| Updated: October 30, 2024It has been almost a decade since Bitcoin came into existence and there still are diverging views regarding its regulation. At present, only a handful of countries have declared the digital currency as illegal. These nations include Bangladesh, Nepal, Kyrgyzstan, Ecuador, Bolivia and, as of 2018, Algeria. On the other hand, Japan has so far been the only country to consider Bitcoin as ”legal tender”.
What we should note here is that when a particular asset (currency) has not been declared as legal tender, this means there is no protection for merchants and consumers using it. It does not mean the currency cannot be used as a means of exchange.
Still, in many parts of the globe, authorities are mulling what approaches they should implement when it comes to Bitcoin regulation. In the European Union, for example, the European Commission has long been aware of the need for dialogue on the matter, while the European Central Bank still considers Bitcoin (among other digital currencies) as not sufficiently mature to be regulated.
In some jurisdictions, it still remains an unanswered question whether Bitcoin and other digital currencies should be overseen by central banks or by specialized regulatory authorities. In others, it is still debatable whether Bitcoin itself should be regulated in one way (as a currency, or a commodity), while the cryptocurrency business as a whole should be regulated in another manner (as an activity that has to be licensed). And finally, it is also a matter of discussion whether Bitcoin should be regulated nationally or internationally.
Now, let us take a look at how major economies address the matter with Bitcoin regulation.
Europe
For the time being, the EU has been rather cautious when it comes to regulating Bitcoin and other digital currencies. Authorities within the bloc apparently prefer to examine the aspects of that market segment first and regulate it afterwards.
On the other hand, the European Central Bank has, on several occasions, supported stricter control over cryptocurrency movement, with the latter being part of a more extensive crackdown on money laundering practices. The central bank has already stated that Bitcoin is not considered as a threat, a statement later confirmed by ECB President Mario Draghi, who explained that the digital currency was not sufficiently mature to be regulated.
United Kingdom
Bitcoin is considered as a ”commodity” by the Financial Conduct Authority (FCA) in the United Kingdom and it is still unregulated. FCA’s Andrew Bailey has not once stated that investors, who bought the digital currency, should be ready to lose everything due to its highly volatile nature. However, the FCA head currently does not see any systemic risk in Bitcoin and, thus, he would rather not push the digital currency’s regulation.
On the other hand, the FCA has indicated that it will take steps to oversee Bitcoin-related derivatives.
United States
Digital currency regulation in the United States, as of now, tends to be unevenly developed, since some of the states have gone way farther in terms of oversight compared to others.
In 2015, New York revealed the contentious BitLicense, which allowed cryptocurrency businesses to operate within the state. However, a number of start-up companies discontinued their operations there rather than comply with the costly requirements.
Two years later, a bill was passed in Washington, under which Bitcoin exchanges are required to comply with money transmitter rules.
At the same time, in Texas, all Bitcoin-associated investment endeavors are being monitored by the state securities commission.
Nationwide, the US Securities and Exchange Commission (SEC) has already placed emphasis on the use of blockchain assets as securities. The effort is aimed to clarify whether the public should be given access to particular Bitcoin investment funds or not, as well as whether a particular offering can be characterized as a scam or not.
Meanwhile, the Uniform Law Commission has proposed the Uniform Regulation of Virtual Currency Business Act, which could be introduced by a number of states in future legislative sessions. The Act is meant to provide a thorough explanation of which virtual currency businesses are considered as money transmission activities as well as the type of license they may need.
Russian Federation
In late 2017 a decree by Russian President Vladimir Putin encouraged development of the so called ”single payment space” within the Eurasian Economic Union. The mandate also stressed on token sales scrutiny and Bitcoin mining licensing.
Meanwhile, in March 2018 the State Duma is expected to propose draft cryptocurrency legislation, which will stress on consumer protection from fraudulent activities and, at the same time, allow citizens and business entities to operate legally with digital currencies.
China
China has not prohibited the use of Bitcoin and also claims it does not intend to take such a drastic measure. However, it has already cracked down on cryptocurrency exchanges and is taking steps to withdraw preferential treatment for those engaged in Bitcoin mining, such as inexpensive electricity and tax deductions.
Canada
Canada was among the first countries to propose a ”Bitcoin legislation”, when it passed the ”Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014 and Other Measures”, also known as Bill C-31. Under the latter, all ”virtual currency businesses” are considered as ”money service businesses” and, thus, they need to be compliant with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.
Canada’s government has already identified clearly that the digital currency is not legal tender. Meanwhile, Canada Revenue Agency has postulated that tax is due on transactions involving Bitcoin, depending on the type of activity.
Australia
It was in October 2017, when a bill was proposed by the Australian Senate, under which Anti-Money Laundering statutes would be applied to all cryptocurrency exchanges located in the country. The bill would also mandate criminal charges for unlicensed crypto exchanges.
At the same time, the double taxation of Bitcoin was removed. It actually resulted from a 2014 decision by the Australian Taxation Office to consider Bitcoin as a ”bartered good” instead of an asset or a currency.
All in all, as of late 2017, all crypto exchanges are required to have a registration with financial intelligence agency Austrac and remain compliant with record preservation and client identification rules.
Meanwhile, officials from Reserve Bank of Australia have recently stated that the use of digital currencies as a method of payment does not necessarily have to be regulated. This can be considered as an indication that, for the time being, there will probably be no further action by Australian authorities.