The threat to national security and the digitalization of the economy: how countries regulate cryptocurrencies
Despite the widespread adoption of cryptocurrencies, the trend towards stricter regulation and de-anonymization still persists. Governments are introducing new rules and prohibitions that affect the digital money industry in one way or another. In addition, the EU is exerting significant pressure on the cryptocurrency industry, which is trying to implement unified approaches to the regulation and taxation of transactions with coins and tokens.
In today's article, we will explore measures that are being taken by the authorities in particular countries with a high level of digital development and how they are changing the field of crypto assets.
USA: regulation is the prerogative of different agencies
In America, legal framework for working with cryptocurrencies is on the stage of preparing. Moreover, the regulation will be controlled by several departments at once. Each of them will be responsible for a different aspect: assets, exchanges, regulation by banks, regulatory framework.
The regulatory environment differs from state to state. Any cryptocurrency relationship is determined not only by federal legislation, but also by the laws of individual states. For example, in New York State, there is a need to license activities with crypto assets, which is not common in many other states. Some other US states, such as Wyoming, are going in a completely different way - not by tightening crypto regulation, but by stimulating this innovative sphere, including through loyal taxation. A separate income tax is also established depending on the region of registration.
Germany: licensing is everything
In Germany there are tough, but favorable conditions for cryptocurrency activity. In December 2019, the country passed a bill allowing financial institutions to buy and sell Bitcoin and other assets. A month later, regulators tightened rules in order to combat money laundering and terrorist financing. In this regard, companies offering cryptocurrency services now need to obtain licenses for their activities. Banks gained the ability to store Bitcoin and other crypto assets. The country also plans to issue a digital euro.
Estonia: a crypto haven amidst a storm of bills
There are perhaps the most convenient conditions for carrying on a crypto business in Estonia. Generally, the legislation is friendly towards blockchain and virtual assets, and a developed digital infrastructure contributes to high-quality regulation and the creation of a favorable investment environment. Here, cryptocurrencies are treated as property, and income from exchanges with digital money is subject to a capital gains tax of 20%.
Singapore: the Asian cryptocurrency hub
In January 2020, Singapore officially entered the rally in order to become the best place to do cryptocurrency business. Now the country has new legislation that allows companies to obtain a license and legally conduct cryptocurrency activities. In addition to bringing digital assets under the legal framework, the law has also formally delegated powers to control money laundering and terrorist financing to the Monetary Authority of Singapore.
Profits from cryptocurrency transactions in Singapore are not taxed, since there is no such type of charge in the state. However, crypto companies based in the country should pay income tax if trading in digital assets is their main business.
South Korea: not banned, but tightly controlled
Recently, the South Korean authorities have legalized cryptocurrency trading and storage, but the country still has a strict attitude towards digital assets. Marketplaces are tightly controlled by government agencies, including the local Financial Services Commission (FSC). For example, in the event of hacks or failures in the systems’ operation, crypto exchanges are obliged to compensate users for their losses. In addition, FSC began to directly control trading platforms and has the right to revoke their licenses due to non-compliance with FATF requirements.
In March 2020, the Central Bank of South Korea announced that it is going to issue its own bonds on the blockchain and is exploring the technology's prospects for recording securities transactions on a distributed ledger. However, the Central Bank is skeptical about digital assets and the national cryptocurrency. From October 2021, the country will have a 20% tax on income from cryptocurrency trading.
China: from loyalty to a complete ban on cryptocurrencies
For a long time, the Celestial Empire was considered the world center of the bitcoin industry. However, in 2017, the PRC authorities banned ICO and cryptocurrency exchanges. At the end of 2019, the Shanghai branch of the People's Bank of China announced its intention to destroy the remnants of the crypto industry in the country. Local law enforcement agencies continue to wipe out cryptocurrency exchanges.
The situation is different with digital assets: China has no laws that would regulate them. The country's authorities are not against cryptocurrencies, but they are ready to support them only if they are able to strengthen the national currency. The People's Bank of China, meanwhile, is actively testing the digital yuan.
Russia: you can mine, you can't pay
At the moment, there is no cryptocurrency regulation in the Russian Federation, but on July 31, President Vladimir Putin signed the law "On digital financial assets", which will come into force on January 1, 2021. According to it, income from cryptocurrency transactions will be taxed according to the following formula: income from sales minus acquisition costs, and the difference will be taxed at a rate of 13% for residents of the country.
In addition, the legal document allows to legally buy, sell, exchange and invest in digital assets, use them as pawn, but prohibits their use as a means of payment.
As for mining, its regulation, together with a more detailed consideration of digital currencies, is planned to be determined in another law, which may be adopted this fall.
Belarus: everything is possible if you are careful
The republic has fairly loyal conditions in relation to the digital currency industry. According to the 2017 Decree on the Development of the Digital Economy, residents of Belarus with the High-Tech Park (HTP) resident status or with the participation of a HTP resident, can buy and sell cryptocurrencies, as well as issue their own virtual money. Until 2023, profits from cryptocurrency transactions will not be taxed.
As for mining, it is allowed in the country, tokens can be purchased and exchanged for Belarusian rubles, foreign currency, electronic money, as well as be donated and bequeathed. To conduct legitimate activities, the creators of crypto projects must identify clients, comply with AML/CFT rules and provide reports on the turnover of funds.
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Now national economies are developing taking into account the widespread distribution of digital assets, and the authorities are trying to bring the regulation of the cryptocurrency industry to a single standard.
In the minds of the leaders of different countries, a revolution is already taking place: they understand that the prohibition of cryptocurrency activities will entail large economic losses from the turnover of digital projects, and, accordingly, potential tax revenues from these amounts. At the same time, entrepreneurs working with digital money will be forced to apply their efforts and investments in other jurisdictions that are loyal to this business.
Many countries are already choosing a progressive path of development – they are following the path of "absolution" of an area that until recently was prejudiced. And this is a way that can help to stay on the top both technologically and socially.
