Cryptocurrency Sample Regulations in The World

Cryptocurrencies, which came into our lives with blockchain technology, have attracted many people's attention as a powerful alternative to state-backed physical currencies that are legally valid and in circulation today. 


While some countries worldwide are cautious about cryptocurrencies, many countries are actively working on regulatory activities. Countries follow different approaches when regulating cryptocurrencies; nevertheless, it prioritizes public order and public safety as a priority. The same is true for "cryptocurrency platforms" that operate as a kind of stock exchange.


It is observed that the United States and Japan are conducting pioneering work to regulate these cryptocurrency platforms that bring together cryptocurrency buyers and sellers. The primary purpose of these countries, which started regulatory studies for cryptocurrency platforms, has been to bring these platforms' licensing obligation.


The use of blockchain technology, which has come to the fore with more than 2000 cryptocurrencies and tokens, in the financial world is not limited to only cryptocurrencies. Thorough to the distributed system in its infrastructure, the blockchain can operate effectively without being controlled from a single center. It has an important place with its different Token (token) features and important ICO activities. Considering the world practices, it has begun to be discussed whether there is a face of fraud or not because ICO projects failed at a rate of 46% in 2017. There is a possibility of fraud, especially because these activities are not regulated in any way, and therefore, no registration system has been established. This has brought consequences such as banning the opening of new ICO campaigns directly in countries such as China.


In meantime, you can examine the "Report of Cryptocurrency" Turkey Informatics Foundation for detailed information on this subject.


Legal Status of Cryptocurrencies on Continents


Cryptocurrencies, one of the most popular application solutions of blockchain technology, have been the primary focus of regulatory activities as they first announced their name with Bitcoin in chronological terms. Although cryptocurrencies are a striking technology product, the need for regulation has increased because they sometimes cause the victimization of the users and are progressing in an uncontrolled system. The regulation studies on cryptocurrencies have changed in the specific countries; as a result, the different perception of trust in the socio-economic conditions and financial systems of the countries has led to the emergence of different regulatory steps.


Besides, it is thought that regulating cryptocurrencies by giving them a legal status around the world will prevent cryptocurrencies from being used for illegal activities such as money laundering, tax evasion, or drug trafficking, thereby increasing their value in the long term. Below, we examine what regulatory measures are taken for cryptocurrencies specific to countries.


Africa

While most countries in the region are still in the monitoring/tracking phase regarding Blockchain technology and cryptocurrencies in Africa, cryptocurrencies are not recognized as currencies in circulation. Almost all governments have warned their citizens of cryptocurrencies and the risks associated with dealing with them. However, among the continental countries, Mauritius and South Africa are the leading countries in this sense. The "regulatory sandbox" application developed in Mauritius is one of the important developments in the region. South Africa is the closest country to putting cryptocurrencies in a legal framework.


Apart from this, countries in the region such as Morocco, Algeria, and Libya have directly banned them. In particular, companies providing financial services in South Africa receive many requests from their customers regarding cryptocurrency products and indicate that transactions with cryptocurrencies are on the rise. Currently, no regulation in the region will give cryptocurrencies legal status, and the perspectives of the relevant public authorities on this issue are also unclear.


On the other hand, two ICO activities were initiated in South Africa in 2018 to support the country's financial and trade system. In addition to South Africa, ICO studies have been initiated by a company named Soluna, which carries out renewable energy and cryptocurrency mining activities in Morocco.


In an article published by the South African Reserve Bank (SARB) in December 2014 on virtual currencies, virtual currencies were "digitally tradable and accepted as a medium of exchange, but not as a legal currency. unit and/or value storage medium". In another statement made by SARB in February 2018, it was stated that the issue was worked on in order to reveal an appropriate regulatory framework.


America

The regulation and legal status of cryptocurrencies in the United States of America (USA) differ between states and between government agencies. For example, the use of cryptocurrency was banned for 12 months by a municipality in the state of Washington of the country; The bill has been submitted to the state legislature to determine the legal status and classification of cryptocurrencies in the state of Wyoming. On the side of state institutions, the Ministry of Treasury classifies cryptocurrencies as decentralized virtual currency that can be exchanged; The Securities Exchange Commission (SEC) includes it in the commodity class if certain conditions are met.


In the United States and Canada, although cryptocurrencies have not yet been fully legalized, supportive steps are taken for their use in commercial life, and studies are carried out to become a leader in this technology in the future. SEC conducts studies regarding ICO activities in the USA.


