International Regulations Related to Disruption
How Bitcoin is Viewed:Cryptocurrencies are considered a category of Digital Assets. They are defined as a math-based, decentralized convertible virtual currency which are protected by cryptography and are used as a medium of exchange and/or a unit of account and/or a store of value but do not have legal tender status.
Exchanges:In March 2019, Mauritius became the first nation to provide a regulatory framework for custodians of digital assets. A custodian service license will be required for entities to operate as a holder of digital assets as well as to function as safe keeper of the assets. In order to acquire the license, the holder will be required to comply with anti-money-laundering (AML) and counter-terrorism-financing (CFT) laws, as well as the country’s Financial Intelligence and Anti-Money Laundering Act of 2002 (FIAMLA). "Crypto custodians" on Mauritius will be also required to maintain at least 500,000 of Mauritian rupees (MUR) or roughly $14,000 of “unimpaired” or hard capital. Furthermore, a crypto custodian must have a board consisting of at least three directors with one of them being a resident of Mauritius, as well as the requirement of maintaining an office on the island.
ICOs/Security:Security tokens are defined by the Securities Act of 2005 as the digital representation of securities and require preliminary approval by the Financial Security Commission of the Republic of Mauritius (FSC). However, all offers of securities to “sophisticated” or “expert” investors are exempt from preliminary approval (similar to Reg D in the USA). TAX:Cryptocurrency gains are not taxed in Mauritius.NOTE:It is worth noting that in 2017, the State Bank of Mauritius (SBM) has partnered with Secured Automated Lending Technology (SALT) to enable its clients to use bitcoin and Ethereum’s ether as a guarantee for loans.
How Bitcoin is Viewed:Bahrain recognizes cryptocurrency as a commodity that can be traded in the exchanges. They do not consider it as a legal tender in any form.
Exchanges:A licence is needed to operate within the “crypto-assets” industry — as the operator of an exchange, a project launching an ICO, and some other activities related to “crypto-assets”. This also applies to an “operator” that accepts, stores or holds “crypto-assets” on behalf of clients.
ICOs/Security:A licence is needed to launch an ICO.
How Bitcoin is Viewed:Not legal tender.
Exchanges:Cryptocurrency exchanges or trading platforms were effectively banned by regulation in September 2017 with 173 platforms closed down by July 2018.
ICOs/Security:In Q3 2017, China banned crypto exchanges and Initial Coin Offerings (ICOs) indefinitely in domestic markets, leading many pundits to wonder if the Chinese Communist Party was on the verge of banning crypto ownership altogether.
Tax:Trading cryptocurrencies is "technically" illegal.
How Bitcoin is Viewed:In 2014 - Bitcoin is defined as a virtual commodity rather than a currency, Bitcoin is per se not regulated by any of the financial regulatory bodies, such as the HKMA or the SFC.
Exchanges:Anyone marketing or distributing security tokens targeting Hong Kong investors MUST obtain a local license. digital asset providers must comply with three key requirements laid out by the SFC. They must restrict their offerings to professional investors only. They must provide clear and comprehensive investment advice and guidelines, and must encourage investors to carry out their own due diligence. If they fail to do this, they will either lose their license or trigger “disciplinary action” from the financial watchdog. It is a criminal offence for any person to engage in regulated activities without a licence unless an exemption applies.
ICOs/Security:Security Tokens are indeed securities and, accordingly as of March 2019, the Hong Kong Securities and Futures Commission (SFC) will no longer allow its citizens invest in STOs–unless they have at least $1 million.
Tax:Hong Kong’s tax regime remains simple and taxes are generally low. There is no Value Added Tax (VAT) or Capital Gains tax. Income tax needs to be paid independent of whether payments are made in cash, cheque or Bitcoin and it is generally up to a business if they want to do their accounting in Hong Kong Dollars or Bitcoin.
How Bitcoin is Viewed:Not legal tender.
Exchanges:The Indian government has issued warnings but does not currently regulate exchanges.
ICOs/Security:India is taking steps to make cryptocurrencies illegal to use within its payments system and is looking to appoint a regulator to oversee exchanges.
Tax:Cryptocurrency tax implications in India are unclear. The country’s tax department sent notices about cryptocurrency investing to tens of thousands of citizens after a national survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period. The notice states, “In case of gains, you have to state profits or capital gains made by you from transaction in cryptocurrencies year-wise with statements showing the workings.” As a result, most chartered CAs are inclined to treat these investments as capital gains tax.
How Bitcoin is Viewed:Considered a financial asset.
Exchanges:Since virtual currencies are considered a “financial asset” in Israel, they fall under financial services and require a license. The Supervision on Financial Services (Regulated Financial Services) Law 5776-2016 requires persons engaging in providing services involving a “financial asset” to obtain a license issued by the Supervisor on Financial Services Providers appointed in accordance with the Law. The license enumerates conditions and types of activities approved for the licensee. “Virtual currency” is included in the definition of a “financial asset” for which providing services requires a license.
ICOs/Security:The Israel Securities Authority is recommending lenient regulations for initial coin offerings, including a clear definition of what separates a so-called “utility token” from a security.
