Cryptocurrencies and blockchain technology have taken the world by storm. Let’s take a look at the most developed countries in the industry in terms of legislation.
Last year, cryptocurrencies were popular; Bitcoin, in particular, has become a real celebrity. The idea of decentralization and freedom is continuously encouraging the development of the cryptographic industry, so hopefully, we will soon be able to leave behind the past’s old and outdated tools. Cryptocurrencies are part of our future, if not present, and some countries worldwide compete to create a sophisticated regulatory framework that will facilitate their growth.
Let’s take a look at the most progressive countries that run the cryptocurrency industry through legislation.
The UAE is led by Dubai with its progressive cryptocurrency regulation, especially since the Dubai Financial Services Authority (DFSA) published consultation documents. The purpose of these documents is to introduce a regulatory framework for cryptocurrencies. Depending on the feedback received from the two consultation documents, the Agency is expected to adopt the new rules in the second and third quarters of 2021.
The forthcoming provisions represent a comprehensive regulatory framework, using best practices from global jurisdictions. The framework also includes anti-money laundering measures.
The first governing rules of crypto assets in the United Arab Emirates appeared more than two years ago. In June 2018, the Abu Dhabi Financial Services Regulatory Authority (FSRA) issued guidance on the regulation of cryptocurrencies, exchanges, and ICOs. The FSRA continues to engage with the cryptocurrency industry actively and has granted several regulatory approvals to, among others, companies such as the BitOasis Cryptocurrency Exchange in 2019.
The Dubai authority, the DMCC Dubai Multi Commodities Center issues licenses to companies focusing on cryptocurrencies. It is making the zone the fastest growing free economic location in the UAE.
The country is a centre of innovative technology, blockchain, the Internet of Things, and data analysis. Together with the Smart Dubai 2021 initiative, these factors provide the perfect venue to become an industry leader in cryptocurrencies and the blockchain.
Back in March 2020, the South Korean parliament gave the green light to legalize cryptocurrencies. The amended law, which legalized cryptocurrencies in the country – the Special Financial Transactions Information Act – aims to regulate and control the cryptocurrency industry’s quality, particularly local crypto exchanges.
The new law has to be applied by the VASPs – Virtual Asset Service Providers, who are involved in the following business activities:
- cryptocurrency sale or buy
- crypto to crypto exchange
- the transfer of cryptocurrencies
- storage or holding of virtual assets
These activities are primarily related to cryptocurrencies, custodian wallet providers, and ICO projects.
Each crypto service provider must establish anti-money laundering systems and must be registered with the Korean financial regulators before commencing their activities.
The law will enter into force in March 2021 and extend anti-money laundering and anti-terrorist financing (AML / CTF) regulations to virtual asset service providers. To avoid sanctions, companies must fully comply with legal rules before September 2021.
Singapore offers a balanced regulatory and legal environment for cryptocurrencies. As Singapore’s financial regulator, the Singapore Monetary Authority (MAS) regulates the crypto ecosystem by keeping in mind the risks associated with crypto activities, such as money laundering and terrorist financing while ensuring that it does not stifle innovation.
Legally, Singapore offers a neutral system to support cryptocurrency transactions. Singapore’s laws are favorably applied as the law governing contracts in cryptocurrencies because its dispute resolution laws are highly developed, arbitrage-friendly, and neutral.
Besides, cryptocurrencies are legal in Singapore, so any contract for cryptocurrencies is considered legal. This is the main reason why Singapore is emerging as an Asian crypto center.
- The headquarters of cryptocurrencies, exchanges, and blockchain businesses in the region
- The Payment Services Act came into force in January 2020
- Provides clear and concise rules for the country’s cryptocurrencies
The law provides a progressive framework governing payment systems and tokenization services.
Japanese crypto regulation allows users to buy, sell and own crypto assets. It can be purchased on exchanges or bought from “Bitcoin ATMs.”
In addition to its long, rich history of technological innovation, Japan is a global financial center. Thus, the country’s laws and business environment are incredibly conducive to blockchain technology, with many blockchain businesses operating in Japan. On a per-capita basis, the country has one of the highest application rates of the technology. Japan is currently discussing using the yen CBDC (Central Bank Digital Currency) (JPY).
Japan has introduced healthy regulatory conditions for the cryptocurrency industry. Since April 2020, cryptocurrencies have had to obtain a license to operate.
The Payment Services Act (PSA) in Japan changed the term “virtual currency” to “crypto-assets.”
Protecting customers is also a priority. The industry has welcomed amendments to the Payment Services Act and the Financial Instruments and Stock Exchange Act with open arms.
Mining activity is not currently regulated in Japan.
The main reason for the people’s enthusiasm in the cryptocurrency for Portugal is that in Portugal, revenues from cryptocurrencies are tax-free.
Individual cryptocurrencies are VAT-free; there is no income tax.
These exemptions do not apply to exchanges or startups – in which case they are charged 21% of the income generated.
In theory, all banks in Portugal accept Bitcoin, as the Portuguese financial authorities say it is officially the same as any other currency. However, some banks have blocked Bitcoin and other cryptocurrency transactions in recent years following allegations of fraud. Millennium BCP and Activobank are two such banks that allegedly blocked cryptocurrency transactions.
The Portuguese branch offices of Santander Totta also rejected Bitcoin transactions but later withdrew from this decision.
Through the Citizenship Investment Program, individuals from outside Europe can acquire Portuguese citizenship by investing more than € 350,000 in real estate, venture capital funds, or companies operating in the country. Companies like Global Citizen Solutions also accept payment for the Gold Visa service in cryptocurrency. You can currently pay in Bitcoin, Ripple, and Ethereum.
Malta has taken a holistic approach to cryptocurrencies, making itself a pioneer in cryptocurrency regulation. The small Mediterranean island nation was one of the first to regulate the cryptocurrency business. However, there has been much criticism on regulatory clarity issues, which have recently been remedied. So much so that in November 2020, Crypto.com became the first platform to the Maltese Financial Services Authority (MFSA) to receive approval in principle. However, not much has happened since then. We are waiting for developments …
Germany, one of the most developed EU member states, has the 4th most robust economy globally in terms of GDP. It is one of the first countries in the world to offer legal certainty to financial institutions.
From 1 January 2020, cryptocurrency service providers must obtain a BaFin approval (the Federal Financial Supervisory Authority). This also applies to cross-border service providers.
The Baltic country is known to be at the forefront of blockchain projects. Estonia aims to support innovation, especially in the financial and fintech industries, by taking a technology-neutral stance against this type of invention.
Through this position, Estonia remains able to create new opportunities for both issuers and investors.
Switzerland has had a positive attitude towards cryptocurrencies for a long time. Virtual currencies are classified as assets. Swiss law states that crypto exchanges and cryptocurrencies are all legal and accepted as a means of payment. Exchanges are regulated by the Swiss Federal Tax Authority (SFTA), which classifies cryptocurrencies as assets.
Therefore, any company or entrepreneur using a cryptocurrency must declare them in their annual tax return as it is subject to Swiss property tax.
Also, crypto exchanges must go through a registration process to obtain permission from the Swiss Financial Market Supervisory Authority (FINMA) if they want to operate. FINMA has also published a list of guidelines developed for ICOs.
In September 2020, Switzerland introduced new laws on blockchain and distributed ledger technology (DLT). The recent amendment, likely to be implemented this year, aims to increase legal certainty and alleviate barriers to blockchain technology application.