Representative image (Pixabay/tombark)
El Salvador's President Nayib Bukele announced that the recently passed law that has made bitcoin legal tender, will come into effect from September 7. The lawmakers had approved Bukele's proposal to embrace the cryptocurrency, making it the first country in the world to adopt bitcoin as legal tender.
Following suit, Paraguay may also legalise bitcoin. A pro-bitcoin congressman in Paraguay said he will present bitcoin legislation in Congress next month with an aim to make Paraguay a hub for cryptocurrency investors worldwide. His efforts follow El Salvador passing a bill making bitcoin legal tender, according to a report by cryptocurrency news website Bitcoin.com.
Here is a list of countries where cryptocurrencies are legal:
The United States of America
While the American market regulator has called on Congress for tighter regulations saying none of the cryptocurrency exchanges has registered with the Securities and Exchange Commission (SEC), posing a substantial risk to investors as compared to traditional securities markets, and correspondingly greater opportunities for fraud and manipulation, it has seen a push as prominent businesses including Dish Network (DISH), Microsoft, Subway, and Overstock (OSTK) by adding bitcoin as a payment method.
Furthermore, the US Department of Treasury's Financial Crimes Enforcement Network (FinCEN) recognises it as money services business (MSB) and not a currency requiring exchanges and payment processors to report and register by bringing them under the purview of the Bank Secrecy Act.
Cryptocurrency is treated as general property for tax purposes in the US.
Canada also follows a similar approach to cryptocurrencies like the USA. The taxation authority generally treats cryptocurrency as a commodity for purposes of the Income Tax Act, meaning any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances.
It also requires the holders of cryptocurrencies to keep records including businesses that accept it as payment. You can read the guideline issued by Canada Revenue Agency (CRA) here.
While the Indian government is yet to issue any guidelines or regulation around cryptocurrencies, the Supreme Court in 2020 set aside the Reserve Bank of India's circular banning banks from facilitating cryptocurrency-related transactions giving a reason for cryptocurrency traders to celebrate.
However, the central bank has asked banks to carry out the necessary customer due diligence process in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002.
4. European Union (EU)
While the European countries have different regulations, in 2015, the European Court of Justice (ECJ) defined the trading of cryptocurrencies as a service and exempted it from value-added tax (VAT) in all EU member states.
Countries such as Finland, Belgium and the UK consider cryptocurrencies as assets and not currency. All the regulations are coupled with disclosure and compliance requirement to be followed by individuals and businesses holding or trading cryptocurrencies.
Australia has also declared cryptocurrencies legal; however, it comes under the purview of Anti-Money Laundering and Counter-Terrorism Financing Act. Like other western counterparts, Australia also considers virtual currencies as property and they are taxed as capital gains.