Tax:In 2017, Israel’s top financial watchdog drafted up new rules that classified cryptocurrencies as “assets” that must fall under the purview of capital gains taxes in the nation. As a financial asset, trading in virtual currency is subject to capital gains taxation. In January of 2018 the Israeli Tax Platform released their draft circular. The plan proposes imposing value-added tax (VAT) on ICOs. It also differentiates them into two categories, service transactions and sales transactions. The draft implies that goods or services offered to foreign residents would result in “a zero tax invoice” under standing laws.
How Bitcoin is Viewed:Considered legal tender. Japan recognizes Bitcoin and other digital currencies as legal property under the Payment Services Act.
Exchanges:Exchanges are legal if they are registered with the Japanese Financial Services Agency (FSA). The process can take up to six months.
ICOs/Security:ICOs are currently not covered within the scope of the Payment Services Act. But Japan is currently working on plans to regulate ICOs. According to reports, if an ICO has the characteristics of an investment, it will likely be regulated under the Financial Instruments and Exchange Act.
Tax:Japan's National Tax Agency ruled that gains on cryptocurrencies should be categorized as ‘miscellaneous income’ and investors taxed at rates of 15%-55%. Japan’s top regulatory watchdog considers Bitcoin to be a “commodity.” The nation’s government also ended the 8% “Consumption tax” that hitherto applied to crypto on July 1st, 2017. Beyond that, Japanese crypto users contend with all of the normal taxation models: income tax, capital gains tax, and company tax.
How Bitcoin is Viewed:Presently, in Russia, it is illegal for digital assets to be used as a means of payment. Digital assets are presently defined as property, not as a legitimate means of payment in the Russian Federation. However, in February 2019, Vladimir Putin has instructed his country’s government to adopt federal laws relating to cryptocurrency by July 2019. Specifically, Putin has issued an order for the government to work with the State Duma, the lower house of parliament, to ensure adoption of “federal laws aimed at the development of the digital economy.” They include “determining the procedure for conducting civil law transactions in electronic form, as well as regulating digital financial assets and attracting financial resources using digital technologies.”
Exchanges:The newly proposed legislation defines cryptocurrencies and tokens as digital assets - with trading only allowed through authorized cryptocurrency exchanges. It also establishes KYC regulations for ICOs.
ICOs/Security:The first version of a Russian digital economy bill was presented by Russia’s Ministry of Finance (MinFin) in January 2018. It included a framework for the regulations surrounding crypto and blockchain-related technology including smart contracts, mining and ICOs. Russia’s central bank was also preparing a draft law on crowdfunding. These new bills are specifically aimed at newly created ICOs. It is presently illegal to invest in ICOs in Russia.
Tax:Although the regulations are unclear, private individuals in Russia are not free from the obligation to inform tax authorities on their income from cryptocurrency operations. The standard tax rate of 13% is applicable to gains from trading cryptocurrencies, according to a letter by the Finance Ministry.
How Bitcoin is Viewed:Cryptocurrency is neither a currency nor a commodity. It is not considered legal tender.
Exchanges:Cryptocurrency exchanges fall under regulatory purview of the Monetary Authority of Singapore.
ICOs/Security:In November 2017, the Monetary Authority of Singapore offered a guide on Digital Token Offerings, which indicated how altcoins should be treated under current securities laws. The guidance dictates that any ICOs or altcoins that are “capital market products” under the Securities and Futures Act can be regulated under the MAS. This includes altcoins that either infer an ownership interest of a corporation or product, debt, or a share in an investment scheme.
Tax:Generally, businesses that accept virtual currencies as payment for goods or services should record the sale based on the open market value of the goods or services in Singapore dollars. The same applies for businesses which pay for goods or services using virtual currencies. If the open market value of the goods or services that would have otherwise been exchanged in Singapore dollars cannot be determined (e.g. the good or service is only traded with virtual currencies), the virtual currency exchange rate at the point of the transaction may be used. Businesses that buy and sell virtual currencies in the ordinary course of their business will be taxed on the profit derived from trading in the virtual currency. Profits derived by businesses which mine and trade virtual currencies in exchange for money are also subject to tax. Businesses that buy virtual currencies for long-term investment purposes may enjoy a capital gain from the disposal of these virtual currencies. However, as there are no capital gains taxes in Singapore, such gains are not subject to tax. Whether gains from disposal of virtual currencies are trading or capital gains depends on the facts and circumstances of each case. Factors such as purpose, frequency of transactions, and holding periods are considered when determining if such gains are taxable.
How Bitcoin is Viewed:Not legal tender.
Exchanges:Legal if registered with FSS, and are part of a closely-monitored regulatory system.
ICOs/Security:ICOs are banned in South Korea. The South Korean Finance Minister recently stated that although ICOs are currently banned domestically, the government would carefully consider them “after watching market conditions, international trends and investor protection issues.”
Tax:Since they are considered neither currency nor financial assets, cryptocurrency transactions are currently tax free in South Korea, but a taxation framework is imminent. In December 2018, it was reported that a task force consisting of experts from government agencies and the private sector will be formed in South Korea to examine overseas cases to establish domestic cryptocurrency tax rules.
How Bitcoin is Viewed:Australia confirmed in July 2017 that Bitcoin would be treated ‘just like money’.
Exchanges:In Australia, digital currency exchange (DCE) providers must register with AUSTRAC and fulfil appropriate AML/CTF compliance obligations.
ICOs/Security:"Some ICOs are financial products. Some are not. For ICOs and crypto-assets that are financial products, the Corporations Act includes prohibitions against misleading and deceptive conduct. Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance contains guidance to help businesses comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct. For ICOs and crypto-assets that are not financial products (for example, ASIC has stated that it does not consider bitcoin to be a financial product), the same prohibitions against misleading or deceptive conduct apply under the Australian Consumer Law."Tax:In 2018, the Australian government ended its infamous “double tax” on crypto in Australia by exempting cryptocurrencies there from facing the goods-and-services tax (GST).This tax has been widely credited as a key reason for numerous operators leaving the country in the past.
belarusICOs/Security:Cyptocurrencies, AMSRT contracts and ICOs are all legal in Belarus.
Tax:Cryptocurrency mining, trading and capital gains on cryptocurrencies & ICOs are tax-free in Belarus until January 1, 2023.
BELGIUMHow Bitcoin is Viewed:Belgium generally is taking a rather sceptical stance towards cryptocurrencies and as of now does not view cryptocurrencies as currency. Exchanges:Additionally, businesses face a ban from the FSMA, the Financial Services and Markets Authority) on marketing of certain financial products. This policy was issued in 2014 and applies to products which “consist essentially of derivatives based on virtual currencies such as Bitcoin”. ICOs/Security:Each token and token offering is different. Depending on the circumstances, a token may qualify as either a “financial instrument”, an “investment instrument” and/or a “financial product”, resulting possibly in a licensing requirement and/or marketing restrictions for either the token issuer and/or any intermediaries involved.Tax: Belgium taxes investments made by individuals that are seen as ‘speculative in nature’ at 33%, plus local surcharges. If an investment isn’t speculative, and is outside of any professional activity, the gains may be tax-exempt and the losses won’t be tax deductible. This classification may or may not apply to Belgian crypto holders, depending on their activities. Professional individual investors in Belgium will be taxed on a progressive scale from 25% to 50%, in addition to local taxes and social security contributions. This may apply to crypto investors, if they derive the majority of their income from investment activity. Belgium’s Ministry of Finance has said that cryptos are currently exempt from VAT. Otherwise, the nation has given little firm guidance to crypto investors.
ESTONIAHow Bitcoin is Viewed:The use of bitcoins in Estonia is not regulated or otherwise controlled by the government. Cryptocurrency companies are defined as a “a provider of services of alternative means of payment”.
Exchanges:The Estonian Ministry of Finance have concluded that there is no legal obstacles to use bitcoin-like crypto currencies as payment method. Traders must identify the buyer when establishing business relationship or if the buyer acquires more than 1,000 euros of the currency in a month. Cryptocurrency companies are required to report all customers who transact over a certain threshold and would have to register with the Estonian Financial Intelligence Unit (FIU), giving the FIU oversight to investigate money laundering and terrorist financing cases that relate to cryptocurrencies.
ICOs/Security:Estonia is in the process of developing the ‘estcoin’, a ‘crypto-token’ which they plan to release through an ICO. This will not be a currency as such, due to the requirement of EU membership to be tied to the Euro. Alternatively, the token is likely to supplement Estonia’s e-Residency program, which the country describes as offering “the freedom to easily start and run a global business in a trusted EU environment” from any country in the world. The estcoin will become the second state-issued crypto-token, following the Venezuelan Petro.
Tax:Income received in virtual currency (gains from the transfer of property, income from employment, business income) is taxed on a similar basis as income received in traditional currency in Estonia. Accordingly, the taxation of virtual income, the purchase or sales price or received income has to be converted into euros at the exchange rate of virtual currency (market price) applying on the date of receipt of the income or costs.
EUROPEAN UNIONHow Bitcoin is Viewed:The European Central Bank classifies bitcoin as a convertible decentralized virtual currency. EU nations have until January 2020 to incorporate the fifth revision of the EU Anti-Money Laundering Directive—which defines virtual currency—into their local laws.
Exchanges:Varies by region.
ICOs/Security:As of October 2018, the European Securities and Markets Authority (ESMA) – the EU’s securities watchdog – was considering whether to regulate initial coin offering (ICO) tokens as securities on a case-by-case basis. It has recommended regulating most cryptocurrencies and ICO tokens under existing financial rules, but said more clarification is needed.
Tax:The power to levy taxes, including cryptocurrency taxes, is central to the sovereignty of EU Member States, which have assigned only limited competences to the EU in this area. The EU lacks a uniform tax regulator. Every member nation has a different tax code. The vast majority of the EU has sided with the US, and consider cryptos as far more like a commodity or stock than a currency. Value Added Tax (VAT) in EU is generally based on consumption tax assessed on the value added to goods and services. Most products and services traded across the EU, are a subject to VAT, but exports sold overseas are exempted. According to the document published on AT website, MMM stated that their users might come from EU Zone, US or any other part of the world. AT announced that transactions that contain a token could, in principle, be deemed as an onerous transfer of goods. Thus, the tokens should have VAT liability. However, the AT also admitted that cryptocurrencies could be eligible for the legal tender VAT exemption.
franceHow Bitcoin is Viewed:Digital currencies are defined as movable property in France.
