Bitcoin Regulation: Which Countries are Bitcoin-Friendly7 min read
Technically, Bitcoin is legal everywhere it isn’t illegal. In practice, it’s more helpful to talk about friendliness towards Bitcoin instead of its legal status. This is due to:
- differing and quickly evolving views by country and region.
- emerging guidance and consultations that have not yet translated into law.
- the varying aspects of cryptocurrency that may be regulated: exchange, legal tender, anti-money laundering compliance, and taxation.
Countries around the world are currently forging their frameworks for Bitcoin regulation. Many are open to the adoption of digital currency and virtual assets, while others support implicit or explicit bans. Some countries signal changes to their stance regularly.
We’ve put together a brief overview of some of the more notable current regulatory positions. With this, we hope to provide a little more clarity on which countries around the world are Bitcoin-friendly.
Bitcoin Welcome Here
Japan is known for being the world’s most progressive regulatory climate for cryptocurrencies. Cryptocurrency exchange businesses are regulated and required to obtain a license from Japan’s Financial Service Agency. Exchanges are obligated to verify customer identities, keep transaction records, and notify the authorities in case of suspicious activity. Japan officially recognizes Bitcoin as a unit of account and means of payment, and over 10,000 businesses – including Rakuten, known as Japan’s Amazon – currently accept Bitcoin payments.
Similar to Japan, Bitcoin exchanges in South Korea are legal and operate in a well defined regulatory system. South Korea is the 3rd largest market for Bitcoin trading but Bitcoin is not recognized as legal tender. Taxation has historically been a grey area, but recent developments indicate the Ministry of Economy and Finance is considering a 20 percent tax on income generated from cryptocurrencies.
Switzerland has a very favorable stance on Bitcoin as an asset. The Swiss Canton of Zug, in particular, is seeking to establish itself as a European hub for cryptocurrencies and Fintech start-ups. Switzerland encourages the adoption of cryptocurrency with low taxes on Bitcoin and exempting Bitcoin sales from VAT taxes, but does not classify Bitcoin as legal tender.
Currently, in Singapore, it is legal to operate a cryptocurrency exchange and trade Bitcoin. Although Bitcoin is not considered legal tender, Singapore’s tax authorities have ruled that Bitcoin is to be treated as “goods” and only apply goods and services taxes. The Monetary Authority of Singapore (MAS) has taken a softer approach to Bitcoin regulation and only applied the legal framework where it was possible. In 2018, the Deputy Prime Minister released a statement clarifying that cryptocurrencies are subject to the same AML and CFT regulations as traditional currencies.
In 2019, The Portugal Tax Authority (PTA) stated that cryptocurrency trading and payments made in cryptocurrency would not be subject to the Value Added Tax (VAT). These cryptocurrency tax rules only apply to the individual. Businesses operating in Portugal that receive income from cryptocurrency trading or any other activities are still subject to progressive rates for personal income tax.
Bitcoin Accepted Here
While there is no singular legal approach to cryptocurrencies in the US, cryptocurrency businesses are thriving and adoption has been impressive. Laws governing exchanges vary by state, and federal authorities differ in their definition of the term ‘cryptocurrency.’ The Financial Crimes Enforcement Network (FinCEN) doesn’t consider cryptocurrencies to be legal tender. But since 2013, they have considered exchanges as money transmitters on the basis that tokens are “other value that substitutes for currency.” According to the Commodities Futures Trading Commission (CTFC), Bitcoin is a registered commodity under the Commodity Exchange Act. The Securities and Exchange Commission (SEC) has indicated that it does not consider Bitcoin to be a security. The IRS, by contrast, designates that cryptocurrencies be considered property, and has issued tax guidance accordingly. Despite the absence of legal and regulatory consistency, Bitcoin is proving an attractive and safe way for American businesses to accept payments.
Bitcoin businesses may legally operate in the United Kingdom, but Bitcoin is not considered legal tender. Owners of Bitcoin in the United Kingdom are subject to capital gains taxes.
Bitcoin is not considered legal tender, and the Canadian Revenue Agency (CRA), classifies and taxes Bitcoin as a commodity under the Income Tax Act. Trading of goods and services for Bitcoin is considered a “barter transaction” according to the Financial Consumer Agency. Canadian Exchanges must register as MSBs and comply with AML and other requirements imposed by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) in the Proceeds of Crime and Terrorist Financing Act.
The Land Down Under has set explicit guidance regarding its legislation around cryptocurrencies like Bitcoin. The Australian Taxation Office (ATO) published guidance documents in December 2014, calling cryptocurrency transactions “akin to a barter arrangement, with similar tax consequences.” From a transaction perspective, the ATO states that the value of Bitcoin in Australian dollars must be recorded for any goods and services traded for Bitcoin. For more information about Australia’s Bitcoin regulation, check out the Library of Congress’ detailed report.
France, though in the early stages of developing a framework for Bitcoin regulation, took some notable steps in 2019. French citizens are free to invest and trade Bitcoin. The French Minister of Economy, Bruno Le Maire, announced on September 12th that crypto-to-crypto trades will not be subject to taxation. Though Bitcoin is not considered legal tender, France reports 25,000+ bitcoin acceptance locations.
The German government introduced a bill in November that, if passed, will finally allow German banks to sell Bitcoin and other cryptocurrencies, as well as grant custody over them, by the end of 2020. Germany officially recognized Bitcoin as a means of payment back in 2018. The German Federal Ministry of Finances considers Bitcoin as tax-exempt as long as it is being used for payments. Furthermore, Bitcoin sales in Germany do not incur any long-term capital gains tax unless the currency is held for less than a year.
The People’s Bank of China (PBOC) banned financial institutions from handling Bitcoin transactions in 2013 and banned ICOs and cryptocurrency exchanges from operating domestically in China in 2017. Last year the government moved to ban cryptocurrency-mining – before the regulations, 70 percent of the world’s Bitcoin was mined in China. China has earned a global reputation for harsh Bitcoin regulations and does not consider Bitcoin to be legal tender. The government’s broad view is that cryptocurrencies pose a risk as they allow capital flight that directly contravenes strict currency regulations designed to prevent large amounts of currency from moving out of the country. In October 2019, Alipay, the digital payment branch of e-commerce giant Alibaba, revealed that all crypto-related transactions were banned from their platform. More recently, the Chinese government, Xinhua News Agency, and President Xi Jinping have all publicly praised blockchain technology as China races to launch DCEP (short for Digital Currency/Electronic Payments), its sovereign, centralized digital currency.
From 2013 to 2017, The Reserve Bank of India (RBI) and the Finance Ministry – through press releases and speeches – have cautioned users about virtual currencies not being legal tender with sovereign guarantee in India. In April 2018, the RBI issued a guideline prohibiting entities from dealing with virtual currencies or providing services to any person or entity dealing with virtual currencies. It argued that virtual currencies are highly volatile and pose potential threats and risks to the banking system. Recently, the RBI clarified to the country’s supreme court that although banks in the country are forbidden from having working relationships with cryptocurrency platforms, cryptocurrency itself is not, in fact, illegal or otherwise banned in India. While several cryptocurrency exchanges have already shut their doors as a direct or indirect result of the ban, India appears once again on the precipice of an important cryptocurrency ruling.
We encourage merchants who accept cryptocurrency to stay up to date with the Bitcoin regulation in markets important to you. Suggested references include business news feeds and https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory