Updated September 17, 2019 – In just a few short months, we’ve seen enormous strides in cryptocurrency global adoption. Not so much in a tactical day-to-day way, but in big ideas, massive infrastructure projects, and institutional attention on the mushrooming crypto industry. As a result, cryptocurrency regulation has had to evolve, possibly beyond the capabilities of regulators.
Cryptocurrency Regulation 2019
Since our last regulatory update in December, we’ve had major fund managers like Fidelity enter the crypto finance space to serve its customers, who are wanting in. IBM has been helping enterprise businesses improve efficiency using blockchain technology, and big banks like JP Morgan and Wells Fargo are creating their own token.
Meanwhile, the number of bitcoin wallet users continues to increase rapidly. ICOs are now taking place on exchanges like Binance and Kucoin in the form of IEOs. Complete newbies are learning to trade on crypto social trading platforms, and bitcoin’s bull has finally reared its head. Altcoins, after a year+ long drought are even having a little comeback this week as further upsets occur in the world fiat economy.
Regulators worldwide have spent a lot of time getting up to speed with technology. Their first main focus was on reining in ICOs. But thus far, we’ve few concrete regulations allowing for anything unless it essentially mimics a stock. While officials did bring down some startups who’d abused the ICO process and lost investor money, or just plain lost the money, blockchain technology continued its quickening pace.
The Growing Crypto Market
With all this happening, regulators have much more to contend with now, as the cryptocurrency user base is ever widening. It’s a time of invention and rapid adaption, just like with the Internet itself.
To this point, cryptocurrency regulations have been primarily reactionary in nature. What regulators and market participants are mostly shooting for is a framework they can live with for guidance going forward. The idea of self-regulation is also starting to take root as the true impact of privacy banking capabilities takes hold.
Over the next week or so, we’ll be checking in on all the regions below to give you an update as to regulatory progress in the area. Each country that has been updated will clearly show the date at the very beginning. The 2018 updates will be there to catch you up in the meantime.
Cryptocurrency regulation 2018
December 2018 – It’s been a long year. Bitcoin is currently at its lowest price with many blockchain projects hitting a wall as regulators scramble to clamp down on ICOs, the primary fundraising mechanism for crypto startups. Officials worldwide are playing catch up. They’re tr
At HedgeTrade, we understand that cryptocurrency regulations are currently in a state of flux and it’s important for investors to have the most up to date information. To that end, we created this Global Update on cryptocurrency regulation. Our overview will fill you in on what’s going on, giving you a current regulatory pulse on the crypto trading environment across dozens of regions.
This is by no means an exhaustive list. But we’ve tried to narrow it down to the most pertinent or recent updates and news stories in the cryptocurrency regulation space. We start with Europe.
Cryptocurrency Regulations – European Union
Update September 2019:
The EU was the first region to openly move to ban Facebook’s proposed Libra crytpocurrency. They seem to have a pretty firm grasp of Facebook’s reach as well as the implications of corporate based monetary system with 2+ billion users ready to onboard. As usual, Europe leads with caution in the crypto realm. Brexit has still not been completely resolved, bonds are now entrenched in negative yields and trade wars between the China and US are affecting stability.
One the other hand, some EU regions, like Malta and to some extent, Switzerland, still provide business friendly atmospheres to crypto startups and exchanges. The Libra project is actually going to have its foundation in Switzerland and Malta is home to some of crypto’s most popular exchanges.
DEC 2018: In 2016, the European Union passed a motion enabling the taxation of crypto holdings and earnings. But since then, they have not set an overarching definition of cryptocurrencies. As such, individual EU countries on their own in formulating regulatory laws.
While bitcoin has legal status in the EU, there exists no overall framework for regulatory controls. Even though the European Parliament met recently to discuss ICOs, they only covered generalities about increasing oversight. There’s been no real movement on crypto regulation. In spite of this, member nations are moving forward with their own regulatory efforts.
Updated April 2019
During the first and second quarters of 2019, Estonia has been tightening up and tweaking regulations for their licensing program for crypto businesses.
Establishing a regulated business on the cryptocurrency market in Estonia is easier than in any other country.– Artur Kuczmowski, CoinIntelligence
While Estonia does make it easier for crypto companies to conduct business, each startup must be fully compliant. Even so, the low costs and simpler process makes Estonia stand out from other countries. Companies, as you would expect, must be registered in Estonia to be eligible for licensure.
Basically, Estonia’s current cryptocurrency regulations allow for two basic licenses. The first is for exchanges that want the ability to make fiat/crypto and crypto/crypto trades. The second is for wallet providers.
As far as the changes in their tightening up process, Estonia plans to do the following:
New policies in Estonia
- Require more verification of team and board members to ensure they have the relevant experience and competence necessary to manage the startup.
- The initial 30-day approval process will get bumped to 90 days, and in the case of complex companies, may go as high as six months.
- During the approval process, negative media attention will be taken into account.
- License fees will increase.
- Current license holders will have a certain period of time in which to meet any new guidelines within these updates.
Just over 4% of ICO projects originated in Estonia during 2018. Not too bad considering that’s more than Germany and Canada combined. They’ve made it easy for businesses to relocate there with a unique e-residence program.
Additionally, they’ve stepped up as the first EU nation to begin certifying ICO startups using two different types of licensure, one for exchanges and the other for wallets. So far, Estonia has issued over 900 licenses to crypto businesses.
Estonia’s embrace of digital assets.
2018 saw the creation of two major pieces of cryptocurrency regulation by the Estonian Financial Intelligence Unit (FIU):
- Estonia Money Laundering Act
- Terrorist Prevention Act
Both of these laws attest to dedication to developing policy in the industry. Their certification hints at streamlining the process and ensuring that KYC and AML procedures are in place. The FIU also monitors those businesses to make sure they’ve begun operations within six months of licensure.
Estonia goes full circle in their acceptance of cryptocurrencies:
- Even though the EU has expressly prohibited any member nation from creating its own currency, Estonia is still considering issuing a coin that could possibly be used by participants in its e-residence program, which helps foreigners get situated in Estonia.
- Applicants are told they must wait 30 days for the approval process, but in most cases, it’s only taking 1-2 weeks for license approval.
One issue that has cropped up here, and no doubt in every region, is getting banked. Cryptocurrency businesses still have trouble getting a bank account, even in Estonia. Traditional banking services are often not available to companies dealing with crypto. This forces companies to use foreign banks and payment services. Some e-residents also face unapproved account applications at banks due to their lack of business connections with Estonia.