Exchanges:In February 2018, French markets watchdog the Autorite des Marches Financiers decided that trading platforms for cryptocurrency derivatives fall under EU MiFID II regulations, thus facing tough reporting and business conduct standards. The watchdog also suggested barring such trading platforms from advertising electronically. This has since been followed by moves from internet companies banning crypto advertising on the grounds of consumer protection.
ICOs/Security:In September 2018, the French government has accepted an article of the Business Growth and Transformation bill (PACTE) dedicated to Initial Coin Offerings (ICO), empowering the French stock markets regulator, Autorité des marchés financiers (AMF), to give licenses to companies that want to raise funds via an ICO.
Tax:In 2018, the Council of State in France (FCS) defined digital currencies as movable property and then halved its crypto income tax rate on capital gains. Previously, profits from cryptocurrency sales were classed as “industrial and commercial profits” that could be taxed up to 45% in addition to a "generalised social contribution tax (GSC)" of 17.2%. Private profits are now classed as capital gains of “movable property”, significantly lowering the tax rate to 19% plus GSC. Mining and other commercial activities will continue to be taxed in the same way. The VAT tax law for cryptos in France is more nuanced than in other European nations. In France VAT tax would apply to crypto miners as a ‘supply of services’, and acquisition of goods or services with cryptos would also be subject to VAT. The purchase or sale of cryptos is free from VAT in France, unless it occurs on an ongoing basis, and is a source of commercial income.
germanyHow Bitcoin is Viewed:Cryptocurrency is not classified as a foreign currency or e–money but stands as "private money" which can be used in "multilateral clearing circles".
Exchanges:Intermediaries recquire licensing, authorization from BaFin.
ICOs/Security:ICOs are legal as long as they comply with local regulations. In Germany, there are two types of securities: 1) Wertpapiere (stock, Aktien) and 2) Vermögensanlage (share, investment asset). Investment assets require a prospectus, but in a much lighter form than wertpapiere.
Tax:Trading bitcoins/altcoins are considered as a private sale under the rule 23 EStG which has tax-free benefits. According to this rule, it means anyone trading bitcoins/altcoins is totally tax exempted if their capital gains are not more than 600 EUR. Also, if a trader is selling his/her Bitcoin/altcoins after a period of one year or more, then those capital gains are also totally tax exempt.
gibralterHow Bitcoin is Viewed:Cryptocurrency is not considered legal tender in the country but cryptocurrency exchanges are legal and operate within a well-defined regulatory framework.
Exchanges:In January 2018, Gibraltar introduced its Digital Ledger Technology Regulatory Framework after extensive engagement with the crypto industry. Under the framework, exchanges must register with the Gibraltar Financial Services Commission (GFSC) and demonstrate that they are meeting the ‘principles’ of the DLT framework, which include a strong focus on the detection and disclosure of money laundering and terrorist financing.
ICOs/Security:In 2017, the GFSC issued a statement on the unregulated use of ICOs and suggested it will monitor their use within the DLT Framework. Similarly, the commission’s Innovate and Create Team has been established to help businesses innovate new products for the crypto-economy.
Tax:Gibraltar does not impose capital gains or dividend tax on cryptocurrencies, and crypto exchanges are subject to a business-friendly 10% corporate income tax rate.
irelandHow Bitcoin is Viewed:"The Central Bank of Ireland was quoted in the Assembly of Ireland as stating that it does not regulate bitcoins."
Exchanges:In March 2018, the Department of Finance proposed the creation of a new blockchain working group with the aim of creating “cohesive” regulation across government agencies.
ICOs/Security:Depending on how digital assets are structured, they could potentially fall within the definition of “transferable securities”, and, subject to the availability of an exclusion or exemption, an offer of such digital assets may require the preparation, approval and publication of a prospectus.
Tax:At present, cryptocurrency profits in Ireland need to be declared to the Revenue Commissioners to be subject to capital gains tax at a rate of 33% beyond an initial tax free gain of €1,270.3.
Isle of manHow Bitcoin is Viewed:The Isle of Man recently launched the MannCoin, a cryptocurrency specifically designed for the Isle of Man.
Exchanges:In the Isle of Man, cryptocurrency exchanges are currently required to register with the FSC (Financial Services Commission) as a ‘designated business’, meaning they fall under the existing Designated Businesses (Registration and Oversight) Act 2015. This requires businesses to comply with anti-money laundering and CFT rules. Any person undertaking business in the cryptocurrency space must be registered with the IOMFSA prior to commencing business. Businesses are required to obtain identification documents from clients, particularly over a certain value threshold; conduct regular AML staff training; identify the source of funds/wealth of clients transacting over a certain value threshold, and to implement formal compliance procedures alongside the appointment of MLRO(s) and compliance officers.
ICOs/Security:The Isle of Man Financial Services Authority (Iomfsa) has made it clear that it would refuse to register businesses conducting ICOs unless they provide investors with a benefit other than the token itself. However, the regulator has not clearly defined the term “benefit,” nor has it clarified when the buyers of a token should receive it. As of October 2018, the IOMFSA will no longer register any cryptocurrency business in the Island unless the companies in question satisfy two requirements: 1) Having a minimum of two board of director members resident on the Island, 2) Management and control of the business must be domiciled on the Island.
Tax:The corporate tax rate in the Isle of Man is zero.
italyHow Bitcoin is Viewed:Cryptocurrencies are considered "foreign currencies".
