This article details cryptocurrency laws and regulations, sorted by country. I give each government a rating: Friendly, Neutral, or Hostile. Each section is divided by global region. Because government laws and regulations often change, I plan to release updates to this article every 2-3 months.
Findings: 15 of the 22 listed governments regulate cryptocurrency in a relatively friendly manner. 5 of the 22 governments were relatively neutral. 2 of the 22 governments were hostile. The overall outlook for cryptocurrency trading becoming a legitimate global institution looks good.
Other resources for information on this topic: Perkins Coie Law Firm, Wikipedia, Bitcoin Bans
United States – Friendly
The U.S. has been taking an approach to foster innovation and growth of blockchain and cryptocurrency while protecting investors from high risks and fraud.
On February 6, 2018, the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) spoke about cryptocurrency in front of Congress. Christopher Giancarlo, chairman for the CFTC, took the position that “we owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balanced response, and not a dismissive one.” Now we will have to wait for the U.S. Congress to make a move on how to regulate Cryptocurrency.
The CFTC recently released a statement against “pump-and-dump” schemes that are currently prevalent in the cryptocurrency community. The CFTC will pay bounty rewards for people who provide original information that leads to successful enforcement actions of pump-and-dump schemes.
A couple months earlier, in December 2017, the SEC released a statement on Cryptocurrency Initial Coin Offerings (ICOs). The SEC took the position that ICOs are subject to U.S. Securities regulations, meaning only accredited investors may participate in ICOs that are not (and almost never are) registered with the SEC. The SEC’s policy is intended to mitigate risk to investors, protect investors from fraud, and hold cryptocurrency projects potentially liable for selling non-registered securities to U.S. investors.
Back to February 2018, Wyoming’s House of Representatives unanimously passed two favorable blockchain bills. HB 70 defines utility tokens (cryptocurrency) as neither traditional money nor a security if it meets certain conditions: it cannot be marketed as an investment opportunity, it is exchangeable for goods or services, and the developers do not enter into an agreement to repurchase the tokens with the intent to manipulate the price. HB 19 will allow cryptocurrency exchanges to re-open in Wyoming after the Wyoming Money Transmitter Act created difficulties for exchanges to operate in Wyoming. Wyoming is also considering other bills that will reduce cryptocurrency taxes, and authorize the state government to use blockchain technology to store records and utilize smart contracts.
Also in February 2018, the Arizona Senate passed a bill that would allow residents to pay income taxes with Bitcoin and other state-recognized cryptocurrencies. Arizona and Wyoming are both creating policies that will spur technological innovation and cryptocurrency trade within their states.
Currently, The Internal Revenue Service (IRS) treats cryptocurrency as property, which subjects it to many taxable trading events. Trading cryptocurrency to fiat, trading cryptocurrency to cryptocurrency, and spending cryptocurrency are all taxable events that may moderately burden cryptocurrency trading.
Canada – Friendly
The Financial Consumer Agency of Canada (FCA) publishes online information regarding digital and cryptocurrencies. The FCA explains aspects of decentralization, peer-to-peer transactions, digital wallets, wallet security, and the risks of using digital currency. They further maintain that digital currencies are not legal tender, and that profits made from digital currencies are subject to Canada’s Income Tax Act. Goods and services exchanges for cryptocurrency must be reported as income for tax purposes, and transactions between cryptocurrencies are considered commodity transactions, and must be reported.
China – Hostile
China is notorious for some of the world’s largest bitcoin mines. In 2017, China banned cryptocurrency trading on Chinese exchanges and made ICO fundraising illegal, curving market demand, and causing a large overall downtrend in the cryptocurrency markets. Many Chinese residents turned to using foreign exchanges to trade cryptocurrency instead. Now, news is circulating from the People’s Bank of China (PBOC) that China may block all access to domestic and foreign cryptocurrency exchanges and ICO websites. It is unclear how much of an effect further Chinese cryptocurrency bans would have, but it could possibly continue to fuel negativity in the market.