Update September 2019:
French regulators readied themselves this summer to approve a tranche of crypto related companies under a new set of rules which would be first of this type of regulation in a major economy. These companies include startups planning to have an ICO, exchanges, fund managers and custodians.
The new rules essentially require all of these types of entities to follow the same regulations as banks and brokerages including capital requirements, consumer protections and taxation.
Updated April 28, 2019
In recent EU news, the French National Assembly adopted the Action Plan for Business Growth and transformation (PACTE) and welcomed the rest of the EU to use PACTE as their guideline as well.
The Action Plan, once enacted, provides a framework for token sales that is noticeably pro-ICO. It also outlined concrete plans to bridge banking services with blockchain based projects. Lastly, the French were first in giving guidelines for insurance and fund managers who want to get involved in the growing crypto industry.
The framework for ICOs that the French developed is called a “optional visa regime”. Startups looking to launch an ICO from France have the option to do a regulated ICO. If they choose that, these companies will need to be compliant, including satisfying AML requirements, among other things. In return, banks will be available to them for financial services.
All in all, the statements within PACTE set a strong example of regulations that encompass the idea that all ICOs are not the same. Further, granting some leeway was also included in recognition of the complexity of decentralized projects and the need for flexibility during this time of rapid innovation.
France’s unique stance on ICOs
Was probably most surprising thing out of this blockchain news was France’s stance on banking. They are not just encouraging banks to extend services to crypto projects. They’re actually saying that if banks refuse financial services to crypto companies, they will have to answer to French Regulators.
France has been plodding along the regulation highway, bringing the highly debated ICO issue to the front as they begin building a regulatory framework. The Autorité des Marchés Financiers (AMF) is currently looking at requiring token issuers to have something like a visa. AMF would issue this ‘visa’ to companies if they meet certification standards that include transparency and due diligence requirements with respect to investors.
If passed, the official definition of tokens will be as:
“…immaterial items, representing in digital form one or more rights, which could be issued, compiled, kept and transferred through a digital shared instrument, allowing to identify — directly or indirectly — its owner.”
And an ICO will be:
“…a public offer for tokens subscription, in whatever form”.
In a nutshell, France wants to create an environment that is ICO and crypto friendly. To that end, the AMF this year published a study on ICO trends, to help gain a better understanding. According to that report, there were 15 ICOs in France during 2018 raising 8.9 million Euros. The majority of these projects had already raised funds through traditional mechanisms.
ICO Encouraged with Some Caveats
AMF embraces ICOs on one hand, and on the other wants to make sure that companies holding ICOs in France submit to the taxation of profits made. Additionally, they’ll be expecting startups to have a clear plan for refunds in case the project doesn’t pan out.
Apparently, the French people are very accepting of digital currencies. Confident of the demand for bitcoin, The Fédération des Buralistes announced that they had obtained the okay from the French regulatory authority to sell bitcoin from some 4000 tobacco establishments. The bank of France has since stated they endorse no such project.
Update to Taxation Rules
In late November 2018, the French government proposed changes to their taxation rules for crypto assets:
“Gains above €305 on the sale of crypto-assets made by private individuals on an occasional basis will be taxed at the flat rate of 30%. This tax regime which includes 12.8% income tax and 17.2% social contributions, is the standard tax regime applied to capital gains.”
As part of the same series of new regulations, they proposed that ICOs who meet all legal requirements, such as KYC, AML, and escrow, can apply for an ICO Visa. Upon approval, the ICO would fall under the whitelisting program. French citizens will need to list their crypto asset accounts held in France as well as abroad once regulation goes through
Bitcoin in Germany used to be classified as a financial instrument by the Federal Financial Supervision Authority (BaFin). Just recently, a court ruling disclaimed this status. The reason behind this change was because Bitcoin does not meet the definition of a financial instrument as found in the German Banking Act. The court dismissed criminal proceedings against a local bitcoin exchange in September 2018
- Is not issued by a central bank.
- Does not have general recognition.
- Lacks a stable value for comparing with other goods and services.
2 German Officials Weigh In
Meanwhile, Finance Minister, Olaf Scholz, continues to express doubts that cryptocurrencies will replace fiat. Though he does seem to be warming up to blockchain technologies. He has raised doubts as to whether global adoption is technologically possible. Just recently, he even brought up the Tulip craze comparison once again.
BaFin Chief, Felix Hufeld has a slightly different take on crypto. He describes the main role of cryptocurrency regulators, and it’s NOT to protect investors:
“We will not be able to protect every single investor from his fate, and that cannot be the task of state supervision. Once again, the maxim is that we must act prudently or regularly if financial stability as a whole is threatened or if consumers are systematically harmed.”
This British overseas territory has faced significant upheaval since
That would certainly help Gibraltar in attracting more of the crypto business community, which is something they’ve been trying to do.
First DLT Licence Issued
In mid-October 2018, UK’s longest running cryptocurrency exchange, Coinfloor, received the
As a British Overseas Territory, Gibraltar developed its cryptocurrency regulation policies based around nine principles, including sufficient AML (Anti-Money Laundering) and KYC (Know Your Customer) practices, robust security for protecting investor assets, and sufficient financial backing. These principles all adhered to:
3 main objectives:
- Consumer Protection
- Protecting Gibraltar’s Reputation
- Economic Benefit
The Gibraltar Financial Services Commission (GFSC) had
Updated May 2019
It’s not surprising that Lithuania has changed gears. In 2018, the same year this country stood out as a token haven, their big objective was building a bridge between crypto businesses and banks. Naturally, regulations were bound to see tightening up and that is exactly what’s happening.
The Lithuanian Finance Ministry is on target to become the first nation to fully implement recommendations made by the Financial Action Task Force. Three major changes will be playing out for Lithuanians and businesses headquartered there:
1-One of the main changes that sticks out is their treatment of crypto to crypto transactions. These types of transfers will now come under the same treatment as crypto to fiat transactions, with their corresponding bank-like regulations.
2- Crypto companies will only be able to service Lithuanians if their business is registered to operate within the country’s borders. That means, for example, exchanges outside this nation, like Kraken, Waves or Coinbase, cannot offer services unless they go through the Lithuanian registration process. This does seem a little unrealistic and makes one wonder if that will ever hold.
