Bitcoin continues to break new ceilings in terms of valuation (the currency recently crossed the $18,000 mark, before dipping again). Investor interest in cryptocurrencies and their potential continues to peak, and even governments and regulatory bodies are getting into the game now.
Venezuelan President Nicolas Maduro recently announced his government’s plan to launch a new cryptocurrency dubbed “petro”, which will be backed by the country’s oil, gas, gold, and diamond reserves. However, the Venezuelan economy is in tatters due to, among other things, mismanagement of its Bolivar currency and the sanctions imposed on it by the US. The ‘petro’, which is ironically being touted by the government despite its heavy prosecution of the many bitcoin miners in Venezuela, isn’t expected to do well either.
While the Venezuelan President adventurously decided to launch a sovereign cryptocurrency, his isn’t the only government considering the idea. There are also other countries trying their hardest to integrate cryptocurrency payments into their economy. Then there are also countries who view Bitcoin and its many counterparts as inherently bad because they can be used (among other things) for money laundering and to make untraceable payments for illegal goods/services.
Here’s a breakdown of where some of the most prominent countries in the world stand on cryptocurrency:
The US is the single largest cryptocurrency-using nation in the world today. It has the highest bitcoin trading volume globally and the most number of cryptocurrency users. The US Treasury has classified bitcoin as a convertible decentralized virtual currency and it is traded and taxed as a commodity. That being said, official regulations regarding the new virtual currencies vary from state to state.
The United Kingdom
The UK has so far been fairly accepting of cryptocurrencies, regarding it as an unregulated foreign currency for most purposes. However, in a bid to crackdown on the growing use of bitcoin for money laundering and tax evasion, the member countries are planning to enforce stricter regulations soon.
Since August 2013, Bitcoin has been classified as “private money” in Germany. Under this classification, Bitcoin users are subject to taxation such as sales tax (VAT) and Capital gains tax, similar to transactions they might undertake with the official Euro currency. This legitimizes the cryptocurrency in Germany but also subjects it to regulation.
The Israel Tax Authority announced earlier this year that it did not consider Bitcoin and other cryptocurrencies as legal tender, but rather as taxable assets. Therefore, each time a user buys a bitcoin in the country, they will have to pay a capital gains tax of 25 percent. In addition, bitcoin miners and traders are treated as businesses in Israel and have to pay corporate income tax as well as 17 percent VAT.
While India has not imposed an outright ban on cryptocurrencies, it has repeatedly made it clear that usage or trading of virtual currencies is not licensed by the government. The RBI has said that investors in such currencies are doing so at their own risk. The government does, however, have plans to introduce a fiat cryptocurrency of its own.
China has, for a long while, been against the use of cryptocurrency. This year, the Chinese government issued a ban on Initial Coin Offerings (ICOs) and soon after shut down all local cryptocurrency exchanges as well.
Bitcoin is technically not illegal in Taiwan; however, regulatory authorities have repeatedly stated that the cryptocurrency is not subject to legal protection and claims. The country’s Financial Supervisory Commission banned Bitcoin ATMs at the start of 2014 and warned financial institutions not to accept the cryptocurrency as payments. However, multiple convenience stores sell bitcoins across the country, and leading retailer FamilyMart also allows the use of bitcoins for the purchase of goods.
Japan has been very accepting of bitcoin, recognising it as a “means of payment that is not a legal currency.” That description hasn’t stopped them from licensing several cryptocurrency exchanges and okaying bitcoin payments for goods and services.
Another very bitcoin-friendly country, South Korea has virtually no laws regulating the use of cryptocurrency, and only its use in illegal activity merits prosecution. Bitcoins are a widely-accepted form of payment and can even be purchased at specialised ATMs in some cities.
Always a pioneer when it comes to all things financial, Switzerland has no legislative measures against the use and trade of cryptocurrencies. Bitcoin is being accepted to pay city fees, buy railway tickets, and more. Also, the first Swiss private bank has been approved for bitcoin asset management, which might lead to other global banks doing the same.
Russia’s position on the acceptance of cryptocurrency is always in flux. While the country’s top officials have touted the benefits of virtual currencies and even encouraged more miners to set up shop there, they have also voiced the need for stronger regulations to handle such currencies. However, the introduction of a new legal framework last month could ascertain cryptocurrency acceptance in Russia.
As a leading global trading hub, Singapore has been quite ambivalent about its stance on cryptocurrency. The Monetary Authority of Singapore (MAS) announced “Project Ubin” in 2016 to explore the potential of blockchain technology and cryptocurrencies, and the project is expected to come to a close next year. MAS chief Ravi Menon recently said that there are no plans to regulate cryptocurrencies in Singapore, and the country continues to be a hotbed for startups from the sector.
Apart from these leading global economies, there are quite a few countries where Bitcoin and other cryptocurrencies have varying degrees of legality. Countries like Argentina, Jordan, and Finland don’t recognise them as legal tender, but many businesses and private establishments in these countries accept bitcoins as a form of payment. Finally, a handful of countries – including Bolivia, Ecuador, Kyrgyzstan, Bangladesh, and Nepal – have banned cryptocurrencies outright, with severe penalties for using and trading them.
A defining feature of cryptocurrencies has been the lack of regulation in the sector, offering greater freedom and anonymity to users. As more governments and regulatory bodies start to take an interest, how will their desire to regulate the world of cryptocurrencies affect valuations? Many fear that the cryptocurrency is a bubble which will burst soon. If this fear proves unfounded, it will be interesting to track how things pan out, forcing governments to be a part of the world of cryptocurrencies.