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Is Bitcoin Legal? Scouting Bitcoin’s Legal Landscape Around the World

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The rollercoaster of events in cryptocurrency last year has been well documented. Who can forget how Bitcoin skyrocketed over the past 12 months? And, how its closest peers followed?

Also, how — during the third quarter of 2017 — the not-so-smitten Chinese regulators dampened the crypto party? This was followed by the equally un-festive grunts coming from nearby South Korea, who contemplated an outright ban.

With cryptocurrency getting put in the spotlight more and more, it’s worth checking its legality around the world.

U.S. government regulations for cryptocurrency

Cryptocurrencies in the U.S. are still legal but each state is handling regulations for it in different matters. New York, for instance, has recently taken a magnifying glass to cryptocurrency exchanges. New York’s attorney general sent an inquiry to 13 cryptocurrency exchanges probing them for information on their practices and operations procedures.

In Wisconsin, the cryptocurrency tide has turned the Badger state into a haven for cryptocurrency businesses and enthusiasts in the U.S. The tide turned when state legislators passed a bevy of bills, including one that exempts certain cryptocurrencies from money transmission laws and securities regulations.

Two other states, Arizona and Georgia, are exploring steps to legalize cryptocurrency as a payment option for taxation purposes. But despite cryptocurrency being legal in the U.S., there are plenty of litigation-related cases involving cryptocurrency. So much so, that one New York law firm has created a list on its website of all the cases currently ongoing in the U.S.

While some states have taken measure, one organization, the Uniform Law Commission (ULC) a non-profit association made up of 350 commissioners established in 1892 that provides states with non-partisan legislation to critical areas of state statutory law, released a two-year study in 2017 that attempts to unify cryptocurrency regulations across the U.S.

The result was the Uniform Regulation of Virtual-Currency Business Act. It reads as follows:

The Uniform Regulation of Virtual-Currency Businesses Act (URVCBA) provides a statutory framework for the regulation of companies engaging in “virtual-currency business activity”. Virtual-currency business activity means exchanging, transferring, or storing virtual currency; holding electronic precious metals or certificates of electronic precious metals; or exchanging digital representations of value within online games for virtual currency or legal tender. The URVCBA’s unique, three-tiered structure clarifies whether an individual or company engaging in virtual currency business activity is (1) exempt from the act; (2) must register; or (3) must obtain a license. The URVCBA also contains numerous consumer protections.

At present time, only three states — Nebraska, Hawaii, and Connecticut — have introduced the bill to their respective congress but they’ve yet to be voted on.

Canada’s cryptocurrency law

Out of most countries, Canada’s laws regarding cryptocurrencies are straightforward. The digital currency is legal but only to trade and not for payments. The cryptocurrencies are regulated by Bill-C31, which was approved by Canadian parliament in 2014. Canada’s Revenue Agency (CRA) treats cryptocurrencies as commodities which means that transactions are treated as barter, and income generated from trading or transactions activities are considered business income.

Japan bitcoin regulations

Japan made news in 2017 when it passed a law that declared bitcoin legal tender. In doing so it became the first country to do so. Because of this, Japan has become a haven for companies and enthusiasts that dabble in the digital currency. Japan has a reported 3.5 million cryptocurrency investors, according to a report from Japan’s Financial Services Agency (FSA). That number equates to about 2.8 percent of Japan’s population.

One company, GMO Internet Group, has taken cryptocurrency a step further and announced that it’s possible to for its employees to receive part of their paycheck in Bitcoin.

However, because of Japan’s affinity for cryptocurrencies, companies and coin exchanges must abide by anti-money laundering and know-your-customer rules. And this has caused a large number of exchanges to cease operation. In March 2018, two exchanges, Mr. Exchange and Tokyo GateWay, closed up shop and joined fellow Japanese exchanges Raimu, bitExpress, and Bit Station in halting operations.

The exchanges shutting down are a result of Japan tightening restrictions in regards to cryptocurrency exchanges. Japan’s FSA has also established a cryptocurrency industry group that will examine institutional issues regarding cryptocurrency and other assets.

Australia cryptocurrency laws

Australia, much like Japan, announced in 2017 that cryptocurrencies will be considered legal tender. It also added that by making it legal tender, it will no longer be subjected to double taxation. In the country’s 2017-2018 budget summary, it states that the plan is to make it easier for cryptocurrency businesses to operate in Australia and make sure that sales taxes are only paid one time.