3- The Lithuanian Finance Ministry will also require crypto companies to establish KYC and AML on their first contact with each client. Many exchanges worldwide have a simpler onboarding process with additional requirements necessary with each tier of services. This new law, once enacted, will eliminate this option.
In November of 2017, Lithuania partnered with Estonia and Latvia by entering into a Memorandum of Understanding. This move solidified their commitment to developing and furthering financial markets in the region. The Financial Ministries of three Baltic nations essentially agreed to “… recognize the importance of the development of the capital market and a stronger institutional framework to handle the cross-border challenges in the Baltic States.”
Building the bridge between blockchain and banking
Lithuania for its part has been proactive in breaching the expanse between the cryptocurrency industry and traditional finance and banking. In a recent interview regarding Lithuania’s upcoming amendments, Minister of Finance, Vilius Sapoka, spoke of his country’s efforts:
“This year, together with the Central bank of Lithuania, we have initiated dialogue between ICO community and commercial banks operating in Lithuania in order to help banks and ICOs better understand each other’s business models and to enhance cooperation between them to overcome the rising challenges. We also believe that the regulation amendments mentioned above will enhance trust between commercial banks and ICO initiators.” – Vilius Sapoka, Minister of Finance, Republic of Lithuania
Government Endorsed Blockchain Project
Lithuania is also the home of Desico, a platform for security token offerings (STOs, the more ‘civilized’ version of ICOs). This project is unusual because of how the Ministries of Finance and Economics in Lithuania has fully endorsed it.
Their goal as a country is to continue its growth as a center for FinTech innovation. This is to include cryptocurrencies, paying special attention to the legalities while laying the groundwork.
Updated May 2019
Since our last update in 2018, Malta has progressed in three major areas:
1 – The Malta Financial Services Authority (MFSA) released new guidelines to help educate the public about the risks of cryptocurrencies. This included resources to teach how to identify fake ICOs and lists of warning signs to look for, such as unrealistic promises of high returns.
2 – MFSA also approved 14 different asset agents to companies seeking licenses. Now these agents must assess each customer’s business plan to help them prepare an application to the MFSA. A great example of regulation infrastructure.
3 – The third major step for Malta came in March 2019, when the MFSA announced a US security partner. They selected CipherTrace as the security firm in charge of monitoring the activities of cryptocurrency businesses within Malta. In essence, CipherTrace will head up all the regulatory and risk management processes for digital assets businesses in Malta.
The crypto friendly business atmosphere in Malta has paved the way for multiple crypto exchanges, including
- The Innovative Technology Arrangements Act introduced a unique way to promote transparency and accountability. Supporting blockchain businesses can go through the voluntary registration process to try and receive a ‘stamp of approval’.
- For regulating ICOs, exchanges, and crypto financial services (i.e. asset managers), the Virtual Financial Assets Act sets forth the regulatory framework for the financial aspects of blockchain technologies.
- Finally, the Malta Digital Innovation Authority Act oversees promotion of blockchain development with the island nation.
With their comprehensive approach to regulation, Malta leads the way in introducing innovative regulations to further the blockchain industry.
The Capital Markets Board (CMB) in Turkey has taken an unusual hands off approach to cryptocurrency regulation. In late September 2018, they announced their official stance on ICOs, which basically stated that they do not regulate or supervise ICOs, blockchain projects or cryptocurrencies.
They also announced that secondary legislation regarding crowdfunding, something they began exploring in December 2017, is now in effect. What this means is that ICOs that disguised their fundraising as ‘crowdfunding’ will face penalties.
The approach of Turkish officials seems light when compared to other regions. Yet Turkey’s government does not yet consider vaguely structured ICO projects to be in the same realm as securities. Instead, they make the effort to caution all investors and educate them about the speculative and risky aspects of ICO investments.
Turkey has a very avid cryptocurrency crowd. According to an ING Bank poll, 53% of Turkish residents strongly agree that Bitcoin is the future of online spending, as opposed to 31% of Americans and 35% of Europe as a whole. Vitalik Buterin noted their enthusiasm in a recent viral tweet where multiple Turkish influencers invited Buterin to collaborate with them. Going forward, they will review each ICO on a case by case basis until more formal guidelines come into play.
Cryptocurrency Regulation – Non EU Nations
Updated May 2019
Switzerland has continued to be a hub for crypto startups, namely exchanges, who are able to register with the Swiss Federal Tax Administration. The Swiss authorities consider crypto as an asset so transactions will need to adhere to corresponding tax laws.
In March, the Federal Assembly, Switzerland’s legislative arm of government, approved a motion to adapt current financial regulations to cryptocurrencies, as opposed to creating new regulations just for crypto assets. The vote is now headed to upper Parliament for approval.
In other March news, Swiss-based Digitec Galaxus started accepting cryptocurrencies on their online retail platform, which is the biggest online store in Switzerland. Their shop now accepts BTC, BCH, BSV, ETH, XRP, BNB, LTC, TRX, NEW, and OMG.
The Swiss have a long-standing reputation as a leader in cryptocurrency regulation. This goes all the way back to 2014, when they hosted the Ethereum ICO in the town of Zug, now often referred to as “Crypto Valley”. That same year they published a report on virtual currencies and have been creating a positive atmosphere for blockchain projects ever since.
Switzerland has been one of the first nations to initiate ICO regulations. Furthermore, they’ve done so in a way that does not stifle innovation. In fact, they’ve actually amended some existing financial regulations to remove unnecessary obstacles for blockchain startups. As for exchanges, they are able to register with the Swiss Financial Market Supervisory Authority (FINMA).
Going with a case-by-base basis
Their idea of crypto regulation while technology is still under development represents a commonsense approach. They’ve published ICO guidelines but leave the door open for flexibility and are willing to explore each ICO startup on a case-by-case basis.
The Swiss have also instituted a federally supported blockchain working group that continues to monitor technology advances in cryptocurrencies:
“The working group will work together with the Federal Ministry of Justice and FINMA and involve interested businesses. It will study the legal framework for financial sector-specific use of blockchain technology with a particular focus on ICOs and report back to the Federal Council, the Swiss government, by the end of 2018.”
How the Swiss Describes Crypto Assets
While Switzerland considers cryptocurrencies to be assets, they take into account three different types of tokens:
- Payment tokens, which are not securities and which must include AML procedures.
- Utility tokens, which allow access to a product or service and which do not have the ‘securities.’ label
- Asset tokens, which fall strictly under Swiss securities laws.
