Here’s a quick guide on blockchain and cryptocurrency legality in different parts of the world
Blockchain technology and its applications, specifically cryptocurrencies like Bitcoin, have seen tremendous growth both in value and in the way various industries have adopted it in the past years. With the rate that blockchain is growing, it’s no longer just a passing trend but an anticipated technology that could potentially revolutionize our very way of life.
As the popularity of cryptocurrencies and blockchain-based applications grow, government institutions and other stakeholders all over the world have taken notice and have paid greater attention to this new technology. In spite of cryptocurrencies being essentially decentralized, a number of steps have been taken by various entities in the effort to regulate the blockchain industry.
Various countries all over the world have adopted certain cryptocurrencies under their own set of rules and guidelines. Here, we’ll cover some of the top countries that treat cryptocurrencies as legal tender, and countries that have restricted its use and trade.
Top 3 Countries Accepting Cryptocurrencies and Blockchain Technology
1. United States
Among the many countries that have a friendly approach to Bitcoin and other types of cryptocurrencies is the United States. In fact, they already have a Virtual Currency Law enacted, which consists of various tax and transparency regulations. Payments made in Bitcoin in the US are subject to the same anti-money laundering regulations as with traditional currencies, and Bitcoin investments are also taxed as property by the IRS.
In 2017, at least 8 states in the United States have worked on bills accepting the use of Bitcoin and other applications using blockchain technology. To date, some of the approved bills are Nevada’s Senate Bill 398, which recognizes and authorizes the use of blockchain technology and smart contracts, and Vermont’s Senate Bill 135, which considers blockchain-notarized documents as legal.
Earlier this year, Ohio and California joined other US states in adopting blockchain-friendly legislations, particularly in strengthening cybersecurity using the blockchain and in authorizing privately held companies to use blockchain technology to record and track the issuance of stock certificates.
Japan is one of the countries in Asia who were quick to embrace cryptocurrencies. In fact, Japan is considered the global leader in cryptocurrency investment. Last year in 2017, the Japanese government, through the Payment Services Act (PSA), legalized the use of cryptocurrencies for payment purposes. To date, Japan officially recognizes 11 companies as registered cryptocurrency exchange operators.
Early in 2018, a group of 18 Japanese brokerage companies joined together to form a consortium to adopt blockchain technology and other emerging innovative technologies into the brokerage industry. Japan Net Bank, the country’s first online bank, recently reported to have tested the application of blockchain technology to offer paperless contract administration services. Prime Minister Shinzō Abe has also recently appointed a pro-blockchain politician as Minister of Science, Technology, and IT. The new minister will oversee official government policy on financial technologies, including blockchain technology.
Canada continues to have a positive stance on Bitcoin and other cryptocurrencies, and on blockchain technology itself. Cryptocurrencies are considered as a commodity by the Canada Revenue Agency (CRA) and are subject to the barter rules of the Income Tax Act. Bitcoin exchanges in Canada are similarly protected by the anti-money laundering laws and are considered as money service businesses.
Earlier in 2018, the Ontario Securities Commission has approved Canada’s first blockchain exchange-traded fund (ETF), providing Canadian investors an opportunity to buy into the emerging blockchain technology market. In September 2018, the first Bitcoin mutual fund, the FBC Bitcoin Trust, gained approval in Canada.
Other selected countries where cryptocurrencies and the adoption of blockchain technology are accepted:
– Czech Republic
– Hong Kong
– New Zealand
– South Korea
Top 3 Countries Restricting Cryptocurrencies and Blockchain Technology
While China may have previously allowed private parties to hold and trade Bitcoins, recent news in 2018 reveals that the Chinese government is taking drastic steps to eliminate all cryptocurrency trading in the country completely. China’s clampdown on all cryptocurrency-related activities has intensified in 2018, including the continuing effort to block out all websites related to cryptocurrency exchanges and onshore and offshore initial coin offerings (ICOs) platforms, in an effort to prevent financial risks. Nevertheless, Chinese traders have found ways to circumvent the country’s strict ban on cryptocurrency trading by using Tether (USDT) and VPN.
However, despite the China’s negative stance on cryptocurrencies, a recent study has shown that five mining pools located in China comprise 74% of Bitcoin hashpower, which may be a looming threat to the security, viability, and stability of Bitcoin. Beijing is also actually in favor of the use and trade of Bitcoins and other digital currencies. The People’s Bank of China is currently looking into developing their own sovereign digital currency.
The State Bank of Vietnam released a statement in late 2017 that all forms of cryptocurrencies are considered illegal means of payment. All methods of payments using cryptocurrencies—including the issue, supply, and use of Bitcoin—are prohibited in Vietnam. Entities that continue to accept payments in cryptocurrencies are subject to face heavy fines.
However, in spite of the government clampdown on the use of cryptocurrencies as a means of payment, cryptocurrency mining isn’t considered illegal. The country is yet to expedite its legal framework on the regulation of cryptocurrencies, particularly on amendments to their tax code in order for the government to tap into the proceeds from virtual property and cryptocurrencies. It was also recently announced that Vietnam will likely have a regulatory sandbox for financial technology, which is also set to be launched within 2018. It was also recently announced that Vietnam will likely have a regulatory sandbox for financial technology, which is also set to be launched within 2018.
Bangladesh is one of the few countries who have taken stringent measures to ban and outlaw any cryptocurrency activity. In 2014, the Bangladesh Bank released a statement that the use of Bitcoin and any other forms of virtual currency is not authorized and legal in the country. Such use are in violation of existing money laundering laws and terrorist financing regulations.
Transacting with any type of decentralized cryptocurrency in Bangladesh is a criminal offense, which can lead to a 12-year imprisonment, consistent with the current Bangladesh anti-money laundering law.
Other selected countries where cryptocurrencies and the adoption of blockchain technology are banned or restricted:
– Saudi Arabia
Countries with a Neutral Stance on Cryptocurrencies and Blockchain Technology
Some countries have neither regulated cryptocurrencies and the use of blockchain technology, nor issued any stance whether they allow it or not. Some of the countries who have a neutral take on cryptocurrencies are the following:
– United Arab Emirates
– United Kingdom
As such with new and emerging technologies, not everyone is ready to embrace the full potential of cryptocurrencies and blockchain technology. With cryptocurrencies being decentralized, there is the risk of having no safeguards against fraud, theft, and manipulation. While such issues are virtually impossible given the secure nature of the blockchain, cryptocurrency technology is still laden with some degree of vulnerability. Blockchain technology and its vast potential is still at its infancy, and while it has its fair share of faults, it’s showing a lot of promise for the future.
– Article written by Tinny