Australia may no the biggest player in the cryptocurrency market but it definitely is playing in the market and slowly climbing to become a larger player. Most recently and perhaps following in Japan’s footsteps once again, the Australian government announced plans to implement new rules on cryptocurrency exchanges.

One of the major rules, according to the announcement released on April 11, is that any exchange doing business in Australia must register with the Australian Transactions Report and Analysis Centre (AUSTRAC) and meet the government’s AML/CTF (anti-laundering and counter-terrorism financing) compliance and reporting obligations.

South Korea cryptocurrency

South Korea (SK) — officially known as the Republic of Korea — shares the Korean Peninsula with the Democratic People’s Republic of Korea (DPRK), aka North Korea (NK).

While NK also makes mainstream headlines almost daily, it’s mostly due to the pre-occupation of their dictator – Kim Jong-un- to blow the US to smithereens; the tyrant told NK’s starving masses during his New Year speech earlier this month that “the nuclear button is always on his desk”.

In stark contrast though, SK seems more focused on innovation; creating and manufacturing useful things, rather than pointing missiles at them. Huge global brands, such as Samsung, Hyundai, and Kia, to name but a few, call SK home.

South Korea is one of the world’s most wired societies; backed by –officially- the fastest Internet available on the Planet, over 92% of the Nation’s 49 million people are on the Web. No wonder that Seoul –the Country’s capital- is also dubbed “the bandwidth capital of the world”.

And, South-Koreans have gone absolutely crypto-gaga. One in every fifty residents are registered crypto traders; in addition to the mega online dealing taking place, purpose-built, walk-in exchanges also exist, where investors can conduct transactions in person.

Furthermore, SK is the largest exchange market in the world for Ether (ETH); and, third for Bitcoin, only after the US and Japan. And, two of the largest exchanges –Bithumb & Coinone- call SK home.

South Korea’s corporate citizens are also huge crypto fans. For instance, during 2017, the parent company of video games heavyweight, Nexon, acquired SK crypto exchange, Korbit; Samsung joined the Enterprise Ethereum Alliance and Seoul-based Shinhan Bank launched a new bitcoin remittance service to China.

During the year, SK also saw its first initial coin offerings (ICOs); fintech company Blockchain OS launched its BOScoin, which sold out in 9 minutes; ICON successfully launched its ICX token, followed by Glosfer.

So, how did the SK government respond? Perhaps, like a cat on a hot tin roof, one might say. Or, as Forbes puts it, “South Korea has become a stage for the clash between conservative regulators and thrill-seeking investors”. Although they had already formed a task force in November 2016 to survey crypto trends, they only fired the first proverbial shot over the bow of digital currency nine months later.

Government watchdog -the Financial Services Commission (FSC)- announced in early September that crypto regulation is on the cards. But, after Bitcoin skyrocketed globally, and mega Chinese money started to flow into SK -following the ban in China- the FSC upped their game a couple of notches, even before the month was through.

In stock-standard rhetoric –peppered with verbiage on crypto Ponzi schemes, ICO hoodlums and, yes, even bitcoin marijuana- official statements from the FSC came thick and fast; including, threats of outlawing ICO’s, although nothing has come of it, yet.

Following a ceasefire over the holidays, well-rested SK government officials returned to their desks earlier this month. Not wasting much time to bring out the armory, Justice Minister Park Sang-ki said last week that the government was preparing a bill to ban trading via cryptocurrency exchanges. And, following the statement, officials summarily raided the facilities of Coinone and Bithumb.

However, other Government representatives weren’t necessarily impressed with his conduct; Finance Minister Kim Dong-yeo called instead for “more coordination among ministries” on the crypto issue and President Moon Jae-in warned, confusion among different government departments is “not desirable and seen as if they are in discord and inconsistent”.

In the meantime, a petition with 212,700 signatures against covert regulation, was lodged on the Presidential website by crypto evangelists this week. Because it exceeds the required minimum of 200,000, officials are expected to react in the next 30 days.

In the meantime, crypto activity in South Korea is anything but illegal. A recent headline by Tech Crunch, “South Korea may or may not ban bitcoin exchanges and that’s the news”, says it all.