However, the Swiss realize that there are and will be in the future many hybrid versions of these three main types of tokens. In essence, their focus is on creating a comfy environment for blockchain startups. Their plan is to do this while addressing investor protections when needed. They’ve recently been in touch with Israel to form a partnership in exploring blockchain business infrastructure.
Updated May 2019
At the end of April, Dave Ramsden of the UK’s Central Bank gave a video interview on CNBC. His statements revolved around UK’s current stance on cryptocurrencies and included the following updates to their view on crypto regulations in the UK:
- The UK financial authorities do not consider cryptocurrency to be a currency. Instead, they refer them as crypto assets and not cryptocurrencies. Some of the reasoning behind this includes:
- It’s too volatile to be a store of value
- As a medium of exchange, it’s expensive and clunky.
- They do not consider the crypto market to be a threat to financial stability. The size of the market is too small at this time. However, they will continue to monitor the market and assess the risks.
Over the past year, UK financial authorities have been spending a lot of time discussing and working on cryptocurrency regulation. Apparently, the more they do this, the more they realize what they are getting into. Recent estimates from HM Treasury officials regarding the formation and implementation of crypto regs are going long – 2 years at the minimum.
“Past precedents show it can take years to make relatively minor regulatory changes to the financial regulatory regime. For example, it took two and a half years from the Treasury’s original announcement (10 May 2004) for the regulation of home reversion plans to come in force (6 November 2006).” James Kaufmann, Legal Director at Reynolds Porter Chamberlain House of Commons Treasury Committee (HM Treasury)
The Choice Facing British Regulators
The fact that they are still dealing with the effects of Brexit may contribute to the lag as well. Basically, they have a choice to make. Either set up a brand new framework for crypto regulation or bring it under the wing of existing financial services regulators. Once they reach that decision, HM Treasury will then have three main regulatory tasks:
- Determine which crypto specific activities need regulating by performing a market study.
- Draft proposed cryptocurrency regulations which would be open to consultation.
- Once the consultation period has ended, make official the changes and create an implementation plan.
As long and drawn out as this may seem, one government official warned her counterparts about taking too long. Her worry was that time was of the essence in creating a usable framework for cryptocurrency regs:
“It’s unsustainable for the Government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting…At a minimum, regulation should address consumer protection and anti-money laundering.”
– Treasury Committee Chair, Nicky Morgan
Cryptocurrency Regulation – The Middle East
In many parts of the Middle East such as Iraq and Qatar, governments see cryptocurrencies as more of a threat than
Qatar made it illegal for banks to deal with digital assets in any way. The central bank explained that in order to ensure the safety of the financial and banking system, all banks operating in the country would be prohibited from dealing in any way with cryptocurrencies or exchanges.
Saudi Arabia’s official stance is that cryptocurrencies are basically a get rich quick scheme and considered illegal. While Iran has banned crypto, they are looking into a national digital currency.
Reasoning behind a national currency
The main goals of such a coin issued by the Saudi government would be to:
- deal with imposed sanctions
- stem inflation
- offer a solution to overcome lack of credit card services
Iran, Saudi Arabia, Egypt, and Qatar currently consider cryptocurrencies illegal. Yet they are open to exploring blockchain technology for state and domestic purposes.
Then there are nations like the United Arab Emirates (UAE) and Bahrain, who are more welcoming to crypto businesses. Their governments focusing on researching blockchain technologies and regulatory concerns.
There’s been a lot of confusion as to crypto regulation in Israel. They definitely are embracing the technology and moving forward, but clear guidelines have yet to be confirmed.
To start out the year, in January 2018, Israel’s government met to discuss the cryptocurrency phenomenon. During this meeting, they concluded that bitcoin and other coins should be assets and not currencies. Their main concern was the risks that these unregulated assets could pose to banks (in the form of compliance) and their clients.
Around the same time, public complaints emerged from bank customers unable to buy bitcoin using their bank accounts. Meanwhile, some opponents of crypto suggested that companies whose main business is in digital assets should not have access to the
Major progress made in Israel
But a lot has happened since then. Israel is now working side by side with one of crypto’s main players, Switzerland, to devise blockchain regulations. Part of this initiative is to help the Swiss access Israeli banks since Switzerland’s banking industry has been less than welcoming to digital asset-based business.
In the spring, Israeli regulators drafted legislation surrounding money laundering. Mainly, they were targeting the illegal gambling industry, but they also covered digital currencies. The proposals were to begin May 31, 2018. At that point, banks thought they had the green light to service cryptocurrency businesses. Much to the chagrin of all participants, regulators postponed legislation for four months to the end of October, leaving everyone hanging.
The legislation they proposed was said to be breaking new ground. But some are complaining about different parts. For example, the limit of $1400 per crypto transaction allowable in banks before a flag is raised (similar to the $10,000 limit in USD).
The regs will also require cryptocurrency financial service providers to keep certain records:
- Customer ID’s
- Public keys
- IP addresses of customers
Many have touted Israel’s new (proposed) regs to be a unique, all-inclusive approach. But no one is sure if they are actually in effect right now or not.
All in all, a high percentage of Israelis are already using cryptocurrencies. The government has even pondered a switch to a national, digital currency. But until they nail down regulations, crypto business can only stagnate.
The United Arab Emirates have a definite forward-leaning view of cryptocurrencies. For the last few years, they’ve called for tougher international regulations on digital currencies. To this day, they are collaborating on a global scale. One of their major focuses is on decreasing the risk so crypto’s image as an asset can improve.
In recent years, low oil prices and weak equity markets in UAE have restricted IPOs. Legislation is in the works attempting to rectify the IPO issue. Until then, reining in ICOs is one way the government plans to spark the creation of new business in the region.
Last year, they classified tokens from ICOs as “special investments.” With that classification, ICO tokens would be treated like other ‘special’ assets within their current financial regulatory structure. In October 2018, the board of the Emirates Securities and Commodities Authority (ASCA) announced it was done drafting ICO regulations that would legalize ICOs beginning in 2019, officially naming ICOs as securities. They’re expecting to have regulations firmed up and rolled out during the first half of 2019.
Cryptocurrency Regulation – Africa
“There are still African countries cut off from international commerce online. Bitcoin is technology that allows financial inclusion” – Tim Akinbo, Founder of Nigerian exchange, Tanjalo.
Nigeria is still reeling from a devastating recession where its national currency (the Naira), lost 85% of its value over a span of two years going into 2016. This had two different effects when it comes to blockchain technologies:
- First, it caused the government to be extra cautionary about risk. This lead officials to go very slowly and carefully with cryptocurrency regulation.
