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Crypto rules around the world
Will India ban all crypto assets or just a few? How will it regulate non-fungible tokens, which aren’t currencies at all?
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By all accounts, the Government of India will introduce a bill to regulate cryptocurrency in the ongoing winter session of Parliament, but nobody yet knows exactly what’s in it. Will India ban all crypto assets or just a few? How will it regulate non-fungible tokens, which aren’t currencies at all?
While we wait (and wait) for clarity, here’s a look at crypto regulations in five countries, two of which are crypto-friendly, two that are crypto-hostile, and one that’s just crypto-confused.
The United States — Confused
Though it has more crypto investors, exchanges, trading platforms, mining companies and investment funds than any other country, the US still lacks clear official rules for the asset class.
What’s more, legislators and regulators seem woefully behind the curve. When executives from six major cryptocurrency firms went to the US House of Representatives earlier this week, it marked the first time that industry's senior leaders explained their businesses to legislators, Reuters reported.
The US Congress is unlikely to make new crypto rules any time soon, analysts told Reuters, and lawmakers treated the hearing mainly as a fact-finding exercise.
Here’s how muddled things are right now: the US Securities and Exchange Commission (SEC) — the most powerful regulator — typically views cryptocurrencies as securities, while the Commodity Futures Trading Commission calls Bitcoin a commodity and the US Treasury calls it a currency. The Internal Revenue Service, meanwhile, defines 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 issued tax guidance.
China — Hostile
China, like the US, is one of the world's largest cryptocurrency markets. That’s despite the Chinese government’s extreme hostility towards cryptocurrencies that dates back to 2013. That December, a joint notice from the People’s Bank of China, the information ministry, and other financial watchdogs barred banks from handling bitcoin-related transactions.
In 2017, Chinese regulators banned initial coin offerings, a way of raising funds through cryptocurrencies that had gained popularity — and notoriety. That ban caused the price of Bitcoin to fall by 6%.
Two years later, in April 2019, China’s National Development and Reform Commission (NDRC) termed bitcoin mining an “undesirable” industry and recommended that it be restricted or phased out.
In May 2021, Chinese Vice Premier Liu He and the State Council issued a warning, saying it was necessary to “crackdown on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field”. By then, authorities in Inner Mongolia, Xinjiang and Sichuan provinces — which were all major Bitcoin mining hubs — had already started introducing policies to stifle the operations of Bitcoin miners.
On September 24, 2021 China's central bank announced that all cryptocurrency transactions were illegal, effectively banning the digital tokens. “Virtual currency-related business activities are illegal financial activities,” the People's Bank of China said, warning that it “seriously endangers the safety of people's assets”. China has since lost its status as the world’s largest miner of Bitcoin as several large mining companies have shut shop or shifted abroad.
Japan — Friendly
Japan, with progressive regulations, is one of the world’s most crypto-friendly nations. While cryptocurrency exchanges must be registered and comply with traditional anti-money laundering and combating the financing of terrorism rules, Japan does not have a single set of rules for all blockchain-based tokens. Instead, the legal status of a particular crypto token is determined by functions and uses.
Currency and utility tokens such as Bitcoin and Ether are regulated under the Payment Services Act, while ‘security tokens’, which represent shares, bonds or fund interests in tokens, are regulated under the Financial Instruments and Exchange Act.
Importantly, non-fungible tokens and other crypto assets that cannot serve as a means of payment (because every NFT is by definition unique) are not regulated as financial assets at all.
Bangladesh — Hostile but softening
Bangladesh, like India, has historically been hostile toward cryptocurrencies. In 2017, the country’s central bank warned that cryptocurrencies were considered illegal in Bangladesh, saying that transacting with them may violate existing rules to combat money laundering and terrorist financing. The notice states that Bitcoin transactions “are not authorised by the Bangladesh Bank or any regulatory agencies, and do not conform with provisions of the Foreign Exchange Regulation Act, 1947, and Anti-Terrorism Act, 2009, and the Money Laundering Prevention Act, 2012”.
But in 2020, the government published the National Blockchain Strategy: Pathway to be a Blockchain-enabled Nation, recognising the importance of the emerging technology.
It said: “Blockchain technology is widely regarded as one of the core and foundational technologies that will be one of the driving forces for the upcoming fourth industrial revolution… Only countries with expertise in these emerging technologies can successfully meet the challenges and exploit the opportunities.... This strategy recognises the need to explore blockchain technology in order to advance its technical capacity, increase efficiency in e-governance, and foster innovations. Here, we would like to highlight our extraordinary ambition: to guide Bangladesh into a blockchain-enabled nation.”
Portugal — Friendly
Portugal is widely seen as the most crypto-friendly country in Europe. Its non-habitual tax regime has attracted many crypto traders as it offers tax exemptions and reductions for 10 years for individuals of high cultural or economic worth. “An exchange of cryptocurrency for ‘real’ currency constitutes an on-demand, VAT-free exercise of services,” Portuguese tax authorities have said, according to Reuters.
On April 21, 2020, the government passed the Digital Transitional Action Plan, which established “free zones” to test crypto technology. The three main goals of the programme are digital inclusion of people, digital transformation of businesses, and the digitalisation of the state.
And in June 2021, Banco de Portugal for the first time issued operating licenses to two cryptocurrency exchanges, Criptoloja and Mind The Coin, recognising them as official “virtual asset providers”.
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