Cryptocurrency Regulations Around the World 2021

Cryptocurrency has massive potential to grow exponentially in the near future, especially as governments have started looking into digital currency as viable means for transactions–partly due to the pandemic. Around the world, the demand for coins as currency or assets has penetrated the high-end investment sphere. It has attracted billionaires, including the likes of Bill Gates, and even Hollywood’s beloved stars–from Johnny Depp to Snoop Dogg. The latter was known for selling his album at 0.3 BTC each in 2013 when 1 BTC was approximately $1,000. His $3 would be approximately $11,000 today. 

Despite seeing cryptocurrency headlines in your news feed on the daily, countries have polar feelings about coins. Not all nations have treated it with enough warmth to allow its legal ownership or transactional use. Snoop Dogg’s move to sell albums for BTC in 2013–8 years ago–would have still raised national alarms in some countries today. 

It’s important to know where you can legally own cryptocurrency and what kind of transactions you can make with them. It’ll help you weigh in on coins from a global perspective and give you an idea of usage restrictions on the occasion that you travel or relocate overseas. 

Asia 

Asia is relatively fragmented in terms of cryptocurrency acceptance. While developing countries have already imposed laws and regulations concerning coins, most of the third-world are yet to take a stance in the evolving digital currency landscape. 

Some Asian countries fall under a category where cryptocurrency is technically not illegal, but they can’t be used to buy or sell commodities. These include Indonesia, Vietnam, and Cambodia, where you can freely trade cryptocurrency in exchanges, but not in the retail scene. Over in West Asia, cryptocurrency is also technically legal in Saudi Arabia and Jordan, but governments have discouraged their use and have disallowed banks to facilitate related transactions. 

Japan

Japan is one of the largest cryptocurrency markets in the world–specifically for Bitcoin. It owns a considerable percentage of the coin’s daily trading volume, with over 3.5 million active traders in the country. It’s one of the few governments that openly recognize cryptocurrency as legal tender, which means that you can use it for transactions as a replacement for fiat money (though very few merchants accept it at the moment). 

After the 2014 Mt. Gox incident, where over 800,000 BTC disappeared after a long-term hacker took off, Japan rolled out a national system to regulate cryptocurrency trading. Exchanges need to have a license to legally operate within the country. 

Under the Payment Services Act, cryptocurrency is treated as property and can be legally purchased, sold, or exchanged. In 2017, the National Tax Agency declared that any crypto-based profit is considered miscellaneous income, subject to a tax rate of up to 55% based on your income bracket. 

Singapore

Singapore has a relatively relaxed cryptocurrency environment, having found a balance between acceptance and regulation. It only recently rolled out the Payment Services Act (in January 2020), which requires crypto-related businesses to obtain a license from the Money Authority of Singapore (MAS) to operate. 

The country doesn’t recognize cryptocurrency as legal tender, so it isn’t a taxable asset. However, anything you purchase using cryptocurrency will be subject to the Goods and Services Tax, which amounts to about 7%. 

China

The People’s Republic of China (PRC) doesn’t ban anyone from holding onto and investing in cryptocurrency. However, initial coin offerings (ICOs), which are released as a fundraising strategy for new cryptocurrencies, have been illegal since 2017. The PRC is one of the strictest countries that have rolled out this ban. They have also blocked access to some international exchanges and restricted local exchanges from operating. Banks aren’t allowed to facilitate trading, buying, selling, and any other transaction related to cryptocurrency. In 2019, there were talks of the country eliminating Bitcoin mining as well. 

While cryptocurrency is technically not illegal in the PRC, they aren’t considered legal tender and can’t be used for retail transactions. They are strictly investment assets but are difficult to legally purchase. The country has also been developing its own cryptocurrency to challenge Bitcoin. It went through a pilot program in 2020 and is expected to undergo a large-scale test in the 2022 Olympics. 

Americas 

The North American region has largely accepted the use of cryptocurrency. However, some smaller nations in Southern America are yet to see the light in cryptocurrency. While they may not be huge fans of these blockchain-backed assets, it’s important to note that they aren’t necessarily against the concept of digital or electronic currency.  

United States

The US is home to approximately 22.6% of the Bitcoin market, so it’s no doubt that cryptocurrency is legal in the country, but with minor limitations. As of January 2021, coins are still not recognized as legal tender. Technically, a legal tender refers to a currency that the law recognizes to pay off monetary debt. While coins aren’t legal tender, it doesn’t mean that you can’t transact with them. Buying, selling, trading, and using cryptocurrency doesn’t have consequences in the US. However, on the occasion that you were scammed after not receiving an item purchased with crypto, the court won’t protect you. 

