The laws and regulations of cryptocurrency in other regions. As cryptocurrency usage grows, so do cryptocurrency regulations put in place around the world to govern it. The crypto landscape is constantly changing, and keeping up with the rules in various global territories is difficult. Navigate the world’s array of cryptocurrency regulations, legislative attitudes, and associated activities. How different countries approach coin and exchange regulation, and whether they have any upcoming legislation that may change their stance on cryptocurrencies.
Cryptocurrency In Other Regions: The Adequate Laws And Regulations Of Cryptocurrency In Other Regions
To ensure effective consumer protection and more streamlined regulatory oversight, the Justice Department continues to collaborate with the Securities and Exchange Commission or SEC and Commodity Futures Trading Commission or CFTC on future cryptocurrency regulations. In 2021, the Biden administration focused on stablecoins in order to address the risk of the tokens’ increasing value. Later that year, the President’s Working Group on Financial Markets issued a set of recommendations, one of which was the need for new legislation.
The status of cryptocurrency service providers in 2021 was also debated in Congress, with new rules included in the Biden administration’s infrastructure bill. Under the new rules, cryptocurrency exchanges are considered brokers and must comply with AML/CFT reporting and record-keeping requirements.
Australia
In Australia, virtual currency is not considered to be a financial product, and, consequently, cryptocurrency activity is not subject to license requirements, except for activities associated with fiat money or other financial instruments.
In 2017, Australia’s government declared that cryptocurrencies were legal. Specifically, it stated that Bitcoin, and other cryptocurrencies that shared its characteristics, should be treated as property and subject to Capital Gains Tax. Cryptocurrencies were previously subject to controversial double taxation under Australia’s goods and services tax regime. The change in tax treatment is indicative of the Australian government’s progressive approach to the crypto issue.
In 2018, the Australian Transaction Reports and Analysis Centre, or AUSTRAC, announced implementing more robust cryptocurrency exchange regulations. Those crypto regulations require exchanges operating in Australia to register with AUSTRAC, identify and verify users, maintain records, and comply with AML and CFT reporting obligations. Unregistered exchanges are subject to criminal charges and financial penalties.
In addition, in May 2019, the Australian Securities and Investments Commission or ASIC issued updated regulatory requirements for initial coin offerings or ICOs and cryptocurrency trading. On May 30, 2019, the ASIC published updated guidance concerning ICOs and cryptocurrency trading. It takes the position that ICOs, by their nature, seek to raise capital from the public to fund a particular project through the issue of crypto-assets such as tokens.
If the crypto asset issued by the ICO is a financial product, the issuer of the ICO must comply with relevant capital raising provisions of the Corporations Act. ICO issuers must comply with Australian laws, such as the ASIC Act, Corporations Act, Australian Consumer Law, and AML/ KYC laws. For crypto-assets, the ASIC Act and the Corporations Act include prohibitions against misleading or deceptive conduct. Under Australian law, the rights attached to crypto-assets issued under an ICO are a key consideration in assessing the legal status as a financial product.
In addition, there is something called the Australian Digital Currency Industry Code of Conduct, which was developed by the Australian Digital Currency & Commerce Association. This Code of Conduct establishes proper standards for conducting cryptocurrency business in the country but is mandatory for execution only for the association’s members.
Looking ahead, Australia has established a pattern of proactive cryptocurrency regulation in the past. These latest regulations illustrate the country’s continued effort to provide a clear framework for crypto businesses to operate in the coming years. However, recent revelations that have exposed serious flaws in Australia’s financial industry will undoubtedly affect how AUSTRAC approaches compliance enforcement in the future and will likely lead to increased scrutiny and tightening regulatory controls across the board.
Cryptocurrencies may be considered assets for capital gains tax purposes, with the guidance stating, “Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded provided the cost of the bitcoin is 10,000 U.S. dollars or less”.
For business transactions, the Australian Tax Authority guidance states that the Australian dollar value of bitcoins received for goods and services must be recorded as part of ordinary income, in the same way as receiving non-cash consideration under a barter transaction. A business that purchases items using bitcoin is “entitled to a deduction based on the arm’s length value of the item acquired. Goods and services tax or GST is also payable and is calculated on the market value of the goods or services, which is ordinarily equal to the fair market value of the bitcoin at the time of the transaction. When a business disposes of bitcoin, there may be capital gains tax consequences.