- But secondly, it caused many Nigerian citizens to continue and even strengthen their embrace of peer to peer payments using bitcoin and other digital assets. Now Nigerians represent the third largest holder of bitcoin, as a percentage of GDP, in the world.
If you compare bitcoin transaction growth in Nigeria to the of the rest of the world, it’s apparent that the bear market hardly slowed the usage of cryptocurrencies in this country.
Source: Coin Dance
Hope for change
So while the government has in the past been cautionary and slow to regulate cryptocurrencies, there is hope that this will soon change. Atiku Abubakar, former Vice President and candidate in Nigeria’s upcoming presidential elections, has integrated blockchain technology into his official “Get Nigeria Working Again” campaign policy statement.
“My mission is to ensure that Nigeria’s economy is responsive to the challenges of the 21st-century knowledge economy by keeping with the amazingly dynamic technological pace.”
– Atiku Abubakar
Even if he’s not elected, the Central Bank of Nigeria is already developing regulation policies, as a bank official explained:
“We are restructuring the licensing regime to accommodate risks that fintech present in the system and how they can work with banks to mitigate those risks. Fintechs are coming up with products and technology that is unmatched with banks, this also needs to be addressed.”
-Musa Jimoh, Central Bank of Nigeria
Uganda is all too familiar with Ponzi and pyramid schemes. They’ve dealt with this problem for years. So it was natural that unregulated cryptocurrencies would be an additional tool for scammers to use.
Chair of the Blockchain Association of Uganda, Kwame Rugunda, told ETHNews in November 2018 that, “Ugandans are familiar with these, and now the Ponzi schemes are either using cryptocurrencies or purporting to be crypto businesses and the Central Bank has warned society about them.”
Officials send assurances that regulations are coming
In response to concerns expressed by members of Parliament, Uganda’s State Finance Minister David Bahati sent assurances that government regulations are coming that will cover cryptocurrencies and pyramid schemes. Just recently, a National Payment System Bill was approved and will be applied to all forms of digital currencies.
In late October 2018,
“We believe that for us to serve the greater purpose of spreading the freedom of money around the world, we need to build more bridges to reach as many people as possible. So we meet our users where they are, through avenues that are most convenient to them, while staying true to our values and principles.”
Cryptocurrency Regulation – Russia
Updated June 2019
Russia’s proposed stablecoin, the CryptoRuble, has stalled its development mainly due to the country’s prioritization of blockchain over crypto. The conservative Russian central bank gave a 2-3 year estimate for the roll out of Russia’s state crypto. This sluggishness is in part a result of the country’s lack of interest in replacing fiat with crypto.
Meanwhile, Vladimir Putin’s new deadline for officials to create a regulatory framework is coming up in July 2019. Until then there is no framework defining cryptocurrency mining, cryptocurrencies, or tokens. While cryptocurrencies are not regulated per se, their use as a payment for goods and services is illegal at this point in time.
Updated Dec 2018
Vladamir Putin instructed Russian officials to lay the foundation for cryptocurrency regulation, giving a July 2018 deadline for legislation. Fears about securities violations, risks to investors and loss of governmental control have collided with a business landscape ready to embrace blockchain technology. Not only that, the Russian people are already heavily engaged in trading digital assets.
Leading up the July 1 deadline, Putin made a statement claiming that, “Russia cannot have its own cryptocurrency, as cryptocurrency “by definition” cannot be owned by a centralized state since it “goes beyond borders.”
Needless to say, the July deadline came and went without formal legislation. The new date for getting laws into place was pushed to October, disappointing the crypto-eager business community. December is upon us now without the formal regulation so ordered by Putin at the start of the year. Recently the date got pushed further into 2019.
Part of the problem lies in the different positions held by the agencies involved:
- The Central Bank of Russia along with the Finance Ministry tend to tow a more conservative line. Their ideas for cryptocurrency regulation center on maintaining government control and treating digital assets very much the same as other securities. Using crypto as a means of payment makes both these bodies of government quite squeamish, or so it seems.
- On the other side is the Ministry of Economic Development, which as you can imagine, wants to bring blockchain startups to Russia and support Russian projects as well.
Amidst this friction, two state cryptocurrencies have been discussed. One, a national cryptocurrency named the “CryptoRuble”, a state-backed stablecoin to be issued by the Central Bank. The second is a more localized use case, Moscowcoin, which could be used in an active citizens’ portal linking them to city services.
Russians have strong knowledge of crypto
In an August 2018 poll of 1500 Russians age 18 and up, it was determined that 13% of Russian people have good knowledge of cryptocurrencies, which is a high figure when compared to other countries. The willingness of the Russian people and the business community to embrace blockchain tech have pressured the government to enact legislation to help legalize blockchain startups and ICOs.
“For Russia especially, blockchain must be a compromise between autonomy and control, which is already taken care of by the president.” – Coinswitch
Cryptocurrency Regulation – India
Updated April 2019
The case of exchanges against the Royal Bank of India (RBI) has come to a screeching halt. In 2018, the exchanges petitioned the RBI who had essentially made it illegal for banks to offer banking services to crypto exchanges and other blockchain based businesses.
The case went before the Supreme Court of India on March 27, 2019, but was adjourned almost immediately. The hearing then got pushed to July, leaving those hoping for quick resolution disappointed. A July date also means the judgment will be made after the general elections, so there may be different officials taking a look at the case.
This was bad news for India-based cryptocurrency traders and business people. Mainly, it added fuel to the fire of rumors that India may ban all crypto in favor of its own centrally regulated government coin – a digital rupee. With India’s stance thus far on crypto, it’s certainly looking like a national ‘cryptocurrency’ is in the making.
Back in April of 2018, the Reserve Bank of India (RBI) ordered Indian banks to cease its servicing of crypto exchanges. One such exchange was Zebpay, which was the biggest bitcoin exchange in India. They have since moved to Malta, due to the negative atmosphere surrounding virtual currencies in their own country.
The good news is that some of these exchanges filed petitions against the RBI. They felt the crypto exchange industry would certainly flounder with the lack of proper regulations. The Indian Supreme Court released a counter affidavit ordering the drafting of regulations to begin in December 2018 with the implementation by March 2019.
Subhash Chandra Garg is heading up the Finance Ministry’s panel in overseeing the legislative process. The panel is tasked with drafting a framework for virtual currencies and laying the groundwork for distributed ledger technologies within the financial system.
