Cryptocurrency is a global phenomenon, which also makes it a unique proposition for governments. Because crypto lacks backing by a central authority, different countries have different regulatory standards. These efforts, driven by their variability, have the potential to send crypto prices dramatically soaring or tumbling.
Here’s a snapshot of the current regulatory climate around the world.
Global regulators view bitcoin as legal tender, depending on the country. There is no global regulatory body for cryptocurrency yet, but the recent G-20 summit saw leaders of central banks from the world’s 20 biggest economies discuss the topic, with plans for action items by this summer. The Financial Stability Board, a watchdog group who regulates the G-20 economies, said they remained open to digital currencies. “The FSB's initial assessment is that crypto-assets do not pose risks to global financial stability at this time," said board Chairman Mark Carney, pointing out that, even at their peak value at the end of 2017, “global market value [of cryptocurrencies] was less than one percent of global GDP.” While some figures have expressed concern for cryptocurrency’s ability to aid money laundering and covertly finance terrorist groups, it has not rejected it outright – rather, there have been calls for increased protections for investors.
Japan is the world’s biggest market for bitcoin, proclaiming it to be legal tender in April 2017. Exchanges are legal once registered with the Japanese Financial Services Agency, and half of bitcoin’s daily volume is traded in Japanese currency. They became the first country in the world to create and implement a system to regulate trading after a series of serious hacks. The Japanese continue to oversee trading where they feel appropriate, punishing or shutting down multiple exchanges after a $530 million theft from Coincheck and issuing warnings to prominent exchange Binance for operating in Japan without a license.
Bitcoin is not considered legal tender in America. Treasury Secretary Steven Mnuchin has expressed reserve about crypto’s ability to assist criminals, but his concerns have done little to dampen enthusiasm among investors, who trade on exchanges that are legal depending on the state and handle the second largest volume of bitcoin worldwide, at 26%. Regulators are currently grappling with how to classify bitcoin and other cryptocurrencies. The SEC believes them to be securities that should be regulated as such, cracking down particularly hard on initial coin offerings. The CFTC classifies crypto as a commodity, while the IRS says it is not actually a currency.
While no member state can introduce its own cryptocurrency, exchanges are legal by country. Money laundering and other criminal activities remain a concern among government officials, and regulations differ from nation-to-nation. Regulators have been cracking down, with French regulator Autorite des Marches Financiers banning 15 exchanges in March. French officials have also revealed a joint plan with Germany to regulate cryptocurrency markets.
The UK does not recognize Bitcoin as legal tender, but exchanges are legal if registered with the Financial Conduct Authority, while holds them to the stringent standards of traditional financial institutions. "The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system," said Mark Carney, who also governs the Bank of England. "Being part of the financial system brings enormous privileges, but with them great responsibilities."
South Korea does not consider bitcoin to be legal tender, though exchanges are legal if registered with the Financial Services Commission. Trading with anonymous bank accounts, however, is prohibited. The country is a global hub for trading, but the regulatory climate is more mixed. The Korean government floated a shutdown of crypto exchanges in 2017 before backing off while reaffirming their commitment to acting against illegal and unfair trading behavior. More comprehensive regulatory offerings have been discussed but not finalized.
Bitcoin is not recognized as legal tender in China, and trading is illegal. The government banned ICOs in 2017 while shutting down all crypto exchanges in the country. Some banking officials have recommended banning trading all virtual currencies, as well as punishing the people and businesses that provide trading-related services. While there is no concrete action yet, crypto enthusiasts in the country have shifted their focus to mining and other activities – at least until the government steps in.
Singapore may not view bitcoin as legal tender, but trading is legal, mostly regulated by the Monetary Authority of Singapore. The country is trying to position itself as crypto-friendly while also urging investors “to act with extreme caution and understand the significant risks they take on if they choose to invest in cryptocurrencies."
Switzerland is viewed as very crypto-friendly. Bitcoin is considered legal tender, and exchanges are legal if registered with the Swiss Financial Market Supervisory Authority. Zug, the town south of Zurich in what is called the country’s “Crypto Valley”, is home to the Ethereum Foundation and other crypto businesses. Regulators have issued strict guidelines for ICOs but remain open to them – four of the ten biggest proposed ICOs in the world have been in Switzerland.
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