The cryptocurrency market is significant as the first digital asset-only financial market entirely decentralized and theoretically outside the government’s control. The peer-to-peer nature of crypto transactions ensures they bypass third parties and geopolitical restrictions. Governments, however, insist on exerting some form of control on the trillion-dollar industry through regulations.
Crypto Regulations and Trading
Data from CoinMarketCap shows a daily trading volume of $61 billion across decentralized and centralized platforms. Countries with crypto-friendly dispositions have more people trading on a centralized crypto trading platform that offers some form of regulation and protection.
In contrast, countries that clamp down on crypto ownership, use, and trading have more people exploring decentralized platforms that don’t have KYC requirements.
Crypto regulations also influence traders’ market decisions. The market tends to slump when news of major regulatory setbacks leaks and often gains when major regulatory bodies lean towards favorable regulations. In January 2024, Bitcoin slumped as traders were uncertain about the Securities and Exchange Commission’s decision on spot Bitcoin ETFs.
Current Regulatory Stance of Countries With the Highest Rate of Crypto Ownership
A look at the countries with the highest rates of crypto ownership shows a mixed result, from those with a pro-crypto stance to those with hostile crypto regulations and those who are ‘indifferent’ to crypto ownership.
The United States
Although the US SEC sets some regulatory requirements for companies and individuals involved in cryptocurrency, the legal status varies across jurisdictions in the US. Some states, like New York, are pro-crypto and have projects they’ve partnered with.
The United States House of Representatives recently passed a bill titled ‘Financial Innovation and Technology for the 21st Century Act,’ establishing a regulatory framework for cryptocurrencies and delineating the responsibilities between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The US now has one of the strictest regulatory rules and has recently moved against some crypto companies in the US.
The United Kingdom
The United Kingdom has a generally friendly crypto stance. In October 2022, it declared crypto assets as regulated financial instruments. The British Parliament passed laws to cover crypto assets, providers, and services. Economic Secretary Bim Afolami recently emphasized the importance of setting clear regulations to foster global competitiveness. Crypto derivatives trading remains banned in the UK.
Crypto companies must register with the FCA before promoting crypto assets. They must meet specific reporting requirements (Know-Your-Customer and Anti-Money Laundering). Exchanges and wallet providers must meet the obligations set by the Office of Financial Sanctions Implementation (OFSI).
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European Union (EU)
The EU views cryptocurrency as legal but allows member states to determine regulations for crypto exchanges. Crypto tax rates also vary by member country.
The European Commission proposed the Markets in Crypto-Assets Regulation (MiCA) in 2020 to enhance consumer protection, introduce new licensing conditions, and define a code of conduct within the crypto industry. In April 2023, the EU Parliament approved legislation to track crypto users in suspected money laundering and terrorism funding cases.
Japan
Japan leads with a pro-crypto disposition, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA). Exchange providers must register with the Financial Services Act (FSA) and comply with ML regulations. In 2020, Japan established the Japanese Virtual Currency Exchange Association (JVCEA), which has crypto exchange companies as members. Further regulations are expected as Japan seeks to de-incentivize crypto remittance to discourage malicious users.
India
India still needs a clear regulatory framework on cryptocurrencies despite having a yet-to-be-voted bill prohibiting private crypto assets. Taxes apply to crypto investments and trades and follow the Finance Bill of 2022, which defines all virtual digital assets as property and applicable income tax.
The Indian Parliament is also interested in regulations for central bank digital currency (CBDC), non-fungible tokens (NFTs), real estate tokens, and other digital assets. Any regulatory requirements for cryptocurrencies will likely apply to other digital assets.
Singapore
The Monetary Authority of Singapore (MAS) regulates all crypto licenses and exchanges according to the Payment Services Act (PSA) and considers crypto assets as property but not legal tender. Singapore, a global leader in digital technologies, provides an enabling environment for cryptocurrency companies to thrive.
The country is also crypto tax-free, with no income or capital gains tax on crypto-related activities. However, digital payment token providers are discouraged from making public advertisements.
China
China has banned cryptocurrency ownership, trading, and mining since 2021, citing differences in permissions for public financing. There are no updates regarding a potential reversal of its stance.
Nigeria
The Nigerian Securities and Exchange Commission (SEC) lifted its ban on cryptocurrencies in December 2023 and has not recognized crypto assets as legal tender or securities. Although crypto trading, mining, and related activities are permitted, no official regulatory frameworks guide the industry. The Nigerian government recently moved against a significant crypto exchange, seeking to clamp down on illegal money exchangers and stem the plummeting exchange rates.
Brazil
The South American nation allows cryptocurrencies as payment methods but has yet to accept Bitcoin as a legal tender. The approved crypto regulatory framework in 2022 became law in 2023, “Legal Framework for Virtual Assets,” authorizing the Brazilian Central Bank to regulate and supervise crypto exchanges. The apex bank recently announced plans to phase the process of regulating cryptocurrencies and other virtual assets.
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The United Arab Emirates (UAE)
The UAE remains crypto-friendly, pursuing its goal of becoming a global leader in digital finance. Although cryptocurrencies and other digital assets are not recognized as legal tender, they are permitted for ownership and trading. There is no income or capital gains tax on crypto in the UAE.
In 2024, the Dubai Financial Services Authority (DFSA) updated its cryptocurrency token rules to improve the regulatory framework for tokens in the Dubai International Financial Centre (DIFC), while the Central Bank of the United Arab Emirates (CBUAE) board approved stablecoin licensing.
The Future of Crypto Regulation
The crypto market is here to stay; the approval of crypto ETFs indicates that regulatory bodies are likely going to adopt regulations that make the crypto space safer and not stifle the growth and adoption of cryptocurrencies. Expect regulations that enhance AML and consumer satisfaction for holding, spending, and trading cryptocurrencies.
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