Legal status of cryptocurrency in different countries of the world

Cryptocurrency is an intangible asset that denotes a specific value.

For many years, cryptocurrency has been an integral part of the functioning of many financial institutions, banks, exchanges, exchangers, business companies, as well as ordinary users. Previously, people didn’t spread much about it, because they didn’t understand why cryptocurrency was needed. However, over time, the situation has changed radically and today almost every person has ever heard of it or even used it.

Cryptocurrency provides the user with many options for use: trading assets on exchanges, transferring cryptocurrencies from one digital wallet to another as a means of payment for purchases, as well as investing.

If you ask the question: “How many people own cryptocurrency?”, then it will not be possible to name a specific number, since billions of exchange transactions are carried out daily around the world and their number is constantly increasing. Such a rapid popularity of a new type of digital money has made the legal regulation of cryptocurrencies in the world mandatory.

The influence of cryptocurrency on the global economy is so great that the authorities of many countries are simply obliged to create financial instruments that will work for the domestic digital market of the country, as well as beyond its borders. In this article, we will tell you about the situation with cryptocurrencies not only on the European market, but throughout the world.

Cryptocurrency regulation. Study of the experience of different countries

Cryptocurrency is not banned in Europe, the USA and some Asian countries. The states of many of them have already developed rules for using cryptocurrencies at the legislative level in order to reduce the indicators of the shadow economy and increase user confidence in cryptocurrencies, as well as to develop many aspects with their help, for example: foreign investment, development of start-up projects, regulation of ICOs and much more other.

Cryptocurrency in Europe

Ukraine

Ukraine is located in the very center of Europe and is a country that is favorably disposed towards cryptocurrencies. According to many analyses, it occupies top positions in countries where the cryptocurrency is popular among users and captures large trading volumes. Every day, Ukrainian exchangers make transfers of millions of hryvnias, which indicates that cryptocurrency is not prohibited on the territory of Ukraine. Previously, Ukraine did not have a legislative document that could regulate the crypto, but in the spring of 2022, the President of the country adopted a law that monitors the crypto and promotes its development in the country. 

According to the law:

• exchanges in the country operate absolutely legally;
• users receive protection of their crypto assets legally;
• banks open cryptocurrency accounts for business.

Malta

Malta has been the leading country in the European Union for simplicity and classification of crypto companies since 2018. It became the first country in the world to adopt a number of legislative papers to regulate the cryptocurrency sector. Also, the authorities of the country have created a legal framework, which includes 4 licenses for carrying out activities with cryptocurrencies:

License 1. Granted for financial advice. Users cannot own cryptocurrencies themselves, but they can sell their services on investment recommendations. The cost of such a license ranges from 25 to 50 thousand euros.

License 2. Allows users to provide VFA, P2P services, but prohibits exchange trading. The price of this license is 120-125 thousand euros.

License 3. This license is suitable for OTC trading and transactions. The cost of the authorized capital will cost 730 thousand euros.

License 4. Is the most expensive and promising license. Allows users to trade on exchanges, store and control clients' money, as well as their keys. The price for such a license is 750 thousand euros.

In this regard, Malta was given the name "Blockchain Island", as the country became literally the center of the cryptocurrency, the most attractive for crypto addicts and companies legally.

Germany

This country was one of the first in Europe to pay more attention to the digital market, namely cryptocurrencies. The legal regulation of the cryptocurrency market in Germany dates back to 2013. The Minister of Finance announced a law that specified that Bitcoin is defined as a unit of account that can be used in private transactions. This means that taxes are levied on the income of private companies and not on capital gains.

It is also worth noting that the country has a law of taxation on cryptocurrency only if it is sold during the year in which it was acquired. On the one hand, it may seem that such a law is not very beneficial for the user, but if we talk about long-term storage of cryptocurrencies in order to earn money by increasing rates, then this law can have a very positive effect on the funds of many.

As for mining, there is no tax. However, if you want to further resell the cryptocurrency that you have mined, then you will need to pay a certain percentage of tax. This type of taxation applies to bonds, stocks and securities that were purchased for the purpose of further sale and receipt of monetary gain.

Registering a crypto exchange in Germany is not a very complicated process. Those companies that associate their work with cryptocurrencies are automatically classified as financial ones. All that is needed for further work is a license. According to it, the company undertakes to submit accounting documentation to the Federal institutions within a predetermined period and to have a starting capital of at least 700 thousand euros.