Exchanges:In 2017 an Italian Ministry of Economy and Finance (MEF) decree was released (Legislative Decree No. 90) obliging those already operational in the cryptocurrency industry to register and report all activity to the Ministry within 60 days. This is by no means complete legislation and more regulation will be required in the future.
ICOs/Security:Italy does not currently regulate tokens or ICO´s. However Italy does have a specific legislation on crowdfunding which was approved in 2012 (DL 179/2012) which application and interpretation could be extended to ICO´s, focused on limiting how many funds can be rained (not more than 5 million euros) and requiring some ICOs to issue prospectuses. Italy is one of several EU countries that have formed a blockchain coalition in an attempt to introduce Distributed Ledger Technologies (DLTs) to boost the economies of those countries, all based around the Mediterranean.
Tax:The Italian Revenue Agency stated in April 2017 that it did consider bitcoin to be a foreign currency, meaning gains from trades would be taxed. In Italy foreign currency capital gains are tax of 26 percent. Gains are calculated as the difference between the purchase price and the exchange rate value at the end of the financial year. If a cryptocurrency wallet holds more than 51,645 euros ($60,000) for more than seven consecutive days in a calendar year, then a taxpayer is liable for 26 percent tax on any gains made between the purchase price and the exchange price at year end. But, because the Italian government hasn’t issued a definitive law explaining its tax stance for cryptocurrency, all positions up to this point could still be contested.
liechtensteinHow Bitcoin is Viewed:Cryptocurrency currently does not have an official status nor definition in Liechtenstein. Unofficially, according to Financial Market Authority of Liechtenstein (“FMA”), cryptocurrencies are private, purely virtual currencies that are not subject to any control authority and are usually implemented using a blockchain.
Exchanges:Since cryptocurrencies are not officially deemed as currency, they are not subject to any licensing requirement in Liechtenstein.However, there may be licensing requirements depending on the specific business model, particularly if ICOs are involved. Such cryptocurrencies may constitute financial instruments subject to financial market law in Liechtenstein.
ICOs/Security:In September 2017, the Financial Market Authority Liechtenstein (FMA) published a fact sheet on ICOs, which stated that depending on their specifications, tokens may constitute financial instruments subject to financial market law. This may include tokens that have characteristics of equity securities or other investments. In principle, activities relating to financial instruments are subject to licensing by the FMA on the basis of special legislation and may require publication of a prospectus. In all cases, the specific design and de facto function of the tokens are decisive. Any AML/KYC obligations also depend on the specific design. Connecting factors for FMA jurisdiction exist, for instance, if a company’s registered office or branch is in Liechtenstein and/or if relevant activities are pursued on the Liechtenstein market.
Tax:Liechtenstein offers a favorable tax system with modest tax rates for issuers of tokens (typically using foundation structure or a special purpose vehicle), for ICO entrepreneurs and for investors. Careful structuring of the ICO is necessary to manage potential issuance stamp tax consequences (in case of issuance of equity tokens) as well as VAT and corporate income tax consequences (in case of issuance of utility tokens). Since there is no gift tax in Liechtenstein, employing a charitable foundation structure is an option which is worth considering in detail. Taxation of ICO entrepreneurs and investors domiciled in Liechtenstein depends on the categorisation of a specific token. Capital gains on digital currency tokens should generally be exempt from income tax (due to taxation of notional income from wealth instead of effective investment income).
luxembourgHow Bitcoin is Viewed:Although not officially considered to be legal tender, Finance Minister Pierre Gramegna, has commented that given their widespread use cryptocurrencies should be “accepted as a means of payment for good and services”.
Exchanges:Cryptocurrency exchanges in Luxembourg are regulated by the Commission de Surveillance du Secteur Financier (CSSF), and new crypto businesses must obtain a payments institutions license if they wish to begin trading. Licenses involve AML/CFT reporting obligations under Luxembourg’s “electronic money” statutes. The first license was granted in 2016 to Bitstamp which trades in a range of currencies, including USD, EUR, bitcoin, and ethereum – and passports into EU member-states.
ICOs/Security:The CSSF provided some further clarity on their regulatory position in March 2018 when they released a five page document warning against a number of risks associated with cryptocurrencies. The risks cited by the CSSF included price volatility, no guarantee of value unlike fiat money, potential liquidity shortages and the use of cryptocurrencies for criminal activity. The document also provides links to various warnings issued by various european regulators, as well as recommending a european or international approach to regulating cryptocurrencies. Despite their initial positive approach to cryptocurrencies, it is likely that Luxembourg will adopt EU legislation on cryptocurrency regulation.
Tax:In the summer of 2018, authorities issued advice on the tax treatment of cryptocurrencies which, in a business context, depends on the type of transaction involved. the Luxembourg tax authorities also released two circulars aimed at clarifying the direct tax and VAT treatment applicable to cryptocurrencies. The introduction of Circular of 26 July 2018 (No. 14/5 - 99/3 - 99bis/3) states that a cryptocurrency is not a currency. A cryptocurrency is not legal tender and its value is not monitored by any central bank. It is therefore an intangible asset for direct tax purposes, meaning that the Luxembourg tax authorities will not allow a company to draw up its financial statements or file its tax return in cryptocurrencies. The circular also states that when a cryptocurrency is used as a form of payment, it does not affect the nature of the income. When income is derived from disposing of the cryptocurrency itself, an assessment needs to be conducted to determine whether the derived income is commercial income or another form of income.
maltaHow Bitcoin is Viewed:Cryptocurrencies are NOT considered investment instruments in Malta.
