Since debuting in 2009, cryptocurrency has taken the world by storm. Despite being used for buying goods and paying for services, there is still some debate in countries all over the world as to how best to regulate its use, particularly when it comes to trading. Whilst most developed countries, such as the UK, Canada and America, allow the use of bitcoin, there are very few cryptocurrency regulations in place and there are currently no universal rules or laws in place that regulate Bitcoin.
With the crypto market being a lawless playground, it is easy for people to be influenced and also scammed. With the rise of more security risks in the market, more countries are now looking at having cryptocurrency regulations that will help to protect people from being at risk.
As cryptocurrency interest increases across the world, so does the interest in the regulations that are put in place to protect both investors and traders. Many countries have now banned mining and trading in these markets completely, whereas other countries are trying to figure out how they can regulate it more. El Salvador is currently the only country in the world where bitcoin has been declared as legal tender.
With cryptocurrency regulations varying from country to country, it is difficult to keep track and trading can be a confusing road. In our latest blog, we will go through the countries that are looking to put cryptocurrency regulations in place and what this means for traders and investors.
United States
Cryptocurrencies: Not considered legal tender
Cryptocurrency exchanges: Legal, although regulations vary by state
Due to the United States consisting of different states with different laws and regulations, it is difficult to have a complete state-level cryptocurrency regulation, but the US is currently trying to develop federal cryptocurrency regulations. The Financial Crimes Enforcement Network (FinCEN) does not consider crypto to be legal tender, but instead, exchanges are money transmitters. In other words, crypto tokens are seen as an alternative to currency.
Exchanges:
Cryptocurrency exchanges are legal in the United States under the regulatory scope of the Bank Secrecy Act (BSA). This means that cryptocurrency trading providers must register with FinCEN, maintain records, submit reports to the authorities and also implement the AML/CFT program. The US Securities and Exchange Commission (SEC) considers cryptocurrencies to be securities, meaning the same laws apply to crypto wallets. Bitcoin and other currencies are allowed to be traded publicly as part of the US cryptocurrency regulations.
Future US Cryptocurrency Regulations:
The US treasury has shown that there is a serious need for more cryptocurrency regulations to be administered in order to tackle global criminal activity. FinCEN brought forward a new cryptocurrency regulation to have data collection requirements on the crypto exchange and wallets. The regulation will be implemented in Autumn 2022. This new cryptocurrency regulation will require exchanges to report suspicious activity for transactions over $10,000 and will also require wallet owners to identify themselves when sending over $3000.
UK
Cryptocurrencies: Not legal tender
Cryptocurrency exchanges: Legal, cryptocurrency regulations require registration with FCA
The United Kingdom’s advances with cryptocurrency regulations have been measured. The UK, at the moment, has no specific cryptocurrency regulations or laws, as cryptocurrencies are not seen as legal tender and the exchanges have a cryptocurrency registration regulation in place. HMRC has stated that due to cryptocurrency being a “unique identity”, it can’t be compared to the more conventional investments or payments. Taxability also depends on the activities and the parties involved.
Exchanges:
The UK left the EU in 2020 and, when they did, they also transposed the cryptocurrency regulation requirements that were set out in 5AMLD and 6AMLD into domestic law. From this, crypto exchanges in the UK need to register with the Financial Conduct Authority and must also abide by reporting obligations. Whilst this cryptocurrency regulation doesn’t make any special facilitations for exchanges, FCA insists that activities involving crypto exchanges must comply with Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
Future Cryptocurrency Regulations:
For the moment, it looks like the UK is remaining consistent with the cryptocurrency regulations in place across the EU, but may diverge at a later date. The treasury also emphasises that the UK intends to bring certain cryptocurrencies under a financial promotions regulation and will also be looking at broadening the cryptocurrency regulations in 2022.
China
Cryptocurrencies: Not legal tender
Cryptocurrency exchanges: Illegal
In 2013, the People’s Bank of China (PBOC) banned organisations to handle Bitcoin transactions. They then later put more cryptocurrency regulations in place by banning ICOs and domestic cryptocurrency exchanges in 2017. China does not see cryptocurrency as legal tender, which is unsurprising given that the country has very harsh cryptocurrency regulations in place. In 2020, the Chinese government has put a status on cryptocurrency for purposes of inheritances.
Exchanges:
In June 2021, China placed a blanket ban on all domestic crypto mining, which then later resulted in making all cryptocurrencies outlawed. This new cryptocurrency regulation banned the use of all exchanges and the government made everyone sell their tokens. Although this cryptocurrency regulation is a blanket ban, some sites are not picked up by Chinese firewalls, meaning there is a way around this by using foreign platforms.
Future Cryptocurrency Regulations:
Although there is no indication that China will lift the blanket ban of their cryptocurrency regulations, recent statements suggest that due to blockchain technology being at the forefront of innovation, China may intend to become a global leader in the digital currency space. China has also been working on their own digital currency (e-CNY) and in 2021, it completed its first test in several areas of the country. The e-CNY digital currency was used in several cities, with it being developed for use to replace cash and coins and be used as payment for toll payments, bills, shop goods and transport fares.
Conclusion
There are mixed reviews on whether cryptocurrency needs regulations and, if they were to be imposed, what they would entail. But, with the increase in the number of people being scammed through crypto trading and investments, there is certainly room for more regulation to be put in place.
It is safer for investors if cryptocurrency regulations were put into place so that they can exchange with safety, plus it is likely to provide peace of mind for investors, creating a better environment for everyone. However, cryptocurrency regulations haven’t always been in place, so if you believe you may have been the victim of a crypto scam, please contact us today and we can provide a free consultation.