Not much love for bitcoin
Though many crypto businesses were encouraged by the news that regulations were in the works, panel leader Garg has been quoted displaying a marked dislike for bitcoin:
“Cryptocurrencies like Bitcoins are neither currency nor coin. Not legal tender in India at all. Trade in these currencies has assumed the character of classical Ponzi schemes. Limited supply and uninformed demand make every new investor assume a higher risk. No underlying real value.”
With regulations in the works, this is certainly a better atmosphere for crypto businesses than in 2017, when consumers were cautioned to stop trading and exchanges were driven out of business. Yet the acceptance of crypto by government officials still seems a long way off.
Cryptocurrency Regulation – Asia-Pacific
At this point, we’ve researched over fifteen countries across the globe in regards to the cryptocurrency regulatory environment. None of them have come close to the succinctly positive and common sense approach that Australia has embraced.
Named “The Cryptocurrency Continent” by CoinTelegraph, Australia continues to develop a vibrant blockchain community in which technical innovation and response to threats are the priorities. The main regulatory body governing the crypto space is the Australian Securities and Investments Commission (ASIC), headed up by Chair, James Shipton.
Part of their regulatory mission as laid out by ASIC’s corporate plan, is to, “…help Australians to be in control of their financial lives,” a theme that correlates nicely with decentralization.
Emphasis on cybersecurity
Cybersecurity and data breaches are the major focus in protecting Australians. To that end, blockchain and fintech businesses will come under the microscope, especially those “firms that provide critical infrastructures e.g. exchanges and payment systems – to mitigate systemic vulnerabilities.”
Between April and September 2018, ASIC took action to bar six different ICO’s. Five of the startups involved went on to restructure their operations to come under compliance. The last, Global Tech Exchange, was shut down. The primary issues found by ASIC officials included:
- Misleading or deceptive statements used in marketing materials
- Illegally operating an unregistered managed investment scheme
- Providing financial services without an Australian license
Again, the regulatory framework put into place is one that is beneficial to the investor and not as restrictive to businesses as seen in some countries.
Australian officials openly plan for blockchain innovation
The Australians openly accept that innovations in blockchain are headed their way. They expect this technology to positively affect local business processes including settlements and data reconciliation. In fact, the Australian Securities Exchange itself will be replacing its own clearing house with a distributed ledger in the near future.
Overall, Australia has emerged as a world leader in regulation technologies and plans to assist and collaborate internationally as developments continue to evolve
Latest China Regulation News
In a marked divergence from our last update, China is gearing up to be the first nation to issue a state cryptocurrency in October of 2019. However, it is certainly not going to be a open public blockchain, nor a true cryptocurrency. It will be more like a sovereign digital currency that is more efficient and economical, that also provides a superb tool for surveillance and control.
Since banning all other crypto activities in 2018, banks in China have been barred from using cryptocurrencies as a tool for retail payments.
During the summer of 2019, Bitcoin was legally recognized by Chinese authorities as digital property. However, the cryptocurrency is still considered illegal in China. While ICOs, exchanges, and cryptcurrency exchange trading for fiat is outright banned, China is still home to a huge pool of Bitcoin miners. In general, the Chinese people are allowed to hold crypto and may even be able to trade it peer to peer. But otherwise, trading it is against the law.
It is par for the course that where crypto is banned it tends to flourish. Not only that, but economic instability has increased with trade wars involving the US and China, drawing more people to opt out of their sovereign currency for the likes of Bitcoin. Tether recently created a stablecoin based on the Yuan, and Binance just announced they would be rolling out over the counter (OTC) trading for the Yuan about the same time China is set to issue its own state “cryptocurrency”.
The Chinese government has banned everything to do with cryptocurrencies. Except for blockchain technology, to which it’s thrown over $3 billion to develop. Maybe the repression of all things cryptocurrency in China will cause it to be the hotbed of invention, as people under the most severe restrictions can sometimes be the most innovative by necessity. Or maybe the government will “succeed” in its quest to centralize and control one blockchain to rule and track all its people.
With its reputation as a non-interventionist when it comes to business regulation, Hong Kong has thus far treated bitcoin and other cryptocurrencies quite differently than other nations. Bitcoin is not considered money and has been labeled as a “virtual commodity” instead of any type of currency.
In its regulatory guiding document, “Basic Law”m Hong Kong’s unique position in relation to world currencies is evident, even including cryptocurrencies:
Carlson Tong Ka-shing, outgoing chairman of Hong Kong’s regulatory body, the Securities and Futures Commission (SFC), has openly recognized the futility of banning cryptos:
“Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets.” – Carlson Tong Ka-shing.
Recognizing the uniqueness of digital assets
The chairman has also acknowledged that virtual commodities, “…do not fit in the custodian, audit or valuation requirements, for instance, normally expected under the Securities and Futures Ordinance.”
During the 4th quarter of 2018, Hong Kong announced the development of several regulatory initiatives. Their purpose was to hold things over until more specific regulations could be developed and implemented. One is a sandbox arrangement for crypto exchanges, which allows them to behave as though they hold a securities license without actually holding one. For the time being, the regulatory tone in Hong Kong is aimed primarily at fund managers, requiring them to service only accredited investors for instance.
All virtual asset business are currently required to:
- Obtain and maintain customer data
- Track the type of business relationship
- Know the source of funds
- Monitor all of the above and report suspicious activity
As of now, all virtual “currencies” in Hong Kong are lumped in together, including both security and utility tokens. The main goal of regulation development here is to limit the exposure of funds to only accredited investors, something that may remind some of Hong Kong’s monopolistic real estate market.
In what is quite likely the biggest regulation news for 2018, Japan in late October 2018 approved self-regulation for the cryptocurrency industry. (To learn more about self-regulation in the crypto world, read our article on it here.) In essence, a body of industry experts will be in charge of governing digital assets as opposed to governmental regulations. The announcement formally granted an association of exchanges with the accreditation needed to regulate the industry:
“The Financial Services Agency (FSA) on Wednesday approved the Japan Virtual Currency Exchange Association (JVCEA), a body comprised of all 16 licensed domestic cryptocurrency exchanges, to become a ‘certified fund settlement business association.”
In seeking approval by the FSA, the JVCEA drafted a 100-page proposal which includes bans on insider trading and privacy coins.