Despite China’s harsh stance towards private cryptocurrency trading, the PBOC has been conducting research into issuing its own state-run cryptocurrency.
South Korea – Neutral
The cryptocurrency market’s all-time highs in January 2018 were quickly silenced, in part from fears that South Korea may ban cryptocurrency trading in a manner similar to China. News sites published articles mistakenly claiming there would be a total trading Ban in Korea, causing havoc in the cryptocurrency markets. The reports of a total ban were later discredited when more facts surfaced that the South Korean Ministry of Justice announced plans to ban cryptocurrency trading without the consent of other government agencies involved in regulations.
Later in January, South Korea proposed new rules to prevent anonymous trading and impose penalties for failing to comply. South Korean lawmakers also increased pressure on exchanges to pay corporate and local income taxes. Foreigners were also banned from trading on South Korean exchanges.
In February 2018, South Korea began to lighten its stance on cryptocurrency trading. Government representatives have pledged their support for regulated cryptocurrency trading. Exchange representatives said that the government will encourage banks to work with exchanges. It appears that South Korea is moving forward to permit regulated cryptocurrency trading.
Japan – Friendly
Currently, Japanese Yen accounts for over 36% of Bitcoin’s trading volume, more than every other currency. USD is second at just over 31%. Japan’s high demand for cryptocurrency is supported by a well-regulated legal system that supports the industry in a way that builds credibility among investors and creates familiarity with securities trading as it relates to cryptocurrency. According to Midori Kanemitsu, the CFO of bitFlyer Inc., one of Japan’s largest cryptocurrency exchanges, “Japan is the first and only country that has a proper legal system regulating cryptocurrency trading.” Kanemitsu criticizes New York State’s “BitLicense” that regulates cryptocurrency exchanges too strictly. Japan’s Payment Services Act was the first national registration system for cryptocurrency exchanges.
In January 2018, hackers stole $534 million worth of NEM from Coincheck, one of Japan’s 36 cryptocurrency exchanges. Coincheck was in the process of obtaining official recognition from Japan’s Financial Services Agency (FSA). The FSA warned Coincheck that it had poor cybersecurity that required dramatic improvements. Coincheck announced it would refund $430 million of lost funds to the 260,000 affected users.
In response to security issues, Japan’s cryptocurrency exchanges will establish a single self-regulatory body of only FSA-approved exchanges in an attempt to regain public trust. The regulatory body will work to create fair trade rules and self-regulations to plug legal loopholes. The body will also discuss cryptocurrency policy and legislation with the government, and create policies on insider trading, advertising and security. Members of the regulatory body that fail to follow the policies will be subject to penalties.
Singapore – Friendly
Singapore is often considered one of the more hospitable governments toward cryptocurrencies. In October 2017, the Monetary Authority of Singapore (MAS) published a clarifying document on cryptocurrency regulation. The document states that MAS does not directly regulate cryptocurrency, but regulates fraudulent and dangerous financial activities such as money laundering and terrorism. The MAS also requires that ICOs structured as securities comply with securities laws to protect investors, however, ICOs that are not structured as securities will only be subject to anti-fraud and anti-terrorism legislation. Singapore’s relaxed regulations and tax laws have sparked numerous ICOs in their territory.
In November 2017, the MAS also announced that it would partner with R3, a blockchain technology company and group of financial institutions to create Project Ubin; a project to conduct inter-bank payments with blockchain technology. Project Ubin’s advisors and partners include Bank of America, Merrill Lynch, Citi, Credit Suisse, DBS Bank Ltd., HSBC Limited, J.P. Morgan, Mitsubishi UFJ Financial Group, OCBC Bank, Singapore Exchange (SGX), Standard Chartered Bank, and Unite Overseas Bank. Collaborators on the technological aspects of the project include: Accenture, R3, IBM, ConsenSys, Microsoft, and Azure Blockchain. Project Ubin developed three software prototypes for decentralized inter-bank payments and settlements with liquidity savings mechanisms. The prototypes inspired two spin-off projects. The first is an SGX driven project focused on increasing fixed income securities trading and settlement cycles through distributed ledger technology (DLT). The second focuses on methods of conducting cross-border payments with central bank currency.
Thailand – Neutral
Thailand expects to clarify its stance on how to regulate digital currencies within the coming months. The government aims to protect against fraudulent activities and deceitful investments, while maintaining the benefits of using blockchain technology.
The Central Bank of Thailand (BOT) banned Thailand banks from five cryptocurrency related activities: investing or trading in cryptocurrency, exchanging cryptocurrencies, creating platforms for cryptocurrency trading, allowing clients to use credit cards to buy cryptocurrencies, and advising customers on cryptocurrency investing and trading.
The Thai government is also in talks with Cryptocurrency project OmiseGo (OMG) to create a national digital identification platform that provides consumer protection and security against fraud. OMG would also help provide online privacy, and provide a convenient, transparent, and fast way to make payments.
Vietnam – Neutral/Hostile
Vietnam’s Ministry of Justice and State Bank of Vietnam (SBV) are quickly preparing a report to present to the Council of Ministers. Currently, the scope of regulations are still unknown. In 2017, Vietnamese tax authorities lost a lawsuit against a local citizen who made a fortune trading Bitcoin. Under Vietnamese law, Bitcoin is not considered an asset, so the court ruled that authorities could not tax him for his gains. In late 2017, the SBV ruled that Cryptocurrency is not a legal means of payment, and effectively outlawed the supply and use in the marketplace. Violators could face fines up to 200 million Dong ($9,000). In January 2018, the Vietnamese State Securities Commission (SSC) requested that Vietnamese security trading firms refrain from providing cryptocurrency related services.
India – Neutral/Friendly
On February 1, 2018, Arun Jaitley, India’s finance minister noted that cryptocurrency is not legal tender and promised to crackdown on illegitimate activities relating to cryptocurrency. Many media sources interpreted his statements as a cryptocurrency ban, however, those media interpretations were incorrect. Although India’s Central Bank, the Reserve Bank of India (RBI) does not allow the use of cryptocurrency as forms of payments, the RBI supports the growth of Blockchain technology behind cryptocurrency. Jaitley took the stance that “the government will explore use of blockchain technology proactively for ushering in the digital economy.”
Iran – Friendly
Recent statements from Iran’s central bank suggest that Iran is developing a state-run cryptocurrency. On February 21, 2018, MJ Azari Jahromi, the Iranian Minister of Information and Communications Technology announced discussing cryptocurrency and blockchain at a meeting with the Iranian central bank’s board of directors. He also announced that they decided to implement the country’s first cloud-based cryptocurrency using the capacity of Iran’s elite. In November 2017, Iran’s High Council of Cyberspace (HCC) said it would welcome bitcoin and cryptocurrency trading, subject to regulations.
Russia – Friendly
In January 2018, the Russian Finance Ministry drafted a bill that would legalize “digital financial assets” stored on blockchain networks as electronic securities. The bill would define the scope of regulations on cryptocurrency, and would not prohibit trading. The bill would further define bitcoin mining as an entrepreneurial activity, which could require Russian bitcoin miners to register with the government. It may also create a 50,000 ruble ($900) ICO investment limit for residents who are not registered as qualified investors. There are plans to pass the bill to Russian Parliament for amendments and voting later this year.
At the end of January 2018, Sberbank, Russia’s largest state bank, announced its plans to launch a cryptocurrency exchange in Europe through its Swiss branch. The bank is planned for Switzerland, because cryptocurrency operations are not currently permitted to be run out of Russia, while cryptocurrency exchanges are legal in Switzerland. Sberbank is currently developing its trading infrastructure, and plans to offer services only to legalized institutional investors.
In February 2018, Russia held meetings with Venezuela to discuss potential collaboration between governments on Venezuela’s new state-run cryptocurrency, Petro.
