Laws and regulations of cryptocurrency you need to know
- Posted by: ebacrypto
- Category: Cryptocurrency
With the regulations and laws regarding cryptocurrency and Bitcoin continually evolving, it’s imperative to stay informed to avoid any serious implications. Here are a few things you should know.
As cryptocurrency and Bitcoin continue to shape the future of the economy, there are some important points you need to consider before trading, selling or buying it.
For instance, are you aware of the current legislation on cryptocurrency in your country or territory? And did you know the stipulations surrounding taxation on Bitcoin?
Legality by country and territory
Firstly, the legality of cryptocurrencies like Bitcoin varies in every country and territory. While some have accepted its use and trade, some have restricted it in its entirety.
The European Union (EU) continues to follow the developments in cryptocurrency, but has yet to make a definitive outcome on the legality. As a result, most countries within the EU have made their own regulations.
However, this could change next week when a group of EU regulators meet to discuss the regulation of cryptocurrency. The vice president of the European Commission said they’ll be looking “at long-term trends linked to virtual currencies, and examine if current regulation is fit for purpose”.
While a large proportion of European countries haven’t banned it, some have issued warnings. In Finland and Belgium, their governments have classed Bitcoin as exempt from VAT by registering it as a financial service instead of a currency.
The Financial Conduct Authority (FCA) in the United Kingdom has shared a positive viewpoint on Bitcoin and has urged more businesses to support the currency. Although in 2017, the UK government stated that Bitcoin is “unregulated” and a “foreign currency” when it comes to VAT/GST.
Germany legally accepted Bitcoin back in 2013, but continue to alter their tax regulations depending on who is dealing with the currency. In contrast, regulations haven’t been established in Cyprus yet, but despite this, it’s still legal to deal in Bitcoin.
At the end of 2017, Belarus regulated the implementation of blockchain technology and the issue of tokens. The country also exempts activities related to the crypto-economy from the national regulation of the securities and foreign currency markets, thus conferring significant tax advantages. Further information about the relationship between Belarus and the crypto-economy can be found here.
Over the Atlantic Ocean, the United States continues to support cryptocurrency. However, they have several government agencies currently working on finding ways to prevent illegal transactions from occurring. Unlike their neighbours, Mexico just classified Bitcoin as a legal form of currency last year under the FinTech Law.
In Oceania, Australia is completely open to cryptocurrency, allowing businesses to trade, mine and buy the digital currency. In July 2017, they even changed the law so Bitcoin wouldn’t be subject to double taxation.
On the other hand, there are some countries who have banned cryptocurrencies altogether. For example, Algeria is changing their laws this year to prohibit Bitcoin, while Morocco already made it illegal in 2017 – classing it as a financial asset.
Other notable countries that have illegalised Bitcoin include Nepal, Bangladesh, Bolivia, Cambodia, Ecuador and Kyrgyzstan.
Taxing cryptocurrency is an area which many aren’t aware of or simply don’t know how it works. However, as different governments around the world start to introduce new laws, it’s vitally important that you understand everything there is to know.
In the United States, there are country-wide taxes and varying state taxes. As a general overview, any cryptocurrency that’s held for a year or less is subject to Short-Term Capital Gains Tax, and anything beyond this time is subject to Long-Term Capital Gains Tax. Any foreign assets above the current $10,000 limit need to be declared.
In the UK, it varies on whether you’re an individual or a business. If you’re declaring on your own, cryptocurrency comes under Capital Gains Tax. Corporate Tax remains the same, while for non-incorporated businesses, Income Tax on crypto-transactions also stays the same. In general, VAT doesn’t apply in most cases, but will for any goods or services acquired through the payment of cryptocurrencies.
The tax laws in Canada remain limited. However, any individuals using cryptocurrency is subject to the Income Tax Act.
Australia announced that if an individual uses Bitcoin for personal use and have a resulting captain gain or loss exceeding $10,000, then Capital Gains Tax will apply.
Information on tax regulations has yet to be released by Russia, China and New Zealand.
Things to consider going forward
While the examples used only act as a snapshot of the current state of cryptocurrency and Bitcoin, hopefully, this will give you the basis to take the necessary precautions going forward.
However, as regulations continue to change on a weekly basis, seeking assistance from a team of professionals could save you a lot of time, money and troubles.
We are experts in the field of digital currency and accountancy, helping multiple businesses across Europe and the world stay informed and on top of the subject. To find out more about our services, or for any questions regarding taxing cryptocurrency and legislation, get in touch via our contact page.