Crypto Laws & Regulations Around the World 2022

Regulators are divided on how to regulate cryptocurrencies despite their growing acceptance as a mainstream asset class. We present a country-by-country analysis of how digital currencies are regulated at the moment in some of the major nations.

Canada

The Canadian government has given the green signal to bitcoin ETFs. Cryptocurrency trading platforms and traders in Canada are now required to have a license under new rules released by the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC)

Trading platforms providing custodial services to Canadian customers must register with the Canadian government in accordance with new policies that came into effect in 2021.

Different firms have already complied with the new standards and registered. Furthermore, Canada has issued recommendations on the promotion and advertising of cryptocurrencies. Several unregistered overseas trading platforms have been targeted by the Ontario Securities Commission's strict enforcement of applicable legislation.

When considering taxation under the Income Tax Act, the Canada Revenue Agency (CRA) often classifies cryptocurrencies as commodities.

Mexico

To put it plainly, in Mexico, cryptocurrency is illegal. In March of 2018, the government and the financial authority, CNBV, approved a package of fintech laws3 that established a legal framework and "sandbox" for digital assets. On the other hand, the country has maintained a cautious stance toward virtual assets and their potential impact on the current financial system.

Authorities in the financial sector issued a statement in June 2021 stating that crypto-assets are not legal money and are not regarded as currencies under existing rules and that any financial institutions dealing with them risk punishment.

"The financial authorities reiterate their warnings... on the risks inherent in the use of so-called 'virtual assets' as a means of exchange, as a store of value, or as another form of investment," the statement noted.

For regulatory reasons, "financial institutions in the country are not authorized to carry out and offer to the public operations with virtual assets such as bitcoin, Ether, XRP, and others."

Some people have embraced cryptocurrency despite the constraints. Over a million people use Bitsos, the largest cryptocurrency exchange in Mexico.

The Financial Action Task Force (FATF) views transactions using "virtual assets" as high-risk; thus, in March of 2018, the Mexican government passed an amendment to its federal anti-money-laundering law to reflect this.

Given the lack of a definitive stance on how cryptocurrencies should be taxed, the regulatory landscape is likely to evolve.

United States

Despite overlap and diversity in perspectives among authorities, the regulatory environment for cryptocurrencies is developing. Despite the fact that the Securities and Exchange Commission (SEC) is commonly regarded as the most powerful regulator, Treasury's FinCEN, the Federal Reserve Board, and the Commodity Futures Trading Commission (CFTC) have all provided their own interpretations and guidelines. The agencies are required to work together on regulatory matters under a March White House executive order.

Many cryptocurrencies are seen as securities by the SEC, whereas bitcoin is considered a commodity by the CFTC and a currency by the Treasury. The Financial Stability Oversight Council and the President's Working Group play key roles in developing a future regulatory framework to iron out regulatory discrepancies, uncertainty regarding terminology, and jurisdiction.

Cryptocurrencies are "a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value," according to the IRS, which has given tax guidance on the topic. Taxpaying cryptocurrency investors are required by the IRS to report their holdings and profits or losses each year.

Most cryptocurrency traders, exchanges, trading platforms, mining operations, and investment funds are located in the United States.

El Salvador

By making bitcoin its official currency in 2021, El Salvador cemented its position as a cryptocurrency pioneer. To encourage bitcoin mining, President Nayib Bukele has promised to eliminate income tax on cryptocurrencies and is planning to construct a city run by geothermal energy.

Concerned about El Salvador's financial stability, the International Monetary Fund has advised the country to change course. The country's debt rating has been downgraded as a result of the shift to legal tender status, which is largely viewed as a risky experiment. Concerns about anti-money laundering and know-your-customer regulations have also been voiced in response to the change.

Venezuela

Authorities have previously detained bitcoin miners and taken their equipment; however, as of 2018, cryptocurrencies like bitcoin are no longer illegal. Venezuela's Superintendency of Crypto-assets and Related Activities of Venezuela (SUPCACVEN) is the government entity responsible for crypto-asset regulation, management, and protection.

Venezuela officially sanctioned bitcoin mining on September 21, 2020. Nonetheless, miners must register, and their operations must be supervised by the "National Mining Pool," with the government responsible for distributing the profits.

The Venezuelan government has also developed its own cryptocurrency, the Petro, which is backed by the value of Venezuelan oil.

France

France's Plan d'Action pour la Croissance et la Transformation de Enterprises (PACTE – Action Plan for Business Growth and Transformation) was enacted by the French National Assembly in April 2019, creating a framework for digital asset services providers. A new set of laws and regulations concerning cryptocurrency service providers and initial coin offerings (ICOs) have been established by the French Financial Market Authority Autorité des marchés financiers (AMF). On December 9, 2020, France passed Ordinance No. 2020-154452 to supplement its own cryptocurrency legislation.

The regulations were officially implemented in June of 2021. Companies must now register and comply with more stringent Know Your Customer rules. The guidelines enacted novel AML/CFT regulations for digital assets. To better align the French AML framework with FATF53 (Financial Action Task Force) principles and to respond to emerging risks related to digital assets, they implemented additional regulations on cryptocurrency exchanges and, prohibited anonymous accounts, expanded AML/CFT and KYC procedures.

