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Cryptocurrencies have created a massive buzz not just in India but across many countries. Some countries have legislation for it and some don’t. Different countries around the globe have their own way of regulating cryptos. Do you know how some of the major economies of the world regulate Cryptocurrencies? This article examines the different regulations governing cryptocurrencies in India & around the world.
Cryptocurrency refers to a digital or virtual currency secured by cryptography. Here transactions are verified and records are maintained by a decentralised system through cryptography rather than through a centralised authority.
Despite certain restrictions from the government, Bitcoin and other Cryptocurrencies are growing in India. As per an estimate, more than 10 crore Indians own cryptocurrencies amounting to be of 6 lakh crore. This considerable participation calls for a regulatory framework to govern cryptocurrencies. However, in India, there hasn’t been one yet.
The Indian cryptoexchanges have been self-regulating, including adhering to the KYC norms and AML compliance. These practices are similar to that of regulated financial institutions, which they follow to bring safety and trust. For instance, one of the crypto investing platforms requires details of their investors on the KYC documents to match with the details of their bank account for verification of identity.
India, with a massive population, lies in a very different position as compared to other nations that have regulated such currencies. Some of the population in India is still underbanked or unbanked therefore, the government has a massive task of finding a solution. Until then, crypto exchanges may continue to self regulate and wait for a regulatory framework to be implemented. The RBI had banned cryptos earlier, but the ban was overturned.
United Kingdom (UK) also lacks a comprehensive law on cryptocurrency regulation. Currently, the financial conduct authority grants licenses to authorised cryptocurrency-related businesses. This also includes crypto exchanges. Such businesses need to comply with the stringent set of rules. These rules are strict, especially for those dealing in crypto futures and options trading.
Moreover, UK taxes benefit in the same way from the trading of Cryptocurrencies as it would benefit from trading in any other currency. Those businesses that trade currencies have to adhere to the corporate tax rules. The crypto exchanges have to comply with the counter-terrorism financing and anti-money laundering initiatives.
United States of America
USA also has a dual legislative system where both central and state governments can regulate. Regulations may vary from state to state in the USA. In a nutshell, USA has been in favour of allowing Cryptocurrencies activities. New York has a favourable environment as far as regulating cryptocurrencies are concerned. It had launched a framework to license cryptocurrency business and exchanges where the company who wanted to deal in such currencies need to get a license from the State Department of Financial Services.
The taxpayers of USA need to report transactions of cryptos as they are liable for tax when they are sold at profit.
China has been tinkering with its dealings in cryptos as they allowed all crypto-related activities at first, but now they have become one of the most restricted crypto-markets across the globe. China was the leader of all in terms of crypto mining but earlier this year they banned crypto mining.
The government of China has displayed great zeal in blockchain technology and has encouraged the growth of blockchain related start-ups. China has started the real-world trials of cryptocurrencies which will be regulated centrally.
In Singapore, the exchange, storage or transmission of cryptos requires having a license. Businesses trading in virtual currencies in their business are liable for taxes on profits as business income. Regulations there also provide for guidelines for compliance and both AML and CTF initiatives.
Cryptocurrency exchanges are legal in Australia and the government there has subjected this currency to anti-money laundering and counter terrorism financing act. As the cryptocurrency is treated as a property there, it is subject to capital gains tax. Three years ago, the Australian Transaction reports and Analysis Centre came out with new regulations where crypto exchanges need to be registered with AUSTRAC in compliance with the AML/CTF 2006.
The Financial Services Agency of Japan governs cryptocurrency trading platforms in Japan. Cryptocurrency was legalised there in 2017 under the Payment Services Act.
In this part of the world, cryptocurrencies can be valued and traded. They are just like bank deposits. Therefore they are subjected to wealth tax. If a person sells such currency, then capital gains made on such sale will not be liable to income tax, but if the person holds it as business assets, then capital gains will be liable for income tax levy.
Above were some examples of the major economies regulating Cryptocurrencies but India is expected to come up with a regulated framework for Cryptocurrencies. In the absence of any guidelines for Cryptocurrencies in India, the IAMAI set up a formal board Blockchain & Crypto Assets Council to oversee the implementation self regulating code of conduct for crypto exchanges. All major crypto-exchanges in India are members of BACC. Investors are keenly awaiting the Crypto Bill 2021 to be tabled in the parliament very soon. While government seems inclined towards ban, market players are vying for regulations.