Japan as early adopter
Japan as a nation was truly an ‘early adopter’ of bitcoin. At the start of 2017, the country began allowing businesses to accept bitcoin as legal tender. At the same time, they created one of the most positive ecosystems for crypto exchanges.
Even with several high profiles and massive hacks on its domestic exchanges, Japan has continued to move ahead at breakneck speed when it comes to cryptocurrency regulation.
South Korea continues to hold its ban on ICOs, contrary to rumors that have circulated social media. But the government does seem to be listening to its crypto friendly population. This is an improvement from an earlier view that all things crypto were bad and only blockchain tech was good. Which doesn’t make a whole lot of sense because how do you have one without the other?
One cannot blame government officials for exerting caution. Just consider the major hacks that have taken place on South Korean crypto exchanges. Yet despite these thefts, and quite possibly in reaction to them, South Korean officials are making progress.
South Korean exchanges now regulated
Some of South Korea’s many crypto exchanges have fallen under regulatory supervision. In a few cases, operations
Singapore has taken a very business minded, commonsense approach to cryptocurrency regulation. The Monetary Authority of Singapore (MAS) has quite clearly spelled out the difference in token types. This is something many other countries have failed to do, opting instead for a lumping them in all together for lack of better direction. Not only that, the MAS may be one of the few regulatory bodies that recognizes a utility token for its true purpose.
In an update to their current policies, MAS in late November 2018 published their Guide to Digital Currencies. Part of it emphasized that if the token acts as a security, it will be regulated like one. As far as making distinctions between types of tokens, the Guide clearly separates out those tokens which can be regulated, including those they consider to be capital markets products, such as:
To be more specific, if a token acts in any of the following ways, MAS will consider it a security:
- Confers or represents an ownership interest in a corporation
- Represents liability of the token holder in the corporation
- Represents mutual covenants with other token holders in the corporation
- Acts as a debenture, where it constitutes or evidences the indebtedness of the issuer of the digital token in respect of any money that is or may be lent to the issuer by a token holder
- Is a unit in a business trust
- Confers or represents an ownership interest in the trust property of a business trust
- Is a securities-based derivatives contract
On the other hand, MAS, which is both the regulatory body and Singapore’s central bank, sets aside utility tokens as products that don’t need a lot of control and oversight.
Another major area of financial regulation that Singapore has focused on is banking. more specifically, debit card and loan services. This path is part of its efforts to bridge banks with crypto projects so that they’re able to operate and have banking services. To this end, Crypto.com has chosen Singapore as its first market in which to roll out is debit card service, which is now live.
Cryptocurrency Regulation – The Americas
The popularity of cryptocurrencies in Brazil has grown tremendously despite the lack of clear regulations. However, the use of bitcoin, even though it’s considered an electronic currency, is not smiled upon by the government and policies have not been set for its use, only warnings.
But the fact is, there are more Brazilian users on crypto exchanges than there are on B3, the Brazilian Stock Exchange. Brazilians have shown their preference for digital currencies and the government has now responded by attempting to tax it all. In early November 2018, the Department of Federal Revenue (RFB) published a document outlining the taxation of crypto businesses and individuals. They are primarily looking to:
- Require crypto exchanges in Brazil to send them monthly reports including
- Transaction amounts
- Customer identities
- Require business and individuals to report monthly all transactions on crypto exchanges if over 10,000 R$ (2700 USD).
Fines for failing to report have also been drafted.
Brazilian bank probe
In the fall of 2018, several major Brazilian banks were reported to have closed some crypto related accounts. The reasoning behind the closures was because they dealt in crypto. This lead to a probe instigated by the Blockchain and Cryptocurrency Association (ABCB). In turn, they petitioned Brazil’s antitrust agency, CADE, to investigate. As a result, in October 2018, Brazil’s federal district court forced the banks to reopen the closed accounts, citing consumer rights violations.
Since the beginning of 2019, Canadian regulators have created guidance for several areas of the crypto industry. Mining, exchanges, and taxes are three blockchain topics they’ve covered thus far.
Canadian Miners To Receive Allocation
Guidance for miners regarding electricity usage was rolled out recently by Canadian energy regulator, Régie de l’énergie. This Quebec based authority is compelling the biggest power providers to allocate 300 megawatts of power to the crypto mining industry.
Part of the reasoning behind the allocation process is to keep low rates for all power customers. Mining businesses will have to meet certain criteria in order to be eligible for the allocation, including investments in Quebec, jobs created, and heat recovery plans to lessen their power usage.
Some Canadians may pay taxes with bitcoin
One Ontario town, Innisfil, launched a pilot program for residents giving them the option to pay their property taxes using bitcoin. At a later date, these citizens may even be able to pay with ETH, LTC, BCH, and XRP. Innisfil would be the first Canadian municipality to offer this payment option for tax payments.
Canadian exchange regulations guidance
Regulatory agencies issued a statement in March 2019 regarding requirements for crypto exchanges. The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) jointly opened up the statement for public comment until May 15, 2019.
The main purpose of the exchange guidelines is to reduce the risk to all parties, from retail investors to the exchanges themselves. Canadian authorities seem committed to working with the unregulated exchanges in Canada today to come up with clear, new guidance. They also expressed the intention to provide regulation that will evolve with the quickly expanding industry.
Canada has postponed the release of its final regulations for cryptocurrency and blockchain companies. Originally due in the fall of 2018, the government now is saying it will be closer to late 2019 before official regulations are published. Quite possibly, the delay has to do with upcoming elections. But the government also received a massive amount of responses and supporting documentation after releasing its June 2018 draft regulation document and opening it up to inquires.
In the meantime, the rules and guidelines as set forth in their June 2018 draft will continue to be used as guidance. This delay, however, may hinder businesses setting up cryptocurrency businesses now in Canada, as they may in the future have to face the cost of complying with new rules. Many view this as a setback, especially in light of the fact that so many other countries have advanced further in their cryptocurrency regulations.
The Cayman Islands have not yet enacted specific cryptocurrency regulations. But existing fintech regulations are covering the bases.
As a British Overseas Territory, the Cayman Islands have for years been a leading financial center, creating a positive business environment suited ideally for tech businesses. They currently are host to about 130 fintech businesses, with 30% of those being-blockchain based companies. Additionally, Cayman Islands Enterprise City is a unique economic zone that offers a tax-exempt environment and an expedited work permit process.