Exchanges:Cryptocurrencies are currently unregulated under Maltese law and exchanges of cryptocurrencies are deemed equivalent to commodity trading. A company utilizing cryptocurrencies isn't required to obtain a license from the Malta Financial Services Authority unless it qualifies as a collective investment scheme or carries on the business of a financial institution or payment service provider, in which case the company would need to be appropriately licensed under the Financial Institutions Act.
ICOS/SECURITY:ICOs are governed under the Virtual Financial Assets Act 2018. Under the act, ICOs are legal but issuers of ICOs are required to disclose full details of their financial history.
Tax:Maltese has no tax legislation regulating cryptocurrencies as a medium of exchange. Only if the sale of cryptocurrency is done on a habitual basis and/or the length of ownership is very short, the consideration of the sale may be considered as being income and therefore subject to income tax at 5%. Additionally, transactions to exchange fiat currencies for units of cryptocurrency and vice versa are exempt from VAT.
netherlandsHow Bitcoin is Viewed:Cryptocurrencies are considered "barter".
Exchanges:Because cryptocurrencies are considered barter, those engaged in crypto-related business have no need to license their activities or meet any sort of compliance regulations.
ICOS/SECURITY:According to the financial services regulatory authority for the Netherlands, the Authority for the Financial Markets (AFM), "not all crypto-tokens are securities".
Tax:Cryptocurrency transactions are taxed according to one's basic income tax rates. Any gains or losses from cryptocurrency trading are considered a ‘business activity’ and taxed as business income. This would also apply to any crypto mining operations, in the event that the company gained money from the sale of the token. The tax laws for individuals in Holland are more nuanced. If a Dutch citizen or resident holds cryptos as an asset, the tax owed will be based on whether or not the assets form a ‘source of income’ to the individual. When cryptos aren’t taxed based on the ‘source of income’ code, they will likely be taxed as savings or investments, at a flat rate. Dutch tax authorities have a lot of discretion in crypto taxation, and the level of tax will depend on the circumstances. The Netherlands doesn’t apply VAT to cryptos.
portugalHow Bitcoin is Viewed:Presently, there are no specific laws or regulations in Portugal directly addressing digital token sales, but Bank of Portugal and the Portuguese Securities Market Commission (CMVM) have issued several statements regarding the risks of acquiring cryptocurrencies and investing in ICO’s. Currently, cryptocurrencies are not viewed as legal tender and do not qualify as fiat currency.
Exchanges:Although there are no formal rules, entities (exchanges) engaging in cryptocurrencies are required to undertake identification procedures and KYC due diligence where there is an occasional transaction of 15,000 euros or more.
ICOS/SECURITY:An ICO could be considered a public offering of a financial instrument, since the token itself might fall under the scope of “securities”, according to the current Portuguese legal framework. Accordingly, prior to issuing an ICO in Portugal, an issuer should first seek guidance from the CMVM.
Tax:On the 16th of January 2018, the Portuguese Tax Authority issued a binding ruling under which it stated that any gains derived from cryptocurrencies trading should not be considered income for personal income tax purposes to the extent that such activity does not constitute a business or professional activity. According to the ruling, the gains derived from the sale of cryptocurrencies are not considered capital gains or any form of investment returns, such as dividends or interest, under the definitions of the Portuguese personal income tax. As a result, trading cryptocurrencies as an occasional activity is a non-taxable event. On the 23th of March 2018, the Portuguese Tax Authority issued a binding ruling under which it stated that any transaction containing a token that might be similar to Bitcoin may be considered an onerous transfer of goods and, thus, prima facie liable to VAT. Nevertheless, according to the ruling, the transfer of a token which is exclusively used as an alternative payment method, due to its characteristics and functions, may fall under the VAT exempt for transactions concerning currency, banknotes, and coins used as legal tender. The Portuguese Tax Authority considered that the VAT exemption may also apply in other EU Member States since VAT is a harmonized system.
spainHow Bitcoin is Viewed:Cryptocurrencies are not considered legal tender in Spain.
Exchanges:All businesses dealing in cryptocurrencies are subject to money laundering supervision.
ICOS/SECURITY:ICOs fall under Spanish Stock Market Law (LMV)
Tax:For people that are required to pay taxes in Spain, cryptos held for investment purposes are treated like any other capital asset. Once they are sold at a profit, the gains are taxed at 23% if held over a year and anywhere from 24.75% - 52% if sold within a year. Corporations pay a flat rate of 25%. Both individuals and companies have to pay taxes on any capital gains realized from mining. There is no specific guidance on crypto and VAT from Spanish tax authorities, but most crypto transactions are outside of the scope of VAT laws, and aren’t subject to VAT. In October 2018, Spain introduced a draft law that would make cryptocurrency reporting mandatory and calling for steep penalties for failing to report.
swedenHow Bitcoin is Viewed:Cryptocurrencies are considered legal tender. Digital currencies are treated as assets - not currencies. In fact, Sweden is practically a cashless society. Many stores abstain form cash payments. It was reported in November 2018 that the amount of cash in circulation in Sweden is equivalent to a paltry 1% of the country GDP. Sweden's central bank is considering launching its own digital money, the e-krona.