French lawmakers have lately discussed the possibility of altering the country's tax treatment of cryptocurrencies. Cryptocurrencies are treated as personal property for tax purposes. Retail traders pay a fixed rate of 30%, whereas miners and regular traders pay 45%.

Germany

Germany's government was an early proponent of ensuring the legitimacy of cryptocurrency ownership by traditional financial institutions. Citizens and licensed companies are allowed to purchase and sell crypto-assets as long as they do so through approved exchanges and custodians. The German Federal Financial Supervisory Authority BaFin issues licenses to businesses.

BaFin considers cryptocurrencies to be "units of account" under the German Banking Act. Therefore, they are not money, currency, or any other kind of legal tender.

However, authorities have determined that crypto-assets fit the definition of financial instruments; thus, they are treating them as such.

Germany has agreed to comply with AMLD5 regulations. Licensing standards for such services have been set up. Crypto-assets, on the other hand, are consensus-based; they are recognized as a medium of exchange or payment or as an investment; and they are electronically transferable, storable, and tradeable.

For tax purposes, digital currencies are treated as private money by Germany's Federal Central Tax Office. Gains of less than €600 kept for less than a year are exempt from taxation for individuals.

The Netherlands

Cryptocurrency companies operating in the Netherlands must be registered with the De Nederlandsche N.V. (DNB), the country's central bank. VASPs in the Netherlands are required by law to provide personal information about themselves and their clients. The DNB is also in charge of making sure crypto service providers adhere to the Sanctions Act of 1977.

In its definition, the DNB states that cryptocurrencies are "a digital representation of value that is not issued or guaranteed by a central bank or public authority, is not necessarily attached to a legally established currency, and does not possess the legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored, and traded electronically."

The Dutch Implementation Act revised Dutch AML regulations and enacted 5MLD in May 2020. Taxes on capital gains are not levied in the Netherlands; rather, a presumed interest is calculated based on the net worth of a company. There is a fixed 31% tax rate applicable to the presumed interest.

United Kingdoms

The U.K.'s Crypto-assets Taskforce is made up of the Financial Conduct Authority (FCA), H.M. Treasury, and the Bank of England. The FCA has issued guidelines for crypto-assets that are compliant with KYC, AML, and CFT standards. Similarly, it has drafted regulations for VASPs, taking care not to hinder innovation.

Until they have an e-money license, cryptocurrency exchanges must register with the Financial Conduct Authority (FCA). It is not possible to use cryptocurrency as payment, and all transactions must be subject to activity-based taxation. Derivatives based on cryptocurrencies are now illegal to trade, per the Financial Conduct Authority.

In April of 2021, the Law Commission issued a "call for evidence" about digital assets. The purpose of the request is to collect feedback from relevant parties before publishing a consultation paper on digital assets that will include proposed legislative changes.

Financial promotions for some "qualifying crypto-assets" would be subject to H.M. Treasury's financial promotions system and FCA financial promotions regulations, according to complementary reform proposals issued by the U.K. government and the FCA in February Financial promotions for some "qualifying crypto-assets" would be subject to H.M. Treasury's financial promotions system and FCA financial promotions regulations, according to complementary reform proposals issued by the U.K. government and the FCA in February 2022.

There is no single U.K. regulatory structure that covers the operations of crypto miners.

Although there is no crypto-specific tax law in the U.K., H.M. Revenue and Customs has laid out its position on how cryptocurrencies should be taxed in light of general principles. When an employee receives cryptocurrency as payment from an employer, the value of the cryptocurrency at the time of receipt is considered income and taxed accordingly. When cryptocurrency is sold at a profit by an individual investor, the investor must pay capital gains tax. When trading often, ordinary income tax may be levied rather than capital gains tax.

Australia

As of 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC), the country's financial intelligence agency and anti-money laundering and counter-terrorist financing regulator, enacted new regulations for digital currency exchange companies.

Companies need to register, adopt Know Your Customer (KYC) practices, report suspicious activity, and comply with anti-money laundering (AML) laws.

As part of its broader plans to revamp the nation's payment system, Australia announced in December 2021 that it would establish a licensing framework for cryptocurrency exchanges and perhaps launch a retail CBDC. The Treasurer, Josh Frydenberg, has said that starting in early 2022, the government would begin consulting on implementing a licensing framework for digital exchanges, therefore allowing people to buy and sell cryptocurrencies regulated.

Frydenberg also stated that the government would organize hearings to discuss the possibility of a central bank digital currency and the regulation of enterprises that handle crypto-assets on behalf of customers.

Capital gains taxes in Australia, which can apply to cryptocurrency, currently sit between 19 to 45 percent.

Disclaimer: Cryptocurrencies are highly volatile and subject to market, technical, and regulatory risks. Crypto trading requires one’s own diligence, and Cryptoforce will not be responsible for any losses incurred. Any information provided here should not be regarded as Cryptoforce’s technical or financial advice.