The center of cryptocurrency in Germany is Berlin. It is in Berlin that there is a large innovative crypto community "Bitcoin Kiez". It brings together crypto platforms from different parts of Europe in order to expand the boundaries for cryptocurrencies around the world.

Switzerland

Based on official data from the Swiss Federal Tax Office FINMA, cryptocurrencies are referred to as digital assets. This means that users can buy, sell, invest with them, and also exchange them for fiat money or another cryptocurrency. The Swiss Authority provides 4 types of licenses depending on the activities with crypto:

• for financial technologies;
• for crypto exchanges and exchangers;
• for investment funds;
• as well as for banks.

Since Switzerland welcomes the development and activities of crypto companies and startups, the country's authorities have developed and adopted a law to legally create such a business. The law specifies that:

• the company must have a director, an investor and a physical address of registration;
• the minimum deposit amount must be at least CHF 100,000;
• the company is obligated to pay a federal tax of 7%.

The leading companies and projects of the country are: Avaloq, Bancor, DIA, Loanboox, Neon, Crypto Finance AG, Taurus Group SA and many others.

Luxembourg

A couple of years ago, Luxembourg did not have a specially developed legislative framework for the full regulation of the financial market, namely: the exchange of cryptocurrencies and work with the blockchain. The Ministry of Finance decided that it was necessary to issue a number of legal documents that would provide a legal basis for the activities of crypto companies.

To date, the exchange of digital assets is regulated by a special Commission for the Supervision of the Digital Market. Each firm that carries out activities directly related to cryptocurrencies and blockchain must have an appropriate license, which will indicate:

• type of activity of the company;
• used cryptocurrency assets;
• detailed information about the managers, shareholders and director of the company;
• reporting in the field of AML, which will confirm that the company is not engaged in money laundering and terrorist financing.

Luxembourg issued the first such license in 2016 on the Bitstamp cryptocurrency exchange. It is a popular platform that has a variety of fiat currencies such as USD, EUR, etc., as well as cryptocurrencies such as Bitcoin, Ethereum, Ripple, Solana, Chainlink, OMG Network, etc. It is important to mention that such a license works not only in Luxembourg, but also applies to countries that are members of the European Union.

Legal Status of Cryptocurrencies in North and South America

Argentina

Since the United States has been occupying a leading position in the world tops by capitalization for many years, it can be understood that cryptocurrency is not something forbidden or illegal here. Many analysts in this country argue that cryptocurrencies can solve a number of problems that stop cities from developing. Take Argentina for example, this country is known to everyone for its biggest inflation in the world, more than 70% today. The authorities of the country found a way out of this situation by resorting to mining. They plan to hire specially trained people in the crypto sector to mine the coins and then convert them into Argentine pesos. Thus, according to the plans of the measure, you can earn about 70 thousand pesos in one month. It is planned to mine stablecoins, as they have a more stable exchange rate due to their peg to fiat. The largest of them: USDC, UST, USDT, BUSD, DAI.

Also, on August 27, 2022, the authorities of the country adopted a law stating that the citizens of Argentina will be able to pay utility bills in cryptocurrencies. At the moment, they already accept payment in Tether coins (USDT).

Brazil

About 50% of people in Brazil believe that Bitcoin should become the national money. This indicates that people have confidence in digital currencies and support their further development. In this regard, one of the Brazilian deputies suggested paying employees salaries in cryptocurrencies, as this could have a positive impact on the country's economy as a whole. The bill specified that:

• the right to receive salaries in the crypt will be able to receive government employees and private individuals;
• each employer makes his own decision on payments, this is not compulsory;
• a mandatory clause is that each employee must agree to such payments;
• employees can also choose the percentage of payments or the entire amount in crypto.

Such a law is advisory in nature, since everything must happen of one's own free will, and not with the use of force. The deputy himself, arguing the law, explained that we live in the era of digital technologies, where cryptocurrencies play a key role. He also clarified that we must abandon primitive habits and adapt to the new rules of the game in order to improve the quality of life of every person.

Bermuda

Many experts and analysts consider these islands to be an ideal place for the development of crypto companies, since there is a positive attitude towards cryptocurrencies from users, as well as from the authorities. If you have a license, then you are allowed to pay taxes, make purchases or exchange money in any cryptocurrency that is backed by the US dollar. This helps to attract new investors who invest in the development of the national economy.

The list of areas of activity that can obtain a license include:

• supply of financial services for the transfer of funds using cryptocurrencies;
• functioning of the exchange of digital coins;
• issue, purchase, sale of cryptocurrencies and tokens;
• services for saving electronic wallets;
• derivative services for the exchange of virtual services.