This doesn’t mean they are without regulations on cryptocurrencies. On the contrary, they already have strict AML and “Proceeds of Crime” laws that require businesses providing financial services to maintain and collect customer data. Their current regulatory framework goes a long way to covering the crypto space. Even with many startups choosing the Cayman Islands to launch their ICO, strict AML laws are in place to prevent crime. And financial services regulations carry over to digital assets for the most part.
Updated May 27, 2019
It’s hard to know where to begin on this update because so much has happened. And so much has NOT happened. The SEC and other federal regulators have been dragging their feet. Most notably with the continual postponements on an ETF decision. SEC officials also issued a framework for ICOs that prohibits any chance of innovation in the space.
As it is in the US as of May 2019, paying for something in crypto, anything from a cup of coffee, to your phone bill, to computer parts, is treated the same way as a property transfer. If you bought some bitcoin in 2017 and maybe a little more in 2018, what happens if you use it to buy something today?
Due to the regulatory environment, or lack thereof, you are responsible for paying capital gains tax (or claim a loss) to acknowledge the difference between the value of BTC when you bought it and the time you spent it. It makes no sense.
Is the US gearing up for a crypto ban?
In other news, a Circle-owned cryptocurrency exchange, Poloniex, delisted 9 popular altcoins citing murky US regulations and the perceived possibility that the SEC would soon be clamping down on ICOs. This followed shortly after Congressman Brad Sherman submitted a bill to ban all cryptocurrencies. His reasoning was that their only purpose is to enable criminals. He claims that while the only intention of all those in the crypto-industry is to evade taxes, engage in drug trafficking and terrorism, or take down the US government.
So while the US regulators on the federal level are dragging their feet and making dark, vague threats, some Americans theorize that this is the beginning of a capital flight away from the USD and towards virtual currencies.
States are working on crypto bills
Meanwhile, on a state level, some local governments across the US are busy devising their own bills. For the most part, most states have yet to provide guidance to those operating crypto based businesses as to whether they are considered money transmitters.
States like California and New York have thus far unsuccessfully tried to initiate complete control and strict regulation over crypto businesses, often driving off innovators in the process with their naive attempts. Other states, like Texas, are going for the total ban of all crypto transactions.
But a good number of the 50 American states have introduced bills in efforts to define and regulate cryptocurrencies. Below are some of the most recent highlights:
US Regulations – State Level
- Wyoming passed a bill that would recognize virtual currencies as money that could be spent and used like fiat.
- A second bill in this wild west state created a legal designation of property rights in owning digital assets.
- Colorado has a pro-bitcoin Governor, Jared Polis, who recently signed a bill exempting cryptocurrency tokens from state securities. The condition is that the purpose of the token must be “consumptive.” In other words, used for household goods and services.
- A new law passed in Montana defining utility tokens as a “digital unit that is created and recorded on a blockchain and can be exchanged without the involvement of a third party.” Lawmakers will use this official designation for tokens that are used for household needs.
- Vermont has included businesses using virtual currencies in the ‘money transmitter designation. This is a striking difference from most states, which don’t recognize cryptos as money at all. Vermont’s state government has also developed several initiatives for developing blockchain based business. This includes guidance for setting up blockchain-based LLC’s (BBLLCs). Additionally, they’ve developed a bill to determine whether a BBLLC is fully or partially decentralized, and whether the blockchain is public or private.
These and many other states are involved with shaping guidelines for crypto business pursuits. But it’s also important to remember that these laws may not exactly coincide with federal regulations.
It’s been a busy year for US regulators and we’re seeing an increasing amount of developments in regulation news around the country.
At the start of November, the SEC published their annual enforcement report. This covered extensively their progress in the crypto market. It was reported that the Commission had brought 20 cases against different businesses who had held an ICO during the last two years. In a nutshell, the report emphasized that “…reducing ICO-related fraud is among their top priorities.”
Many of the ICOs sued by the SEC were fraudulent in some way, or outright scams. For instance, in October, the SEC dealt with Blockvest, a company who had purportedly misled investors into believing they were SEC approved. The SEC obtained an emergency court order to shut down the Blockvest ICO, immediately freezing all assets.
US regulators force ICOs into compliance
Things started to swing a little bit when the SEC took aim at ICOs that were not scams, but simply had not complied. On November 16, 2018, the SEC announced it was forcing two ICO companies into compliance. These crypto startups now must return investors’ money, pay a $250,000 fine, and register and comply with the SEC from here on out.
These were the first instances where the SEC brought ICOs into compliance for a simple lack of SEC registration. The SEC did not consider either company (Paragon and Airfox) to be a scam or fraud. Instead, the reason they attracted attention was that they did not register and comply with the SEC.
In a somewhat jarring statement, Stephen Palley, a lawyer with DC-based Anderson Kill, surmised that the SEC actions “…would appear to apply to about 95% of all the token sales in the last two years”.
The effect on the crypto market
Some folks theorize that this revelation was one of the major reasons behind the recent fall in cryptocurrency prices
Meanwhile, individual states are also delving into cryptocurrency regulation. In one area that was not too long ago the actual wild west, the state of Colorado has officially signed orders to shut down 18 ICOs because they were operating as unregistered securities.
Ohio become first state to accept bitcoin
Alternatively, Ohio just became the first state to accept Bitcoin for state treasury payments. This includes sales tax, withholding taxes and using a 3rd party payment processor, OhioCrypto.com. However, the State Treasurer, Josh Mandel, is soon stepping down.
His replacement, Rep. Robert Sprague, openly approves of the idea of the pilot program. But he plans to review it fully before moving ahead. State officials recognize the risk of taking payments in digital currencies. However, they want a reputation as a progressive and business-friendly crypto region. This is definitely something many other states are struggling with now.
Update on new bill proposal
Update – On December 20, 2018, two US Congressmen, Warren Davidson (R) of Ohio and Darren Soto (D) from Florida, introduced the Token Taxonomy Act of 2018, to:
…amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude digital tokens from the definition of a security, to direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography, to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.
Essentially this landmark legislation would end the policy of lumping digital assets together with traditional investment vehicles. Trading between cryptocurrencies would no longer cause capital gains taxation. Furthermore, cryptocurrencies would no longer be considered securities. If enacted, this could put the US at the forefront of the crypto trading industry.
Cryptocurrency regulation, as you can see, is a work in progress. Some may think that by the time regulatory agencies put policies put in place, self-regulating entities within the space will have things under control. In a decentralized way. Stay tuned to learn more about that in an upcoming self-regulation update.
Also published on Medium.