In South American countries, on the other hand, it is seen that the situation in the USA is in the opposite direction, and the use of cryptocurrency is prohibited, although the countries do not yet take a step. For example, the use of cryptocurrencies has been banned in Bolivia due to concerns over crimes such as tax evasion and money laundering.


Venezuela, one of the countries with the highest inflation, aims to trade with Petromoneda (Petro), a cryptocurrency indexed to oil. On the other hand, the first important step regarding digital assets was with the Fintech Law enacted in Mexico. In addition to payment services, the law also covers crowdfunding activities and digital assets. However, according to the practitioners in the country, the law still does not contain sufficient regulations to prevent digital assets from mediating crime.


Looking at other South American countries; It is seen that a working committee for the regulation of digital currencies has been established in Brazil, the Banks and Financial Institutions Surveillance Authority in Şile aims to work on blockchain technology, and in Colombia, studies are carried out for tax implementation on cryptocurrencies.


Asia

The vast majority of cryptocurrency trade is carried out through the Asian continent countries. For example; Blockchain technology and cryptocurrencies in Japan have gained a legal basis in the country. In Japan, "Cryptocurrency" is defined as money. Although cryptocurrency trading is banned in China, as a result of its work for nearly three years, the Central Bank of China has established a "Digital Money Institute" unit within the Central Bank and started working to issue its own digital currency.


In South Korea, as of January 30, 2018, in order to combat money laundering and to monitor the applicability of tax regulations, a regulation has been introduced to ensure that cryptocurrencies are processed only through real person bank accounts, and thus, cryptocurrency trading with anonymous bank accounts is prohibited.


Singapore has become a very popular country for ICO activities. As long as the country's competent monetary authority (Monetary Authority of Singapore - MAS) considers a digital asset as a capital market instrument, it regulates activities such as clearing and ICO related to the digital asset. Accordingly, platforms and brokerage houses that transact with tokens that can be traded, such as capital market instruments, must fulfill their registration and license obligations, subject to the regulations of the country's Capital Market Law (Securities and Futures Act - SFA).


With the Securities Commission's guide on January 15, 2019, various regulations regarding digital assets have been made in Malaysia. Different definitions have been made to recognize these assets within the framework of the country's regulations on securities. Accordingly, digital asset platforms operating in the country must be approved by the Securities Commission, and ICO activities will not be carried out unless approved by the commission. In March 2019, a new consultation report was published to regulate ICO activities subject to various criteria.


In Thailand, digital assets and cryptocurrencies are regulated separately. There are two different regulatory frameworks in the country for the taxation of transactions with these assets and the income derived from these transactions. Accordingly, ICO platforms must obtain approval from the SEC to operate in the country and separate approvals for each ICO project. The SEC may refuse to approve ICO projects it deems contrary to public safety and order.


Japan and Hong Kong are among the other countries that make ICO activities, such as Thailand. In Japan, again, depending on certain criteria, it can evaluate digital assets and ICO transactions within the scope of securities regulations. The Japan Virtual Exchange Association, established under the Payment Services Law in Japan, has made ICO activities regulations.


Europe

Policy and regulation studies for cryptocurrency trading and blockchain technology are ongoing within the European Union and member countries. On June 19, 2018, the European Union financial institutions issued a warning to citizens because virtual currencies are still not fully regulated and their risky nature. Apart from the benefits of The Fifth EU Anti-Money Laundering Directive (5AMLD), the European Banking Authority (EBA) also emphasizes the need for a separate independent regulation to minimize the risks posed by cryptocurrencies.


On March 8, 2018, the European Commission prepared a "FinTech Action Plan" in which many innovations such as blockchain technology, artificial intelligence, and cloud storage services were examined in order to take advantage of technological developments in the financial sector. Although cryptocurrencies' legal definition is uncertain within the union, most member states subject them to profits tax, which varies between 50-0%. In a decision made by the Court of Justice of the European Union, it has decided that the exchange between cryptocurrency and other national currencies should be exempted from VAT. Among the countries that most support cryptocurrency activities are Switzerland and Malta. In the region, especially in Malta and Switzerland, the development of cryptocurrencies is clearly encouraged, and regulation studies are carried out to clarify the market activities.