Switzerland – Friendly
During 2017, Swiss ICOs raised about $550 million in funding, totaling about 14% of the global $4 billion ICO market. As a response, the Swiss Financial Market Supervisory Authority (FINMA) published ICO guidelines on February 16, 2018, under the Swiss anti-money laundering and securities laws. Switzerland considers many ICOs as securities, with some exceptions. The guidelines create three categories of tokens: payment tokens, utility tokens, and asset tokens. Payment tokens and tokens used to access an already running blockchain platform would not be regulated as securities.
FINMA’s CEO, Mark Branson said the regulations are a “balanced approach to handling ICO projects and inquiries [to allow] legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.” Many tokens are also subject to Switzerland’s favorable tax laws, which are partly responsible for the high demand for blockchain companies to base their ICOs there.
Britain – Neutral
On February 22, 2018, the U.K. Treasury announced that it will begin looking into issues surrounding cryptocurrency and blockchain technology. The investigation will look into the role of cryptocurrencies in Britain, including both opportunities and risks for consumers, businesses, and government. The Treasury Committee will look at the potential risks that cryptocurrency could pose, such as price volatility, money laundering, and cyber crimes. The Treasury Committee will also look at the potential technological and economic benefits, and how cryptocurrency can create innovative opportunities and disrupt traditional economies.
France – Neutral
In January 2018, Bruno Le Maire, the French Minister of the Economy, announced the creation of a group to develop cryptocurrency regulations. The group will be responsible for proposing guidelines and drafting regulations to prevent tax evasion, money laundering, financial crimes, and terrorist activities. Le Maire’s stated, “We want a stable economy. We reject the risks of speculation and the possible financial diversions linked to Bitcoin.”
Germany – Friendly/Neutral
Joachim Wuermeling, the Director of German’s Central Bank (Bundesbank), is pushing for bitcoin and cryptocurrency to be regulated through an international set of rules, rather than solely national rules. He believes cryptocurrencies are difficult to regulate within a specific region or country. At the G20 summit this March, Germany and France are planning to release a joint statement proposing regulations, and analyzing the risks linked to bitcoin and cryptocurrency.
In Germany, cryptocurrency is not considered a commodity, stock, or currency. It is classified as private money, similar to foreign currency. Thus, trading cryptocurrency in Germany is tax free for short-term gains under 600 EUR, and tax free for long-term capital gains of over one year.
Italy – Friendly
The Ministry of Economy and Finance of Italy (MEF) recently finished public consultations regarding new regulations for cryptocurrency in Italy. The MEF will aim to improve anti-money laundering laws by holding exchanges responsible to prevent illegal cryptocurrency transactions and money laundering. The MEF will also recognize cryptocurrency as a means of exchange, separate from legal tender, for purchases of goods and services, that is not issued by a public authority or central bank. Aside from the MEF’s newly proposed regulations, Italy does not regulate cryptocurrency heavily. Most cryptocurrency gains and holdings are exempt from taxation. However, the Italian parliament introduced a new law that would require identities of parties in cryptocurrency transaction.
Poland – Friendly/Neutral
Poland has often promoted cryptocurrency and blockchain technology. Poland is working with The Polish Blockchain Technology Accelerator, which is subsidized by the Ministry of Digitalization, to create a national cryptocurrency called Digital PLN (dPLN). However, in an odd twist, Poland’s Central Bank, the National Polish Bank (NPB) recently admitted to paying YouTubers thousands of dollars to dissuade Polish Citizens from trading cryptocurrency. The NPB called it an “educational campaign.”
Central and South America
Venezuela – Friendly
In December 2017, the Venezuelan government announced Petro, its state-run, oil-backed token as a form of legal tender to pay for taxes, fees, and public necessities. The cryptocurrency entered the pre-sale phase on February 20, 2018. Initially, 100 million Petros will be issued at an initial value of $6 billion. The Venezuelan government will allow exchanges of Petros for hard currencies (less vulnerable to inflation) and cryptocurrencies, but not for the Venezuelan Bolivar.
