With the Indian government looking to bring about legislation on cryptocurrencies in the country, Patriot takes a look at how other countries around the world are dealing with cryptocurrencies
Cryptocurrency has been around for some time now, and whether you have invested in them or not, you cannot escape the conversation around the Bitcoin and Ethereum of the online world. And now that the Indian government has finally decided to meddle in the affairs of blockchain, a bill to regulate cryptocurrencies is expected to be tabled in the ongoing winter session of the Parliament, people are waiting with baited breath to see if it’s going to be for better or worse.
But it’s not going to be a simple ‘yes’ or ‘no’ situation for the Indian government, as countries around the world have tried, failed and even accepted cryptocurrencies. Let us take a look at how cryptocurrencies have fared around the world.
Like every other technological advancement, cryptocurrency has faced the the ire of many institutions, particularly from the banking community and legal entities due to the difficulty in regulating the currency, however some countries have been accepting of this commercial tender and have devised ways to bring crypto under the ambit of legally accepted tenders. Some of the countries which have accepted crypto with open arms include El Salvador
The country became the first to officially declare Bitcoin legal tender. Accordingly the country’s President, Nayib Bukel, claims that the move would ensure 400 million dollars in fees on remittances sent home from abroad every year from cryptocurrencies.
While countries like El Salvador have been welcoming of crypto currencies and accept it as a legal tender, countries like the USA, Australia, Canada the European Union, Finland and Belgium have to various extents not only accepted the use of cryptocurrencies but also regulated their use.
The United States has legitimized the use of certain crypto currencies like bitcoin, but have listed them as property, thus enabling taxation by the IRS. The digital currency has also found its way to the US derivatives markets and the US Department of Treasury Financial Enforcement Network has been issuing guidance on bitcoin since 2013.
Defined as a money services business rather than a currency, bitcoin is placed under the Bank Secrecy Act requiring exchanges and payment processors to report, register and record exchanges.
Taking an approach similar to that of the US government, Canada also treats bitcoin exchanges to be a money service business, a commodity, rather than a currency. This again ensures that bitcoin is not used for money laundering as government agencies require that suspicious transactions are reported and compliance with government regulations are ensured.
Additionally, bitcoin transactions are viewed as a barter transaction, and any income generated is treated as business income, ensuring that the government not just earns from bitcoin trading but also regulates its movement. However, it is impertinent to note here that some major banks in Canada have banned the use of credit and debit cards for bitcoin transactions.
The European Union
The EU in 2015, started considering the buying and selling of digital currencies as a supply of services and that this is exempting it from value-added tax (VAT) from EU member states.
Akin to the United States and Canada the government of UK considers cryptocurrencies as property and not legal tender, thereby opening transactions and investments to taxation and regulation.
Japan takes a progressive approach to crypto regulations, recognizing cryptocurrencies as legal property under the Payment Services Act (PSA).
Australia classifies cryptocurrencies as legal property, which opens the opportunity for the government to extract capital gain tax. Cryptocurrency exchanges are required to register themself with the authorities to ensure compliance.
Singapore also classifies cryptocurrencies as property and not legal tender. And all transactions are regulated by the country’s monetary authority. However, the lack of long term capital gain tax has cemented the country’s reputation as a safe haven for companies and individuals wishing to invest in digital currencies.
And while many countries have accepted, regulated and even found ways to tax crypto currencies, other countries have not been so kind.
China, which till June 2021 was known as the mining hub for crypto, has banned all cryptocurrencies. The move as suggested by reports knocked off 40% of total crypto mining operations in the world.
The country is now developing its own digital currency, the digital Yuan and has even begun trials of the centrally regulated crypto.
Other countries which have banned crypto currencies include – Russia, Bolivia, Columbia, and Ecuador.
Now with the Indian government looking to legislate on the use of cryptocurrencies in the country, it will be interesting to see what stand it takes. It is also to be seen whether the Indian government will take different stands for Bitcoin and altcoins or whether it will bring in a blanket rule for all cryptocurrencies. In the meantime though investors in India wait with bated breath.
(Cover: Getty Images)