If a business gives bitcoin to an employee, this may be considered either a fringe benefit or normal salary and wages. Suppose an entity is in the business of mining, buying, and selling bitcoin as an exchange service. Any income derived must be included in its assessable income, and any expenses incurred may be deducted.
The tax authorities also published separate guidance on applying the GST on goods and services concerning transactions involving digital currency. A previous ruling regarding GST was withdrawn in December 2017 following the passage of amendments to A New Tax System Act 1999 and associated regulations, which apply to transactions after July 1, 2017.
Under the amendments, digital currency sales and purchases are not subject to GST. If a person is carrying on a business concerning digital currency or accepting digital currency as payment as part of a business, there are GST consequences. The changes aimed to remove the “double taxation” of digital currencies under the GST system.
Russia
The Russian government and the Central Bank of Russia agreed on their approach to regulating cryptocurrencies after months of speculation about how the Russian government will handle digital currencies. The state bodies are now working on a draft law to be launched on February 18th that will define crypto as an “analog of currencies” rather than digital financial assets. Russia’s Ministry of Finance is pushing forward with its plan to regulate cryptocurrencies in the country and has introduced a bill to parliament.
The bill is based on the previously approved roadmap drafted by several government bodies, including key law-enforcement agencies. The announcement highlights the policy split with the Bank of Russia, which opposes regulation and would rather see cryptocurrency trading and mining banned. The central bank, which has been pushing forward the pilot of its central bank digital currency, the digital ruble, has suggested punishing crypto trading and issuance with fines up to 500,000 rubles or 6,360 U.S. dollars for individuals and 1 million rubles for companies.
The bill treats the crypto as an investment tool, not a legal tender, and cryptocurrencies may not be used to pay for goods and services. Bill also specifies requirements for cryptocurrency exchanges and OTC desks, which must satisfy specific criteria to obtain a license. Foreign crypto exchanges must register legal entities in Russia before providing services. All cryptocurrency-to-fiat transactions must be conducted through bank accounts. Users must go through KYC checks with the banks and the cryptocurrency exchanges as per applicable AML/KYC laws and regulations.
Cryptocurrencies function in the legal industry only if they have complete identification through the banking system or licensed intermediaries. Currently, Bitcoin transactions and possession of cryptocurrency in Russia are not prohibited. Still, transactions must be conducted through a digital currency exchange organizer, a bank, or a licensed peer-to-peer exchange. Moreover, cryptocurrency transactions of more than 600,000 rubles have to be declared.
In April 2017, the Central Bank of the Russian Federation recognized virtual currency as a digital commodity. In February 2018, the Russian Duma began a discussion of cryptocurrency legislation, which can be seen as a draft Federal law on digital assets. Eventually, the chairman of the Russian State Duma Committee on Financial Markets confirmed that the bill which provides the regulatory framework for cryptocurrencies in Russia had been completed. The official explained key features of the bill, including how cryptocurrency exchanges and miners will be regulated. However, the bill’s adoption has been delayed due to the coronavirus pandemic.
The bill provides that mining is an entrepreneurial activity aimed at creating a cryptocurrency and validation to receive remuneration in cryptocurrency. Cryptocurrency is defined as a type of digital financial asset created and accounted for in the distributed registry of digital transactions by the participants of this registry following the rules of maintenance of the register of digital transactions. The rules of turnover of cryptocurrencies are not determined by the bill and will be established separately.
There is still a certain resistance towards any currency Russia does not issue as a state. Breaking the official rules comes with legal penalties at the moment. People who own one or two Bitcoins are not at risk. But all cryptocurrency exchanges and wallets hosted on Russian sites with a Russian domain at the end are at risk indeed.
As you can see, there is currently a lot of ambiguity in the legal status and the regulation of cryptocurrencies in different countries, making this one of the reasons why it is quite complicated to determine what laws and regulations must be applied to cryptocurrencies. However, understanding the broad regulatory terms of your country helps to understand different points of view of national regulators. It is therefore beneficial to determine what financial crime compliance measures are likely to find application.
Final Thoughts
The year 2021 was a watershed moment for digital assets, and the stage is set for regulators to create a framework to govern this massive new market. So far, the regulatory response has been ad hoc, rhetorical, or, in some cases, driven by enforcement. It will most likely take years to complete the challenge in such a new and disruptive area. Adding to the difficulty is the ambiguity of digital assets and the lack of standardized definitions, which raises issues of overlap and jurisdiction.