The Petro has quickly become controversial. The Venezuelan opposition-run congress denounced the Petro as illegal and unconstitutional, because it would be effectively borrowing against the country’s oil reserves. U.S. Senators Marco Rubio (R – FL) and Robert Menendez (D – NJ) also denounced the Petro in an open letter the the U.S. Treasury Secretary. The Senators believe it may be possible for Venezuela to use the Petro to bypass American sanctions. Harry Colvin, director and senior economist at Longview Economics expressed his doubts about the Petro’s success, saying “Venezuela has been known for misappropriation of assets in the past and the central bank has just created hyperinflation so I imagine there’ll be trust and transparency issues.”
Brazil – Hostile
In May 2017, Brazil set up a commission to discuss regulation of cryptocurrency. It has since held seven public hearings. In December, Brazil announced it would take the stance to prohibit the issuance of cryptocurrency in national territory, prevent its commercialization, intermediation, and acceptance as a means of payments and settlement of debts. The CVM and Central Bank of Brazil also announced that “The Bitcoin is a financial asset with no ballast that people buy because they believe it will appreciate. That is a typical bubble or pyramid… The Central Bank is not interested in bubbles or illicit payments.” In January 2018, the Securities and Exchange Commission of Brazil (CVM) announced that cryptocurrency is not considered a financial asset, further hindering direct investments.
The Brazilian state of São Paulo is rumored to be looking into using cryptocurrency to help solve its infrastructure problems. Hélcio Tokeshi, the Secretary of Treasury for São Paulo, said, “We like innovation in São Paulo, and blockchain and cryptocurrencies are being followed as extremely interesting innovations that we had to start experimenting with.”
Mexico – Friendly
Mexico is one of the leaders in cryptocurrency exchange trading in Latin America, and has one of the largest financial technology (fintech) markets in the region. Mexico is planning to pass a bill to regulate fintech and cryptocurrency markets within the next few weeks. The bill establishes regulations that classify cryptocurrency as non-legal tender, but still gives permission to use it to pay for goods and services. Under the bill, financial institutions will be permitted to operate with virtual assets and invest in fintech institutions encompassing ITFs (both collective financing institutions and electronic payment fund institutions). The bill may create massive change to the Mexican financial ecosystem. ITFs could be considered just as important as banks, and all trade finance companies may soon be operating with ITFs.
Mexico’s Central Bank, The Bank of Mexico (BOM) plans to take a stance to support new technologies and strengthen the economy while maintaining control. The BOM will likely require licenses for cryptocurrency exchanges and enforce penalties for non-compliance.
Africa and Australia
South Africa – Friendly
In July 2017, the South African Reserve Bank (SARB) selected blockchain company Bankymoon to test digital currency regulations. The project has served as an experiment to help SARB decide on how best to regulate cryptocurrency. In February 2018, SARB announced it would begin testing Ethereum’s blockchain for smart contracts.
UBU, the first South African cryptocurrency project launched recently. UBU is a Universal Basic Income project that aims to significantly reduce poverty in Africa through decentralized distribution of digital currency to the poor. Projects such as UBU would provide digital currency to help people invest and earn money in nations that often suffer from poverty and hyper-inflated national currencies.
Australia – Friendly
The Australian Taxation Office (ATO) treats financial gains from trading cryptocurrency as property subject to capital gains taxes. An ATO spokesperson said, “Any financial gains made from the selling of bitcoin will generally be subject to capital gains tax and must be reported to the ATO.” However, reports say this policy has yet to be tested in court.
The Australian government does not stringently regulate cryptocurrencies. The relaxed regulations have caused Australian banks to opt out of cryptocurrency trading. CoinSpot, one of Australia’s most popular cryptocurrency exchanges has said that Australian banks were not cooperating with exchanges, placing strict limits on accounts, and frequently closing them. Analysts are predicting the high demand for cryptocurrencies will force Australian authorities to begin regulating the industry soon.
Updated February 25, 2018 to reflect more accurate information about India.