Exchanges:For certain businesses interacting with fiat (mainly exchanges) the current regulation dictates that an application for approval/license must be filed and all the AML/CTF and KYC regulations applicable to more traditional financial service providers must be followed.
ICOS/SECURITY:Currently, ICOs in Sweden are described as investment products which are legal and can be traded.
Tax:Because cryptocurrencies are treated as assets in Sweden, they are subject to capital gains tax. If cryptos are sold at a profit, it is considered a taxable event. If cryptos are held as a business asset, and gains from their sale, or income derived from their leasing would also qualify as business income. Crypto miners in Sweden are subject to the same laws that govern other businesses, which means that any cryptos that are sold would be considered business income. If an individual mines cryptos, they would be subject to similar laws, and would have to pay capital gains if and when their mined cryptos are sold. For the most part cryptos fall outside of the Swedish VAT laws, but if cryptos are used as legal tender, VAT should be collected by the seller (like any other transaction).
switzerlandHow Bitcoin is Viewed:Bitcoin is officially characterized as a foreign currency. Swiss Federal Railways, government-owned railway company of Switzerland, sells bitcoins at its ticket machines.
Exchanges:Bitcoin businesses in Switzerland are subject to anti-money laundering regulations and in some instances may need to obtain a banking license.
ICOS/SECURITY:ICOs are legal and regulated under the Swiss Financial Market Supervisory Authority (FINMA). Each ICO is examined on the economic function and purpose of the offering. FINMA recognizes the distinction between Payment tokens / cryptocurrencies, Utility tokens and Asset tokens.
Tax:Switzerland applies the Swiss Wealth Tax to any crypto assets, and is currently working on a more comprehensive tax code for the emerging asset class. Crypto ownership must also be declared on annual tax forms. Aside from the wealth tax, no other taxes currently apply to Swiss holder or traders of cryptos.
United kingdomHow Bitcoin is Viewed:Not legal tender. As of 2017, the government of the United Kingdom has stated that bitcoin is unregulated and that it is treated as a 'foreign currency' for most purposes, including VAT/GST. Bitcoin is treated as 'private money'.
Exchanges:Cryptocurrency exchanges in the UK generally need to register with the Financial Conduct Authority (FCA) – although some crypto businesses may be able to obtain an e-license, instead. Although it doesn’t make special provisions for exchanges, FCA guidance stresses that entities engaging in crypto-related activities which fall under existing financial regulations for derivatives (like futures and options) require authorization. In early 2018, an industry body called CryptoUK formed to self-regulate the cryptocurrency industry, with the aim of improving industry standards and to engage policymakers. They have proposed a twelve point code of conduct which includes the provision of AML and security measures, as well as ensuring all customer funds can be paid out in the event of insolvency.
ICOS/SECURITY:The UK is still "studying" virtual currencies. A 2018 Treasury Committee report identifies the issuance of ICOs and crypto-exchanges as the two primary activities that should be regulated. So far, the FCA has decided that utility tokens are not securities within their jurisdiction, regardless of functionality, and that ICOs are more akin to crowdfunding. The United Kingdom’s Financial Conduct Authority (FCA) released a ‘consultation paper’ on 1/23/19 as part of its next step on working with crypto assets. It sets out details on where different types of crypto assets might fall in the regulatory perimeter. This consultation paper allows the public to give feedback on the proposed measures that the FCA is taking in regards to classifying and regulating cryptocurrencies. The consultation phase will close on 4/5/19.
Tax:Depending on the circumstances, crypto transactions are taxed either by an income tax or a capital gains. Gains have to be computed when a disposal is made e.g. the exchange or sale of cryptocurrency in sterling or any other fiat currency. Further examples: when exchanging for another cryptocurrency, when exchanging for goods or services, when gifting the cryptocurrency. Mining as part of a business will have to pay corporation tax at the standard rate of 20%. Individuals are required to pay capital gains tax on any profits made from cryptocurrency investments. Chargeable gains can be reduced with losses from the year. Moreover, a loss can be carried forward to set against chargeable gains in future years. It should be noted that each person has an allowance of £11,300 per year which is tax-free. VAT will be due in the normal way from suppliers of any goods or services sold in exchange for bitcoin or other similar cryptocurrency.
How Bitcoin is Viewed:Cryptocurrencies are considered a commodity and are not currently legal tender in Canada. Only the Canadian dollar is considered official currency in Canada.
Exchanges:New regulations imposed by Canada will class cryptocurrency exchanges as Money Service Businesses (MSBs) and will tighten client due diligence processes and reporting obligations. Exchanges will be required to obtain KYC from their customers for all transactions over $1,000 CAD, whilst all large transactions exceeding $10,000 CAD will need to be reported to the regulator and exchanges will need to keep a “large virtual currency transaction record”.
ICOs/Security:In August 2017, the Canadian Securities Administrators (CSA) issued a notice on the applicability of existing securities laws to cryptocurrencies, and in January 2018, the head of Canada’s Central Bank characterized them “technically” as securities.