Under the Internal Revenue Service, Bitcoin is considered a property and is subject to property tax, which varies per state. Exchanges are allowed to operate in the country but must first obtain a money transmitter license. In September 2020, 48 states agreed to ease up on the regulations by allowing license holders from one state to operate in other participating states. 

Canada

Canada allows the use of cryptocurrency but doesn’t consider it as legal tender. They can be purchased, sold, or traded and exchanged for products and services. If you purchase an item with crypto, it will be considered a barter–a transactional exchange between two individuals without the use of legal currency. 

All barters must be issued the Form 10990-B (Proceeds from Broker and Barter Exchange Transactions) annually and reported to the Internal Revenue Service. These will also be subject to an income tax of 15-26%. Anything purchased or sold with cryptocurrency will also incur a Goods and Services Tax of 5%. 

Note that in 2018, the Toronto Dominion and Bank of Montreal banned their credit and debit clients from purchasing cryptocurrency with cards issued by the former two. However, at the start of 2020, the Bank of Canada and other major central banks have started looking into digital currency–a sign that the financial sphere is easing up on the idea of coins as well. 

Mexico

Mexico is one of the frontrunners in the cryptocurrency boom, as it has welcomed Bitcoin and various altcoin into its financial sphere. The country saw a 342% boom in trading volume in its major crypto exchange, Bisto, between the 3rd quarter of 2019 to the second quarter of 2020. The growth was largely due to strict and expensive online fintech laws that have turned away even major third-party intermediaries such as Paypal. Cryptocurrency became one of the easiest ways to transfer funds online. 

Despite cryptocurrency’s relevance in Mexico, it still isn’t considered legal tender, but rather a virtual asset that serves as a representation of value. As of January 2021, Mexico hasn’t rolled out an official tax framework for trading cryptocurrency, though its high trading volume may result in the implementation of one soon. 

Venezuela

Cryptocurrency has been legal in Venezuela since 2018. It’s been a crucial form of alternative currency to counter the inflation of bolivar. The country recently passed a mining law where miners must be part of the National Digital Mining Pool. Venezuela is one of the top Bitcoin mining territories in the world. 

While there have been no reports of crypto taxation in Venezuela, it isn’t advisable for investors to flock to the country to trade, as it’s plagued by political and economical crises. 

Europe 

In September 2020, the European Commission announced plans to regulate cryptocurrency. However, they recognize that the future of finance lies in the digital sphere, and are rolling out regulations to protect investors and legalize coin-related companies and exchanges. One of their goals is to unite the European cryptocurrency landscape so that a company authorized by one of the 27 EU countries can operate in other member states as well.  

However, it’s important to note that the EU’s view of stable coins is lukewarm–they plan to impose tougher restrictions due to controversies related to the asset reserves that back these coins. 

Germany

Germany doesn’t recognize cryptocurrency as legal tender, but using them isn’t illegal in the country. You can use them for any transactions but won’t get government protection from scams, hacks, and other unfortunate circumstances. The Banking Act requires exchanges to obtain a financial services license to operate in the country. 

Cryptocurrency is considered an intangible asset. Sales under 600 euros are tax-exempt, but anything over will incur income tax. Interestingly, investors who “HODL” their coins for over a year can enjoy tax-free capital gains. The system encourages people to jump into cryptocurrency for long-term investment rather than digital currency. 

In December of 2020, the German government passed legislation that embraces blockchain technology in securities. It’s a huge milestone for crypto enthusiasts as a major aspect of its technology, blockchain, has been recognized by the government. 

Spain

The government of Spain has not rolled out any regulations concerning cryptocurrency and related companies. At the moment, it remains as a grey area as there are clear upsides and downsides to this arrangement. First, the government offers no guarantees or safeguards when you decide to participate in crypto transactions. On the flip side, because there aren’t strict regulations, Spain has become a popular investment capital for countries that don’t largely support cryptocurrency, such as Russia. 

Residents of Spain are subject to an income tax for any capital gains earned through cryptocurrency. The percentage varies from 19-23%. 

Russia

Russia notoriously proposed a total cryptocurrency ban but negated that idea in mid-2020. Now, the government is discussing laws that recognize cryptocurrency as property. You would be given the right to retake your assets in court. 

From January 1, 2021, cryptocurrencies are officially legal in Russia, but with strict regulations. The largest being that they cannot be used as currency to exchange for goods and services. Crypto is purely an investment asset that can be mined, traded for other cryptocurrencies in legal exchanges, and held long-term. On the bright side, Russian banks are now allowed to facilitate exchanges, and new cryptocurrencies can be locally issued under the central bank’s supervision. 

As for taxation, Bill No. 1065710-7 was passed to impose a 20% VAT on cryptocurrency if you sell over 6,700 euros worth of assets per year. This move falls in line with Russia treating cryptocurrency as property. 