Malta has focused on distributed ledger technology and has enacted three new laws as a result of approximately two years of work: Financial Assets Act; VFAA, Innovative Technology Arrangements, and Digital Innovation Authority Act; MDIA. With these three regulations, Malta has defined and regulated the distributed ledger technology beyond cryptocurrencies. Distributed ledger technology with the adoption of these regulations;

  • Electronic money,
  • Financial instruments based on distributed ledger technology,
  • Virtual tokens and;
  • Virtual financial values

It is classified as. VFAA outlines a framework for regulating distributed ledger technology products and related service providers. It also introduces a new class of intermediaries known as Virtual Financial Asset Intermediaries with this regulation. Another important detail is that the VFAA regulations have authorized the Malta Financial Services Authority to develop a Financial Instrument Test to determine whether a ledger technology asset belongs to one of the classes mentioned above and thus can be regulated.


Similar studies have been conducted in Switzerland, and virtual currencies have been evaluated as "assets". In 2014, the Swiss Federal Council, in a report published by the Swiss Federal Council, defined virtual currencies as "the digital representation of a value that can be traded on the internet," and although it does not recognize it as a national currency in circulation, it has more of a currency role.


In Germany, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) decides whether the regulations regarding securities and banking will be applied according to the contractual relations and the purposes of the tokens used in each ICO project. BaFin defined cryptocurrencies as financial instruments and provided regulatory clarity. According to the press release of BaFin published on March 2, 2020; cryptocurrencies are now: regulated or not guaranteed by any central bank or public institution, do not have legal currency status, can be used by legal entities or individuals as a means of payment or clearing, can be used for investment purposes, can be transferred electronically, They are classified as "digital value representations" that can be stored or traded. In the related report of BaF, it is also stated that cryptocurrencies should not be confused with electronic money, which is subject to different laws in the law.


In Switzerland, the (Swiss Financial Market Supervisory Authority – FinMa) published a guideline in February 2018 evaluating the legal framework applicable to ICO projects and pointed out that, similar to the approach in Germany, different regulations will be applicable for each coin used in the projects and the purpose of these tokens. . Moreover, in a report published by the Swiss Federal Council, the current Swedish legislation is applicable to Blockchain technology-based business models and made recommendations to create the best possible regulatory conditions.


In France, the French Parliament passed an important bill on ICO activities on September 12, 2018. Approval mechanism has been arranged for ICO projects; Regulations have been made for cryptocurrency intermediary platforms, and finally, a special tax regime has been introduced for transactions with crypto assets. These regulations do not apply to securities tokens; French security regulations are made for these types of tokens.


Gibraltar has actively worked to ensure legal certainty regarding the functioning of cryptocurrencies within its jurisdiction. It requires the registration of cryptocurrencies currently located in Gibraltar, companies using distributed ledger technology to store or transmit value belonging to others. The registration process involves the Gibraltar Financial Services Commission's review of the application, and if certain criteria are met, a license can be issued that allows the owner to run a business using distributed ledger technology. In addition, The Proceeds of Crime Act transposed the EU Anti-Money Laundering Directive into Gibraltar's national law. Section 9 (1) (p) expands the definition of "related financial enterprise".


Australia

It is seen that the governments of the continental countries generally support the Australian cryptocurrency activities and blockchain technology. The use, trade, and mining activities of cryptocurrency in Australia are accepted as legal in the country, and taxation guidelines are prepared to guide people. Especially in the study published by the Australia Securities and Investments Commission (ASIC) in 2017, it was stated when and under what conditions ICO projects can be evaluated as a financial transaction. Here again, an evaluation is made based on the token's economical use in the ICO project.


The Middle East and North Africa

The countries attract blockchain technology in the region, and research continues for regulation studies in many countries. Especially after the statements that cryptocurrencies are halal in the fatwas given within Islamic Law's scope, there has been a stir in the sector. Despite these statements, it is thought that the steps to be taken by the governments in the countries of the region will determine the situation of the sector. Cryptocurrencies are favored by some countries, especially in order to avoid the sanctions of the United States. For example; Due to the fact that VISA and Mastercard transactions cannot be made in Iran and inflation is at high rates, the value of the national currency is constantly changing; This ensures that cryptocurrencies are followed with keen interest by individuals across the country.


In Israel, although digital currencies are not accepted as a valid currency by the Bank of Israel, the Israel Tax Authority stated on January 1, 2018, that the use of virtual currencies should be seen as a "virtual payment tool" and should be taxable. 


