A cryptocurrency, often shortened down to “crypto”, is a digital currency with the unique capability to circulate without the oversight of a central monetary authority.
Instead of a bank or government agency like the SEC (The US Securities and Exchange Commission) presiding over the creation and subsequent circulation, cryptocurrency is created and circulated on the blockchain, a secure network that depends on a tamper-resistant system of recording transactions.
Cryptocurrencies are designed to be used for different purposes. Some are pegged to the value of a certain fiat currency (like the US dollar, or USD), while others still are exchanged for goods and services.
Reasons Cryptocurrency Needs Regulation- Points To Note
Even with the blockchain present to prevent crypto-fraud, all cryptocurrencies have a value in fiat currencies like the dollar, meaning it’s still possible to use them for unlawful purposes. That’s why governments around the world today have begun tackling the question of understanding crypto, and more importantly:
How cryptocurrency can be regulated like other securities and commodities (like stocks).
How Different Countries Are Approaching Cryptocurrency Regulation
The most important thing to know about crypto regulations around the world is that there’s no clear regulatory framework in place yet. Not in the US, not in China, and certainly not around the world. Instead, countries regulate crypto through a patchwork of self-instated regulations, which means tax treatments and classifications for crypto differ around the world.
Here’s how crypto regulations break down in some of the world’s leading countries today:
1. The United States
Despite having one of the highest numbers of crypto investors and firms that work with the blockchain in the world, the US is lagging far behind when it comes to regulating crypto. Most laws concerning the creation, sale and purchase of tokens come from the Securities and Exchange Commission, which views cryptocurrencies as a security.
Here’s where the conflict comes in. The Commodity Futures Trading Commission (the CFTC), another important agency when it comes to the trading of commodities, calls Bitcoin (the world’s leading crypto) a commodity, and the US Treasury calls it a standard currency.
2. China
A global power still figuring out most of its regulations and adapting to the twenty-first century, China takes a double-sided view to cryptocurrency: it isn’t classified as legal tender but is classified as the property in the case of determining inheritances. Moreover, China is one of the few countries to have banned crypto exchanges overall, with the People’s Bank of China stating they “facilitate public financing without prior approval”.
In May 2021, the country also banned the mining of Bitcoin, forcing more than thousands of miners to close down operations (and sell off their rigs), or relocate to countries with more relaxed laws if possible.
3. The European Union
Where would we be without the good old EU?
The European Union stands out as one of the only world powers to have fully embraced crypto, with it being legal throughout most countries and part of the EU. However, countries like Germany, France, and Norway have tightened restrictions on KYC/CFT regulations, making it harder for unlawful activities to be financed through crypto.
Taxation systems also see the great variation when it comes to the EU, ranging from a nonexistent 0% to a whopping 50%. People considering investing in crypto should consider reading up on the MiCA: a proposed framework designed to increase consumer protection and establish clear industry conduct in crypto.
Conclusion
In the end, investing in crypto isn’t just a question of market volatility and having disposable funds. It’s also a question of location since that’s going to play a big market in deciding the taxes you have to pay, and even whether it’s legal for you to invest in crypto in the country you’re currently residing in.
Regions like the EU and Canada have taken a generally favorable stance on cryptocurrencies, while newly-developed countries like India and emerging powers like China have taken to banning crypto overall.
Moreover, if you’re thinking of investing in cryptocurrency (while the market’s still good), you’re going to need a trading platform that you can trust, and one that doesn’t bleed you dry in taxes, like this platform.