Oceania 

Australia 

Australia officially legalized cryptocurrency in 2017 but doesn’t consider it as legal tender. Instead, crypto is treated as property and is subject to the Capital Gains tax, which equates to your annual income tax rate. The Australian Transaction Reports and Analysis Centre is responsible for regulating exchanges and initial coin offerings (ICOs). 

New Zealand 

New Zealand is one of the only countries that treat cryptocurrency exchanges as “money changers” and are subject to the same regulations that apply to the latter. Any financial service related to crypto needs to comply with the Financial Markets Conduct Act 2013. Meanwhile, cryptocurrencies themselves are considered property–for tax purposes. 

In August 2019, New Zealand became the first country to legalize salary payments made in cryptocurrency, but with the following conditions: 

• Must be a fixed amount

• Must be regularly paid (it cannot be a one-off arrangement) 

• Can only be used to pay salaries under an employee agreement

Only cryptocurrency pegged to at least one traditional currency and can be directly converted to traditional currency is allowed in this arrangement. Essentially, employers can only pay their employees with stable coins. These are treated as pay-as-you-earn (PAYE) income payments and are taxed from 10.5-33%, depending on income margin. 

Africa

Cryptocurrency is completely banned in Northern Africa, which is home to Algeria, Egypt, and Morocco. However, the rest of the continent has either made cryptocurrency legal (as an investment only or for retail) or hasn’t spoken up about their stance. 

Countries Where Cryptocurrency is Illegal 

Some countries have taken a more traditional stance against the usage and ownership of cryptocurrency. It’s pertinent not to get involved in any coin transactions in these areas as a misstep can land you in prison or under the watchful eye of authorities. 

Africa 

• Algeria

• Egypt 

• Morocco

South America

• Bolivia

• Ecuador 

Asia

• Saudi Arabia

• Iran 

• Nepal

• Pakistan

Countries Where Cryptocurrency is Tax-Free 

Some countries haven’t rolled out any cryptocurrency ownership or trading regulations, which means that you can freely earn or trade without worrying about taxes. They’re golden fields where you can score big bucks (with the right investment and buying strategy) with no deductions. 

However, note that with the increasing popularity of cryptocurrency and blockchain technology, any of the following countries can change their stance on crypto taxation. 

Europe

• Germany – Only tax-free after 1 year of holding cryptocurrency assets, and only for individuals. Businesses are not exempt from taxes. 

• Switzerland – Tax-free capital gains make it a great place for investors to earn, but mining is taxed through self-employment income (maximum of 40%). 

• Slovenia – Capital gains are not taxable, but using cryptocurrency in business activities is taxable through corporate tax (19%). 

• Malta

• Cyprus

Europe/Africa

• Portugal 

Americas

• Mexico – Its high trading volume makes it a target for taxation in the near future. 

Asia 

• Singapore – Products purchased with cryptocurrency are subject to the 7% Goods and Services Tax. 

• Malaysia

Is it Possible to Trade Cryptocurrency Outside of My Country of Residence? 

There is no way to trade cryptocurrency without a legal ID from your country of residence. In some countries, such as South Korea, even foreigners with legal residency may not be allowed to trade as a measure to mitigate crime. 

There is, however, one way to bypass that rule–but it only applies to some countries. If you’ve never heard of the golden visa, it’s essentially citizenship granted to people who make a substantial monetary or property investment in their country of choice. It’s a method that allows you to obtain permanent residency in a foreign country without committing to years of settling in. The best part is that your immediate spouse and family will also receive residence permits as long as you maintain the investment. 

In October of 2020, Portugal announced that they would start accepting major cryptocurrencies, such as Bitcoin, Ethereum, Ripple, Monero, and Dash, for property purchases toward obtaining a golden visa. Major countries in the EU, including Switzerland, also have substantial citizenship-by-investment programs that you may want to consider if you want to benefit from their tax-free cryptocurrency market. 

Summary 

While cryptocurrency is legal in most countries, they’re still riddled with strict regulations and do’s and don’ts that make it challenging for coins to achieve mass adoption. A common trend among third-world and developed countries is accepting cryptocurrency as an investment asset, but not as a digital currency. 

Some countries have also disallowed banks from facilitating any cryptocurrency-related transactions, so interested individuals would have to find creative ways to work around the legalities to make it to the exchanges. That usually involves hiring a broker, which may come with expensive fees. 

In general, cryptocurrency still has a long way to go before mass adoption becomes a possible dream–and the first step starts with government-ruled acceptance. There has been massive progress in the past year, especially with Russia, a major market, easing restrictions. As governments continue to study the nature of digital currency, it’s now a waiting game for positive news to come around soon.