It is noteworthy that at the point where cryptocurrency's ongoing conflict relationship with law and regulation has come to a place, it is noteworthy that the actions are taken to act in cooperation with regulatory organizations, especially by realizing that the regulation of institutional structures will not always have restrictive consequences for cryptocurrencies and will benefit in spreading. As a matter of fact, in the Libra White Paper issued by the Libra Association (Libra Association), which consists of companies such as Visa, Mastercard, Paypal, Ebay, Uber, Lyft, Spotify, and Vodafone Group, as well as Facebook regarding the Libra cryptocurrency unit, the financial It is noteworthy that an innovative call for cooperation was made to the sector and regulatory bodies.


Regulation Steps for Cryptocurrency Trading Platforms


Countries around the world are cautious about the activities of cryptocurrency platforms, as is the point of view of countries' cryptocurrencies and ICO activities. Most country's cryptocurrency the unregulated trading platforms and the risks of trading with cryptocurrencies warned individuals about these risks. In terms of regulation studies, the most important development is seen in the European Union.


Virtual currency exchange providers and custodian wallet providers were included in the scope of 5AMLD with the changes brought to the 4th Anti-Money Laundering Directive in the European Union on June 19, 2018. Thus, cryptocurrency platforms and wallet service providers are required to fulfill Customer Due Diligence (CDD) obligations as per 5AMLD and prepare policies and procedures to prevent money laundering and combat terrorist financing.


With the changes made on 5AMLD, cryptocurrency platforms have been placed in a regulatory framework for the first time. Union member countries, on the one hand, warn citizens against the risks of trading on cryptocurrency platforms; on the other hand, they also impose some obligations on these platforms. For example; Cryptocurrency trading platforms in Germany must obtain authorization from the German Federal Financial Supervisory Authority (58) before they become operational. Similarly, in the regulations for blockchain technology newly released in Malta, all technology platforms operating on distributed ledger technology are expected to complete the Malta Digital Innovation Authority certification process.


When looking at countries other than the European Union member countries, it is seen that cryptocurrency platforms are subject to examination for similar purposes. For example, in Singapore's draft Payment Services Law, the implementation of AML / CFT obligations for brokerage houses operating in cryptocurrency trading is regulated. Thus, cryptocurrency intermediary platforms are also expected to fulfill the obligations imposed on financial authorities, such as the Know Your Customer (KYC) principle, suspicious transaction reporting, and record-keeping obligations.


On the other hand, Canada goes one step further, stating that although it does not define Bitcoin as security in itself, exchange transactions that allow cryptocurrency trading will be considered securities, and therefore platforms must operate subject to the relevant legislation. Canada's legal system requires companies using digital currency to register with the Canadian Financial Transactions and Reports Analysis Center (FINTRAC). New regulations adopted in Canada in June 2019 require businesses working with cryptocurrencies to obtain and report larger amounts of identifying information from customers.


When looking at the United States, it is seen that crypto assets and transactions with these assets are subject to different definitions and regulations from state to state and even from institution to institution. While crypto assets that can be considered as securities are subject to SEC's regulations; In the event that the cryptocurrency trading deals with other regulated commodities, these transactions include the United States Commodity Futures Trading Commission; It will be subject to CFTC regulations. Financial Crimes Enforcement Network according to the country's Anti-Money Laundering (AML) legislation; FinCEN businesses that offer cryptocurrency trading services to customers are considered as a type of activity that must be registered with FinCEN, and therefore these processes must carry out AML compliance processes.


Although many states in the country do not yet have regulations regarding digital currencies and business models that enable cryptocurrency trading; In New York State, cryptocurrency trading activities are considered as a kind of money transfer, and new regulations are published that require licensing for platforms.


It seems that the priority legal steps for cryptocurrency platforms focus on taking the necessary steps to comply with AML regulations and to prevent money laundering and terrorist financing crimes. It is anticipated that cryptocurrency platforms, which are currently subject to licensing or certification, will be included in more comprehensive regulations in the future. Since the most common usage examples of cryptocurrencies are encountered in cryptocurrency trading platforms, the permission / licensing of these platforms by the country's authorities is among the most important regulatory issues.


As Sanction Scanner, we make it easy for cryptocurrency service providers to comply with global and local AML regulations with our AML solutions. By complying with the legislation, you can both protect yourself from regulatory penalties and protect yourself against financial crimes. Talk to us or request a demo to discover Sanction Scanner's AI-powered AML solutions.



Previous Post
An Overview of 2021 AML Trends
Next Post
How the AML/CFT Fights Proliferation to Terrorism (PT)