Canada

There are a huge number of platforms for transactions with crypto-currencies in Canada, and the central bank of the city is already working on issuing a digital version of the Canadian dollar. The legal regulation of blockchain and cryptocurrencies was introduced back in 2014. The requirements of this law apply to:

• companies and ATMs that deal with cryptocurrencies;
• exchanges that trade virtual assets;
• platforms that operate with cryptocurrencies in Canada, but have foreign registration.

The law also clarifies that when making any exchange transactions using digital currencies, such a transaction will be regarded as barter, which is also subject to taxes. Mining is regarded as a commercial activity, which is subject to income tax. Regarding wages, payment in cryptocurrency is also practiced here with the consent of both parties.

The cryptocurrency market is developing at lightning speed and every time the question is raised more and more sharply: “What methods to make the legal regulation of ICO?”. At this stage, the country's authorities are busy developing programs that will be able to analyze the digital currency market in more detail, its technical and fundamental aspects.

Salvador

El Salvador is a small state in the very center of America, whose population reaches 6.5 million people. This city is considered to be the first to legalize Bitcoin as an official means of payment. Many believe that this can have a positive impact on the economic situation in the country and will allow people to save their money when transferring funds from abroad, since many citizens work outside the city. The mayor believes that the legalization of cryptocurrency will be able to attract considerable investments to the budget. The adoption of a law on the legal use of cryptocurrency will be able to reduce the percentage of the shadow economy and make all financial transactions as accessible as possible for each user.

Regulation of cryptocurrencies in Asia

Singapore

This city is quite good for the development of blockchain startups, business companies and other options for financial activities related to cryptocurrencies, as many experts consider it the city of global finance. Registering and maintaining your business in Singapore will be much cheaper than maintaining such a business in Liechtenstein or, for example, in Switzerland. This is justified by the fact that there is no tax on your capital gains in Singapore. There are only territorial taxes, the cost of which is not so high in comparison with other jurisdictions. The mood towards cryptocurrencies in this city is friendly, both on the part of the authorities and on the part of users. There are many financial structures operating in the city that are actively introducing digital technologies into the daily life of users. One of these structures is the Tangem company, which issued its own bitcoin banknotes with an embedded chip, which work like cold hardware wallets.

Kazakhstan

Two years ago, the President of the Republic of Kazakhstan issued a law “On the regulation of digital technologies”, where changes were made for cryptocurrencies as well. All digital assets were divided into two groups: secured and unsecured. According to the law, cryptocurrencies are classified in the second group, since they are very risky.

However, despite this, the Minister for the Development of Digital Technologies and Aerospace plans to create and develop the institute of crypto-exchanges, where he wants to attract 1% of the crypto turnover worldwide. According to this plan, the mining of cryptocurrencies in Kazakhstan is not prohibited. It is carried out on platforms, each transaction of which is taxed. At the moment, about 7% of the world's mining is concentrated in the country. After consulting, the authorities of the country decided that the future really belongs to crypto-currencies and set a plan to increase the volume of investments in the mining sector to 550 billion tenge.

China

Due to the huge size of the country and the rapid development of technology, China has been among the top countries in terms of cryptocurrency turnover since 2017. In 2017, a law was passed that established the legal regulation of cryptocurrency in the country. According to this law, all digital assets, blockchain and ICO, will be treated as the user's virtual property, which is subject to taxation. The key crypto-currency taxes in China are:

• income tax;
• for capital gains;
• at a profit;
• added final value.

In order to open an exchange in China, you need to obtain a license that belongs to a number of financial ones. The most popular crypto exchanges in China are:

• Bybit;
• EXMO;
• Paybis;
• BNB Premium;
• BTC Alpha;
• Coinbase;
• Nexo;
• OKX;
• YouHolder.

However, in 2021, China declared cryptocurrencies illegal. Also, transactions with cryptocurrencies, financial services related to digital assets, exchanges and other platforms are illegal activities. The key role of the ban on cryptocurrencies was played by the fact that during mining, carbon is released into the atmosphere, which negatively affects the flora and fauna of the country.

Conclusion

After analyzing the best countries for cryptocurrencies around the world, it can be argued that digital technologies are rapidly developing every day and are not going to back down. Despite the prohibitions in some countries on transactions with cryptocurrencies, the trigger has already been launched and we only have to imagine what scale the cryptocurrency will reach in the near future.