legal in Estonia and operate under a well-defined regulatory framework that includes strict reporting and KYC rules.

Accordingly, it classifies them as digital assets for tax purposes but not subject to VAT. Lots of initiatives with potentially significant regulatory consequences have been adopted in Estonia after the 2017 AML/TFA act, including the concept of national cryptocurrency “estcoin”. Estonia also published regulations last year for stock exchanges and imposed the ban for private wallets provided by VASPs, what concerned many of banning private ownership of cryptocurrencies, but regulation applied finally to VASPs exclusively.

In Singapore, cryptocurrency exchanges and trading are legal. Although cryptocurrencies are not considered a legal tender, bitcoin is an asset and subject to tax. Government will regulate the issue of digital tokens if those tokens are classified as “securities”. Also, high standards for cryptocurrency service providers, and higher technology risk management are to be regulated. Singapore recently encouraged to immigrate the high profiles Chinese ByBit, Huobi, Cobo, and OKCoin and their clients. All due to China restrictions on cryptocurrencies and harsh regulations.

The European Union and UK adopted the MICA Markets in Crypto-Assets Regulation, with the new draft for further regulatory measures, including the introduction of a new licensing system for crypto-asset issuers, industry conduct rules, and new consumer protections. UK after Brexit has no specific laws currently, cryptocurrencies are not considered legal tender and exchanges have registration requirements.

Australia is a pattern of proactive cryptocurrency regulation state, and illustrates the country’s continued effort to provide a clear framework for crypto businesses. In particular, the Australian government is moving to increase its regulation of cryptocurrency exchanges. The proposed framework in 2022 would enable consumers to safely purchase and sell crypto assets in a regulated environment, and represents a move to position Australia at the forefront of the global effort to keep tech companies in check.

In the USA and Canada there is conservative approach at the state level with the slow progress in legislation on the federal level. The Justice Department continues to coordinate with the SEC and CFTC to ensure consumer protection first. In 2021, President Biden turned his attention to stable coin and addressed the danger of the tokens’ growth in value. His administration released recommendations and appeals for the new legislation. Congress also debated the status of cryptocurrency. Cryptocurrency exchanges are regarded as brokers for the moment and have to comply with the relevant AML/CFT regulations, reporting record-keeping responsibilities. In Canada the government evaluates recent changes before applying additional acts.

In 2020 China’s Civil Code rule is that cryptocurrencies are “property” for inheritance purposes. China does not intend to lift the ban on cryptocurrencies anytime soon, but recently high officials, endorsing blockchain technology, revealed that they intend to be a leader of the crypto world.

Last but not least, Russia provides a sort of legal schizophrenia. The government proposition of the bill upholds the ban on crypto payments for goods and services, and limits the total investment that Russians can invest in cryptocurrencies, but defines and enhances to mine cryptocurrencies. Russia shares 12% of the global cryptocurrency market. Number 2, behind the USA, in the mining industry, due to its excess of cheap electricity, cold climate. Meanwhile the Central bank has taken a hard line against crypto regulations, describing cryptocurrencies as a black market.

So what?

As our overview shows, cryptocurrency is loved by democratic countries. The closer we get to dictators, the worse it gets. Fortunately, there are many more democratic countries in our ranking.

Fortunately also for the cryptocurrency itself, even in authoritarian systems, it is in the hands of citizens, although in the non-statutory zone, it circulates and develops.

Well, forbidden fruit tastes better.

tekst Tamar, opracowanie angielskie Joanna Giersig

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