Understanding Virtual Currency Regulations Around The World

Virtual currency regulation

Cryptocurrency has gone mainstream, and its popularity has exploded in recent years. However, as governments began to respond to this emerging industry, several important issues emerged.

Regulatory changes are of great importance to crypto traders, as they can have a significant impact on coin valuations.

Governments have adopted a wide range of approaches to regulating crypto exchange platforms, even defining assets in different ways. Until now, digital currency regulation has mainly focused on:

1. Consumer protection

Protecting consumers is the biggest challenge for governments for two main reasons. Firstly, because cryptocurrencies have proven to be unstable, and secondly, because cryptocurrencies are designed to exist outside of central control, meaning that anyone with an internet connection can That means regulations can be easily ignored.

2. Tax policy

One of the many questions that arises from allowing the investment and use of cryptocurrencies is the issue of taxation. A related issue appears to be how to classify virtual currencies and certain related activities for tax purposes. This has led to differences in how virtual currencies are classified for tax purposes. This means that depending on the jurisdiction and legal entity that benefits from the increase in value, virtual currency may be subject to VAT, income tax, and corporation tax, and a few jurisdictions even allow loss deductions. To do. As the following examples demonstrate, the countries surveyed classified virtual currencies differently for tax purposes.

Israel is taxed as an asset. 

Bulgaria is taxed as a financial asset. 

Switzerland is taxed as a foreign currency. 

Argentina and Spain are subject to income tax. 

Denmark: → Subject to income tax, losses are deductible. 

United Kingdom: → Companies pay corporation tax, unincorporated companies pay income tax, and individuals pay capital gains tax. 

Countries that regulate virtual currencies

Since most cryptocurrency transactions are anonymous and can cross national borders, it is difficult to identify the original source of funds flowing into a cryptocurrency network or to determine national regulations if this anonymity changes. This can be difficult to do and can have a significant impact on price. The majority of trade is processed through exchanges registered in countries such as Malta, Belize, and the Seychelles, according to research by JPMorgan. If the regulatory environment in these countries changes, these exchanges could easily be relocated, suggesting that such changes would have little impact. For example, Binance relocated from Hong Kong to Malta in response to regulatory changes.

Since Bitcoin remains the largest coin by market capitalization, this gives us a rough indication of trading volumes in each economic region and thus tells us where regulatory changes are likely to have the biggest impact on price. .

Some countries and regions where cryptocurrencies are legal include: 

In Finland, Bitcoin is treated as a commodity rather than a currency.
In Belgium, the Federal Treasury has also exempted Bitcoin from VAT. 
Bitcoin is uncontrolled and unregulated in Cyprus. In the UK, Bitcoin is subject to certain tax regulations.
In Bulgaria, the National Tax Agency (NRA) has brought Bitcoin under current tax laws. 
Bitcoin is considered legal in Germany, but taxes vary depending on whether you are an exchange, a miner, a company, or a user.
In Australia, Bitcoin is considered a currency like any other currency, and businesses can trade, mine, and purchase Bitcoin.
In Canada, Bitcoin exchanges are considered money service businesses. Considered a commodity by the Canada Revenue Agency (CRA).
Although attitudes toward Bitcoin are generally positive in the United States, several government agencies are working to prevent or reduce its use in illegal transactions.

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