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Cryptocurrency regulation: Here’s what countries around the world have done

As India takes steps towards regulating or even banning cryptocurrencies, we take a look at the regulations adopted by countries around the world.

November 25, 2021 / 03:08 PM IST

The Indian government has listed 26 Bills for the upcoming winter session of Parliament that is set to begin on November 29, and among these is the much-talked-about bill to regulate and restrict cryptocurrency in the country.

According to a PTI report, the Cryptocurrency and Regulation of Official Digital Currency Bill seeks to ban all but a few private cryptocurrencies to promote underlying technologies while allowing an official digital currency by the RBI.

The news led crypto stakeholders to urge the Centre on taking a “nuanced approach” towards regulating crypto assets in India.

Here are the regulations and rules implemented by countries around the world:

United States: The US has regulations under the central and state governments (similar to India), which means that rules differ from state to state. The overall sentiment, however, is positive.

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– New York State, for example, favours crypto and in 2016 launched a licensing framework called ‘BitLicense’ for businesses and crypto exchanges.

– The framework requires companies to seek license from the New York State Department of Financial Services to hold, buy, sell or transmit crypto.

– Wyoming State too exempted crypto developers and sellers from securities laws in 2018, subject to meeting certain conditions.

– Most recently, IANS reported that banking regulators in the US announced a plan to clarify the rules and regulations around how banks can use cryptocurrencies.

– In a joint statement, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency said they “recognise emerging crypto-asset sector presents potential opportunities and risks” and feel it is important to “provide coordinated and timely clarity where appropriate to promote safety and soundness, consumer protection”, besides laws and regulations.

China: China has been the harshest towards cryptocurrencies, moving from initially welcoming crypto mining to completely banning it as of June 2021. The move was so impactful it knocked off 40 percent of total crypto mining operations, as per reports.

– It started by banning initial coin offerings (ICOs) in 2017, following by shutting down crypto exchanges. Blockchain technology and related startups however remains largely supported.

– The country is developing a digital Yuan (digital version of its fiat currency) and has already begun real-world trials of the centrally regulated crypto.

United Kingdom: The UK does not have specific legislation on cryptocurrencies and the sector is currently governed by the Financial Conduct Authority (FCA), which grants licenses for crypto businesses and exchanges.

– The FCA has a “stringent set of rules”, particularly for those dealing in crypto futures and options (F&O) trading. It also regularly issues warnings on potential risks of cryptocurrencies and asks investors to proceed with caution.

– The UK also collects taxes on cryptocurrencies similar to any other currency trade – by bringing businesses or the exchanges themselves under corporate tax rules.

– In fact, tax authority Her Majesty's Revenue and Customs (HMRC) has stated that gains or losses on cryptocurrencies are subject to capital gains tax.

– Firms additionally have to comply with counter-terrorism financing (CTF) and anti-money laundering (AML) initiatives.

European Union: The regulation here is complicated with topics of concern divided between member nations and the Union.

– Most EU countries have ‘soft-touch’ frameworks, but the bloc as a whole has begun considering a consolidated framework on crypto.

– The draft Markets in Crypto-Assets Regulation (MiCA) legislation was released by the European Commission in September 2020.

– MiCA will treat crypto as regulated financial instruments similar to trading and brokerage firms and thus require prior approval from regulators.

– Unique aspect of the legislation is that it identified different crypto utilities (assets, tokens, e-money, etc.) and sets up specific rules for each.

Singapore: Singapore has set “clear rules” where legislation for the sector is implemented under its Payment Services Act by the Monetary Authority of Singapore (MAS).

– Further, buying, selling, holding or transferring cryptocurrencies in Singapore requires an entity to seek license and comply with AML and CTF rules.

El Salvador: The South American country became the first to officially declare Bitcoin legal tender.

– President Nayib Bukele's government claims the move will give many Salvadorans access to bank services for the first time and save some $400 million in fees on remittances sent home from abroad every year.

– In June, El Salvador's parliament approved a law to allow the crypto money to be accepted as tender for all goods and services in the small Central American nation, along with the US dollar.

– However, opinion polls showed a majority of El Salvador's 6.5 million people reject the idea and will continue using the US dollar, the country's legal currency for the last 20 years, AFP reported.

– Economists and international bodies such as the World Bank, International Monetary Fund and Inter-American Development Bank have expressed concerns about El Salvador's bitcoin adoption.

Where does India stand?

By and large, the ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' seeks to "create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI).

– The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses".

– Currently, there is no regulation or any ban on the use of cryptocurrencies in the country, but Prime Minister Narendra Modi met senior officials earlier in November to discuss the issue and “indications are strong” that regulatory steps will come, PTI added.

– There has been a rising number of advertisements, featuring even film stars, promising easy and high returns on investments in cryptocurrencies in recent times, amid concerns over such currencies being allegedly used for luring investors with misleading claims.

– Last week, the Standing Committee on Finance, chaired by BJP member Jayant Sinha, met the representatives of crypto exchanges and BACC, among others, and arrived at a conclusion that cryptocurrencies should not be banned, but it should be regulated.

– The RBI too has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well as their claimed market value.

– RBI Governor Shaktikanta Das has also reiterated his views against allowing cryptocurrencies, saying they are a serious threat to any financial system since they are unregulated by central banks.

– Further, the RBI had announced its intent to come out with an official digital currency, in the face of proliferation of cryptocurrencies like Bitcoin about which the central bank has had many concerns.

– A pan-India survey by LocalCircles found that around 54 percent of people interviewed did not favour legalising cryptocurrencies, but instead wanted them to be treated as digital assets held overseas. The study received over 56,000 responses from people in 342 Indian districts.
Jocelyn Fernandes

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