The crypto world started as a tiny niche full of geeks and developers, back in the first years of Bitcoin is the first decentralized digital currency. It was created in 2009, by an anonymous founder or group of founders.... Now, to say that has changed a lot it’s an understatement. We have over 18,300 coins in a market valued at $1.8 trillion [CoinMarketCap]. People from all fields and possibilities worldwide are participating, and the governments wouldn’t let it slide anymore. Crypto regulations are here to stay.
Some authorities are totally against this type of economy, while others have shown interest in it. We can assume that the world is mostly in favor of cryptocurrencies, so far. But they won’t go without any rules as they did before. So, let’s check some new and relevant crypto regulations worldwide.
Bad regulations: crypto bans
Of course, not everyone likes cryptocurrencies. China is now a very famous case. The hostilities started as early as 2013. Their central bank, the People’s Bank of China (PBOC), banned all financial institutions from handling Bitcoin transactions. Since 2017, Initial Coin Offerings (ICOs) and crypto exchanges are banned in the territory. Then, in 2021, they completely banned all crypto activities and coins inside the country.
Sadly, they’re not alone. According to the last report by the U.S. Library of Congress, eight other countries have absolute bans applied against cryptocurrencies and their related activities. Besides China, they are Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia. There are more countries with “implicit” bans, though.
Those regions don’t explicitly ban cryptocurrencies, and the citizens can still freely use them. However, the governments there are very skeptical of it and have placed some limitations like a no-use for regular payments or a banking ban (banks can’t handle these transactions). Examples of the first case are Russia and Turkey. Examples of the second case are Bahrain and Nigeria.
Other countries with an implicit crypto ban include Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Côte d’Ivoire, Democratic Republic of the Congo, Ecuador, Gabon, Georgia, Guyana, Indonesia, Jordan, Kazakhstan, Kuwait, Lebanon, Lesotho, Libya, Macao, Maldives, Mali, Moldova, Namibia, Niger, Oman, Pakistan, Palau, Republic of the Congo, Saudi Arabia, Senegal, Tajikistan, Tanzania, Togo, Turkmenistan, United Arab Emirates, Vietnam, and Zimbabwe.
In total, there are 42 countries with crypto regulations including implicit crypto bans. If we add it to the ones with absolute bans, they’d do 51 countries. The number seems high, but from 195 jurisdictions worldwide, only 21% have these hostilities, and barely 4.6% have complete bans.
Countries with AML and taxes
Most governments may accept cryptocurrencies now, but not without rules anymore. As described by the mentioned report, at least 103 countries (52%) are applying Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws and taxes for crypto-related activities. The first type of law usually applies to crypto companies (e.g. crypto exchanges). They’re obliged to properly identify all of its customers (KYC) and report any suspicious activity to the authorities.
As for the taxes, they’re commonly applied to the possible profit made from crypto trading or long-term holding. Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and crypto mining are rarely taxed. Nevertheless, if the activity is widely popular in the country, the authorities use to apply taxes. For example, given that a large part of the Chinese miners ended up in Kazakhstan and Russia, these two countries are planning to apply (or increase) taxes to the activity.
Maybe the country with the higher tax rate for crypto is Côte d’Ivoire, which treats cryptocurrencies as fiat money for tax purposes. Indeed, this country has the highest income tax rate in the world: 60%. Australia would follow since it can apply up to 45% for high-profile investors. The United States is also a country with high taxes: it can ask up to 37% for capital gains with cryptocurrencies.
We can also talk about the less-taxed countries. El Salvador, in which Bitcoin is legal tender, doesn’t have taxes for crypto profits to attract foreign investors. Germany has some taxes (from 0% to 45%) only for the short-term investments above 600€. But if an individual investor holds cryptos for over a year, then there are no taxes at all. In Singapore, the investors only pay 7%, and in Switzerland they pay between 0% and 22%, depending on the region.
Crypto mining: PoW vs. PoS
Just recently, a polemic proposal to ban Proof-of-Work (PoW) crypto mining in Europe was almost discussed in Parliament. However, for now, they reconsidered and are looking for other ways to deal with the potential environmental impact. That’s a worry difficult to erase, though. PoW mining can be somehow polluting since it consumes large amounts of energy.
That’s exactly why crypto mining has been limited or banned by some crypto regulations in several countries, like Kosovo (Southeast Europe). For its part, due to several blackouts in the country, Iran banned crypto mining in December and for several months. Likewise, attractive countries for crypto mining such as Kazakhstan, Malaysia, and Venezuela applied a strict license system for miners. They use to shut down any non-licensed mining farm and seize all the machines.
As for the Proof-of-Stake (PoS), some countries are catching up with the possible profits this brings for investors. Taxes are the logical consequence, then. Countries like Australia, Austria, United States, and United Kingdom apply different taxes for PoS income. In general, PoS is considered a green alternative to PoS, but it’s unlikely that most cryptocurrencies switch to this system, anyway. It may be greener (if the PoW isn’t done with renewable energies), but it’s still kind of insecure and centralized.
Bitcoin and cryptos as legal tender
Just like there are crypto regulations with full bans, there are also very crypto-friendly countries. That doesn’t mean they don’t have any rules (or taxes) at all for crypto activities. But these rules are, in general, favorable for investors, miners, and companies. Examples of friendly countries are Malta, Estonia, Germany, Singapore, Japan, and Switzerland. As a result of their friendly rules, there are commonly a lot of crypto services around there.
But there’s another step in the path to embracing cryptocurrencies: making them legal tender along with national fiat currencies. We can say that legal tender is the official means of payment inside a territory. It’s usually described as mandatory; as defined, for example, by the Bank of Spain. It’s then this “compulsory” status that could distinguish legal tender from legal money, which is also allowed as a payment method.
Currently, most nations still state that Bitcoin (or any other crypto) isn’t legal tender inside their borders. It doesn’t mean it’s illegal, but it doesn’t have the same status as their national currencies. However, two nations have officially adopted Bitcoin as legal tender so far: El Salvador (Central America), and Ukraine (Eastern Europe). Indeed, Ukraine also made Ethereum (ETH) legal tender, being the first country to do so in March 2022.
Nevertheless, we can note that the official announcement by the Ukrainian government doesn’t explicitly say that An abbreviation for Bitcoin. and ETH will be “legal tender”. The term they use is “legalized”, but it’s been assimilated as almost the same.
Beyond these two, there are more countries and regions considering doing the same crypto regulations. Panama, Paraguay, Guatemala, Honduras, Chile, Malaysia and Tonga are discussing the possibility. Meanwhile, Arizona and California (U.S.) have asked to do so, and Lugano (Switzerland) wants to make Bitcoin (BTC) and Tether (USDT) de facto legal tender.
On the other hand, many countries are preparing their own Central Bank Digital Currencies (CBDCs). They’re, basically, a cryptographic and digital version of their own fiat currencies. Therefore, they would be legal tender automatically. In most cases, they’re not even considered “real” cryptocurrencies, since they’d be fully controlled by governments.
So, while some countries see decentralized cryptocurrencies as the way to go, others are looking to make their own centralized versions. In the future, these two options may compete hardly, and who knows which one will win?
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