China cryptocurrency

Shifting the spotlight to China, the situation is perhaps more cut-and-dried, as most on-shore cryptocurrency activity is officially banned.

The systematic crackdown already started in 2013, when regulators warned that Bitcoin had no “real meaning”, and barred financial institutions from using or owning the currency. The ban was quickly extended to third-party payment providers in the Country –such as YeePay- who were given until January 2014 to comply.

But, at the same time, the Chinese Government had quietly assembled their own research team on cryptocurrency. This fact was only acknowledged two years later when, during an official announcement in 2016, the People’s Bank of China (PBOC) said that their research findings were positive; digital currency reduces cost.

2017 proved to be the time of final reckoning, though; Bloomberg reported in February that the PBOC will be launching its own cryptocurrency, no doubt; in fact, they had already done trial runs of the prototype, the article said.

Following that, during September –after what the regulators described as “talks”- all initial coin offerings (ICO’s) in China were outlawed and monies -over $1.1 billion had been raised in more than 65 ICOs- ordered to be paid back to investors.

And, with the same discontent, cryptocurrency exchanges were also summarily closed that month. It is now illegal for Chinese mainlanders to exchange digital money online unless they operate offshore; Forbes headlined during November, “Cryptocurrency Exchanges Officially Dead In China”.

It must be noted, however, that Bitcoin and its peers can still be traded in China, albeit only in over-the-counter markets, a slower process that some analysts say increases credit risk; according to a recent report by Fortune magazine.

As far as Bitcoin mining goes, it is still legal in China. Although, the South China Morning Post reported earlier this month that “China aims to drive cryptocurrency miners out of business by limiting power consumption”; according to unnamed sources, the People’s Bank of China (PBOC) outlined their plan, in this regard, at a closed-door meeting, the newspaper says.

Bitcoin Russia

Over to Russia. To try and understand the official position of this country on cryptocurrency, is like following work-in-progress. But, let’s start in 2016 when Interfax reported that the Ministry of Finance was preparing more stringent amendments to the Criminal Code; effectively meaning that issuers of “money surrogates” could face up to seven years in jail.

Exactly what the definition means, is open to interpretation; but, no cryptocurrency-related arrests were made, until September 2017, when Forbes reported, “Russia Opens First Criminal Case Involving Bitcoin”. However, to be clear, the accused were arrested for alleged money laundering activities; and, not for having Bitcoin as such.

Although there have been huge amounts of conflicting rhetoric in the media, coming from Russian regulators over the past couple of years –and even from President Putin himself- the only certainty on cryptocurrency in Russia, currently, is that you cannot make exchanges between crypto and rubles –the official currency- because the state machine makes sure of that.

Although, just a couple of days ago, Newsweek reported that the Russian Ministry of Finance has drafted a new bill to legalize cryptocurrency trading on organized trading platforms; but, it will need to pass a vote at the federal legislature in February first, the report says. Therefore, the work-in-progress continues.

EU – pioneering a crypto future

As for the European Union (EU), although its stance on cryptocurrency, all along, may be described as accommodative, consultative, or, perhaps, even positive, there has always been a major concern over the anonymity of users; especially, their enhanced ability to hide or mask money-laundering and other clandestine activities through the use of digital currencies.

This fear was underscored by the European Commission, which stated –in 2016 already- that it seeks “to help identify the users who trade in virtual currencies”, as well as an end to “the anonymity associated with such exchanges”.

Fast-forward to March 2017, and the EU Parliament drafted legislation outlining their plans to regulate digital currencies. With transparency as its core theme, the draft describes the empowering of watchdogs, the keeping of databases on crypto users and their wallet addresses, also the ability of national-level financial intelligence gatherers to share that information, once obtained.

In December 2017, Fortune magazine reported that “the amendment is slowly crawling through the legislative process”, and, quoting an unnamed European Commission source, that “it will probably be officially recorded into EU law in a couple months’ time”.

The source further commented that, after the law has passed, crypto exchange platforms and wallet providers in the EU will have “to do due diligence to check where the money comes from and where it goes”, also perform “extra checks” in terms of certain large quantities of virtual cash.

So, that concludes our whirlwind tour for today. Of course, as digital currency gains wider traction and momentum, so will the situations, rules and legislation continue to develop. But, right now, all eyes and ears remain fixated on South Korea; fingers crossed that the petition meets favorable consideration and that positive news reaches the world soon.

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