Cryptocurrencies have already made a big entrance on the financial market and with every passing year, they are expanding their influence further and further. Today, their capitalization is estimated in the tens of billions of dollars. Many private investors and funds put their trust and huge sums in digital assets investment. Naturally, they all want legal protection – cryptocurrency regulation. However, the crypto industry is still in the gray area. And yet in European countries, the authorities carry out regulation at the legislative level in the field of digital money.
What is cryptocurrency?
The European Central Bank (the ECB) in 2012 issued a report on the schemes of digital money. The document focused on the problem of their rapid spread, the consequences for the reputation of European Central banks, and the economy.
According to the Directive, digital money is an entity that is on an electronic medium and can be accepted as a means of payment by both the Issuer and other legal entities.
From the legal point of view, cryptocurrency cannot act like a currency or money. It does not fully meet the three main functions of money:
- Medium of exchange
- Accounting method
- Preservation of value
The European Central Bank noted that digital money cannot act as a means of preserving value. The reason is their increased volatility. In 2015, the ECB defined cryptocurrency as a digital representation of value not issued by a credit institution or Bank which can be used as an alternative to money.
Thus, European legislation regards digital money mainly as a means of exchange, rather than a payment.
Taxation in the field of cryptocurrencies
In the European Union, there is no single legislation regarding the tax regime of digital money. In 2015, the European Court of Justice issued a preliminary ruling and some countries of the economic bloc supported it.
Back in 2015, there was a trial between David Hedquist and the Swedish tax service against the background of the need to impose VAT on the sale and purchase of bitcoin on the exchange. The parties interpreted the current legislation differently. The highest European court released the work of David Hedquist from VAT. In his opinion, BTC when trading on the exchange acts as a currency, not a commodity. The judicial authority referred to Council Directive 2006/112/EC from 28.11.06. It exempts “currencies, banknotes, and coins” from VAT. The final judgment was made on 22.10.2015.
Laws against terrorist financing and money laundering
In July 2016, the European Commission proposed amendments to the fourth anti-money laundering Directive. It also pointed out blind spots in the supervision of funds used by terrorists. Among them are cryptographic currencies. Aiding and abetting terrorism is considered the main legislation problem of digital money. They allow for completely anonymous transactions. As a result, terrorists receive funding and the opportunity to hide from the authorities.
The last text of the Directive 5AML confirmed the European Parliament from 30.05.2018. It establishes cryptocurrency as a digital representation of value, not provided by the Central Bank or Government Agency. It is not tied to legally valid currencies and does not have the status of money or currency. At the same time, digital money can be used by individuals and organizations as a means of exchange.
Cryptocurrencies need the development of state regulation. There are still many blind spots and gray areas. Filling them will lead to increased investment as private buyers and organizations want to have maximum protection for their digital assets. Follow the latest news on our portal, so you will always be aware of the latest changes in the legislation on cryptocurrencies.
Cryptocurrency regulation in Asia
The popularity and spread of cryptocurrencies are growing, the legislation of various countries cannot leave this area in gray. The policy of Asian States in relation to digital money is different from country to country. Let’s take a look at countries that have adopted laws concerning cryptographic currencies.
Cryptocurrency regulation in China
The Central Bank of China in 2017 banned the ICO. If the company has already conducted the initial coin offering, it is obliged to return the investors their funds. Subsequently, they introduced the ban on direct transactions for buying and selling bitcoin for Yuan.
A representative of the Bank of China in the spring of 2018 said that the regulator does not recognize cryptographic currencies as a means of payment. These financial products are considered “unreliable” and they can lead to unpredictable negative consequences in the financial market.
The Agency for The Supervision of Information Security began to monitor the activities of cryptocurrency platforms from other countries and local platforms that have moved their work abroad. This decision was made to combat financial pyramids, investment fraud, and money laundering on platforms available to the Chinese.
The prohibitive policy of the authorities led to the almost complete disappearance of the market of cryptographic currencies in mid-2018. Beijing without any risks managed to liquidate 85 sites and almost 90 exchanges of cryptographic currencies. All of them conducted ICO and successfully functioned in 2017.
Regulation in India
The Reserve Bank of India (RBI) has issued a ban on the use of cryptocurrency by local financial institutions. Companies, whose activities are related to digital money, are obliged to stop such activities.
The Central Bank is studying the possibility of issuing the state digital currency. This decision causes dissatisfaction among many citizens. On April 6, 2018, the regulator issued a circular banning the regulation of financial institutions related to digital money.
Regulation of cryptocurrency in Vietnam
In October 2017, the Central Bank of Vietnam changed the monetary policy of the country. As a result, the circulation of cryptocurrencies has been completely banned since 2018. The fine for the violation is $ 9,000.
In Vietnam, there is a ban on the import of equipment for the production of cryptocurrencies, which is caused by the state recognizing digital money as illegal.
Regulation of cryptocurrency in Hong Kong
Until 2018, the state of Affairs in the field of cryptocurrencies in Hong Kong had virtually no restrictions. Therefore, many exchanges and exchange services of digital money from China began to operate here.
In February 2018, SFC (securities and futures Commission) sent letters to cryptocurrency exchange services and exchanges regarding the listing of coins without a license. The requirements were immediately met and the distressed assets were removed from the platforms. Thus, cryptocurrencies were equated to securities.
In General, it can be seen that the authorities of Asian countries are malevolently opposed to cryptocurrencies. This plays into the hands of States that support the development of coins: many move their business under their jurisdiction. Follow closely the news in the sphere of cryptocurrency regulation in China and other countries. This information can greatly affect the rate of digital money.