Tax:In 2013, the Canadian Revenue Agency (CRA) declared cryptocurrencies are “commodities” under Canadian law. As such, cryptocurrencies will either be taxed as business income or as a capital gain (or business loss and capital loss, respectively). Canada levies a 50% capital gains tax that would apply to any crypto transactions. This tax would only apply to buy-and-hold investors. High-volume traders could be considered a business by the tax authorities in Canada, and would have to file their taxes accordingly. Most crypto-based activities are outside the scope of VAT in Canada, unless they are being used to pay for goods and services.
How Bitcoin is Viewed:Cayman has no blockchain-specific regulations.
Exchanges:Regulators have hinted that they have been waiting for greater regulatory certainty to be established globally before making their own stance clear.
ICOs/Security:In April 2018, the Cayman Islands Monetary Authority (CIMA) issued a press release warning against the potential risks associated with ICOs and all existing virtual currencies. CIMA urged the public to thoroughly research virtual currencies and the entities behind them in order to establish the facts around each product before investing. The document lists nine different risks associated with cryptocurrencies, including market volatility, lack of regulation, vague information surrounding certain ICOs, potential for terrorist financing and money laundering concerns.
Tax:The Cayman Islands is most famous for: being a zero tax regime. Or as their PR team puts it, ‘tax neutral’. This means that there is no tax on personal or corporate income, capital gains, dividends, wealth or inheritance.
How Bitcoin is Viewed:In March 2019, Mexico’s central bank, Banxico, has issued a series of proposed fintech regulations that, if passed, would have an impact on the country’s burgeoning cryptocurrency and blockchain technology sectors.
Exchanges:Banxico is likely to seek to expand the scope of its regulatory authority, requiring that all companies wishing conduct transactions in cryptocurrencies or provide any cryptocurrency-related services apply for a permit from the regulator. Banxico’s cryptocurrency-related proposals suggest creating a regulatory system similar to the one currently it uses for conventional electronic payment-related companies.
ICOs/Security:ICOs are considered virtual assets and subject to governance under the nation’s FinTech Law.
Tax:Because Mexico has not provided clarity on whether it views cryptocurrencies as property or currency, Mexico's tax system currently lacks clarity with respect to how cryptocurrencies are taxed.
How Bitcoin is Viewed:Not considered legal tender. It’s hard to find a consistent legal approach to cryptocurrencies in the United States. Laws governing exchanges vary by state, and federal authorities actually differ in their definition of the term ‘cryptocurrency’. The Financial Crimes Enforcement Network (FinCEN) doesn’t consider cryptocurrencies to be legal tender but since 2013 has considered exchanges as money transmitters (subject to their jurisdiction) on the basis that tokens are “other value that substitutes for currency”. The IRS, by contrast, regards cryptocurrencies as property – and has issued tax guidance accordingly.
Exchanges:Cryptocurrency exchange regulations in the US are presently unclear, and several of the federal regulators claim jurisdiction. In March 2018, the Securities and Exchange Commission (SEC) it stated that it was looking to apply securities laws comprehensively for digital wallets and exchanges. By contrast, The Commodities Futures Trading Commission (CFTC) has adopted a friendlier, “do no harm” approach, describing bitcoin as a commodity and allowing cryptocurrency derivatives to trade publicly.
ICOs/Security:No formal regulatory structure; however, Jay Clayton, the Chairman of the U.S. Securities and Exchange Commission has stated publicly that every ICO he has seen would constitute a security but that bitcoin and ethereum would not. In April 2019, the SEC, Division of Corporate Finance, has issued its first No-Action letter to TurnKey Jet pertaining to the issuance of a token that is considered not to be a regulated security.
Tax:Cryptocurrencies are viewed as property and tax as such on a federal level. Read more here.
How Bitcoin is Viewed:Brazil’s tax authority, the Receita Federal announced in 2014 that the government does not view Bitcoin as a currency.
Exchanges:Brazil continue to debate over how to regulate cryptocurrencies.
ICOs/Security:In January 2018, Brazil’s securities regulator prohibited investment funds from buying cryptocurrencies.
Tax:Brazilian legislators have characterized crypto as an “asset,” not a currency. Accordingly, Brazilian crypto users face a 15% capital gains tax on their profits.
How Bitcoin is Viewed:With the nation in economic chaos, cryptocurrencies have become an attractive alternative to the national currency, with the use of Bitcoin, Dash and other cryptos reportedly rising across the country.
Exchanges:The cryptocurrency industry in Venezuela is regulated by the National Superintendency of Cryptoassets and Related Activities (Sunacrip). Cryptocurrency exchanges are required to obtain a licence from Sunacrip in order to conduct business in Venezuela. If any crypto-related company violates the licensing rules or fails to properly register with Sunacrip, its owners can be punished with up to one to three years in prison, and fined 50 to 100 sovereign crypto assets ($3,000 to $6,000).
ICOs/Security:In 2018, the President of Venezuela announced the implementation of a cryptocurrency system called “Petro”, which is backed by the natural riches of the nation such as gold, oil and gas, amid an economic crisis and a plunge in the value of the bolivar.
Tax:Earlier this year the Venezuelan government decreed that anyone who deals in cryptos must pay whatever taxes they owe in cryptocurrency, as the Venezuelan government needs help raising funds. The decree didn’t give any guidelines on whether or not crypto holders or traders have to adhere to a different set of tax laws, so it is safe to assume that they will be taxed like any other asset or business.