November 27, 2020 -

Cryptocurrency Regulations Around the World

Cryptocurrency Regulations Around the World

Regulation of Bitcoin and other cryptocurrencies is a very difficult topic to discuss. On one side, the main advantage of cryptocurrencies is decentralization. It is associated with a lot of advantages such as a high level of reliability and anonymity. However, the second advantage is also a disadvantage because lack of regulation leads to increased criminality. For example, Bitcoin can be used for buying and selling weapons, drugs, and other illegal operations.

For this reason, the status of regulation is not defined in a lot of countries. Today, we are going to describe the cryptocurrency regulation around the world.

European Union

In the European Union, no regulators have accepted any special rules for cryptocurrency, but this type of assets is regulated depending on the kind of operation. However, this asset is recognized as not associated with finances.

There is only one exception. In 2015, the European Court of Justice canceled a value added tax for purchasing and selling the cryptocurrency for traditional fiat money.

However, in 2016, an additional regulation for cryptocurrency exchanges, which provide cryptocurrency wallets for people, was created. They need to get a license for these operations. Also, a database with information about users is going to be created.

European regulators don’t use the word “cryptocurrency”. Instead of this, the term “virtual currency” is used. All cryptocurrencies are considered a payment method. At the same time, this approach was criticized by the European Central Bank that thinks that this definition isn’t ideal. According to it, digital currency isn’t a payment method, only an exchange method. This is not money and not a currency.

Cryptocurrency regulation in the European Union within the framework of implementing the policy of combating the legalization (laundering) of proceeds from crime and the financing of terrorism is not official in the EU.

In October 2012, European Central Bank talked about the digital currency, including Bitcoin, and analyzed the legal status of this system in the frame of European law. Electronic money was defined as an item that is kept on electronic devices. The emission of this money occurs in an amount not less than the emitted money value. Also, electronic money is used as a payment method not only for the subject who is responsible for the emission of money.

According to this report, Bitcoin is suitable for the first and third criteria. However, the most important is the second, but this cryptocurrency does not meet it.

Cryptocurrency Regulations Around the World

Next, EBA created a press-release with an official warning for people about risks associated with purchasing, keeping, and making transactions with the virtual currencies. EBA published an article that describes the following risks:

  1. Lack of special regulation that can protect users from financial losses associated with the bankruptcy of companies that have special technologies to maintain the exchange of digital currencies. This is a point about the high possibility of closing companies providing these services.
  2. If transactions are made with digital coins, consumers don’t have any rights to return money in the framework of European legislation. For example, if the counteragent denies these operations, money can’t be returned. In comparison, operations with credit cards are more protected from money being stolen or bank closed.
  3. If legal authorities see that exchanges of virtual currency are used for illegal actions (for example, for making money received in an illegal way legal), it can lead to the closure of these companies in a very short term and customers won’t be able to have access to them or any possibility to return the money.
  4. If a company becomes a scammer, owners of the electronic wallets aren’t protected by European legislation.

According to this press-release, consumers often lose significant amounts of money, and there were no chances to return them. Also, according to this press-release, some tax risks are associated with virtual currency.

A more recent period of regulation is associated with the 2016 and 2017 years. For example, in 2017, the European Union added Bitcoin and businesses connected with it to the list for simpler regulation by the government.

There are some rules that are necessary for every business owner who performs their activity using cryptocurrency.

  1. Platforms that provide operations with Bitcoin and wallet providers have to identify their clients.
  2. Usage of the prepaid cards is limited.
  3. Increasing the number of requirements for transparency.
  4. Opening wider access to important data, for example, about registration in national banks.
  5. People who get a profit need to give information about their activity.

One of the problems of Bitcoin regulation in the European Union is the prohibition to create any currency that isn’t a euro. For example, Estonia wanted to create their own cryptocurrency, but this action was forbidden.


The legislation of this country sees cryptocurrency as a payment method. According to its view, this is a financial instrument that can be used for speculative operations. A person who increased the amount of money owned in cryptocurrency needs to pay a 25 percent tax in a situation if income is earned within one year after getting Bitcoins.

For users who use cryptocurrency as a payment method, these are some other rules. They need to pay tax not only for the Bitcoin operations but also for the goods that are purchased.

If a person wants to use cryptocurrency, he needs to get a license. In 2011, BaFin, the regulator of Germany, said that Bitcoin isn’t a full electronic payment method because it wasn’t connected to any known currency at that moment. At that time, individuals didn’t have to get a license for using cryptocurrency. Bitcoin was regulated only in two cases:

  1. Bitcoin is an object of trading.
  2. This form of performing transactions is allowed by the structure of the operation.

Next, in August of 2013, the German Ministry of Finance explained that it doesn’t consider Bitcoin as electronic money or a full-fledged currency. Instead of this, it considers cryptocurrency as a payment method and a financial instrument that has partial application.

The opinion was changed several times. For example, in December of 2013, BaFin considered Bitcoin as a payment method and a kind of financial instrument that is regulated by Banking Law. According to its viewpoint, this is a form of private money that is similar to capital in the tax aspect.

This payment method can be compared with foreign currency with the only difference that they are not a legal payment instrument. This point is very close to the idea of the German Ministry of Finances, but the difference is in only one thing. BaFin doesn’t use the term “private money”.

In 2014, the Ministry of Finances published a letter where it was written that commercial selling Bitcoins is the other service. Due to this, retailers need to pay taxes two times. First, they have to pay a tax for selling Bitcoin, and second, they have to pay a tax for selling goods.

This rule was spread to other cryptocurrencies. At the end of 2017, BaFin warned investors about risks associated with ICO. It was the first detailed point of this structure about this.

According to it, there are two main risks:

  1. Investments can be totally lost.
  2. ICOs are very attractive for scammers because they can create a false impression about these projects.

Bundesbank calls Bitcoin an expensive and inefficient system

Cryptocurrency Regulations Around the World


If we talk about the USA, the regulation of the cryptocurrency sphere is as difficult as in the EU. The main reason for it is the features of the law system of this country. There are two types of law: federal and state. Regulators don’t have the only point about this. Digital currency is considered both as money and a financial asset that can be traded on exchanges.

Every state requires getting their own license for activities with cryptocurrency. All operations with cryptocurrency are taxed. For example, salary in Bitcoin is an object of federal income tax and payroll taxes. Now, the sphere of cryptocurrency is regulated by two structures: the Internal Revenue Service and the Bureau of Financial Crimes.

Users don’t have to get a license for using cryptocurrency as a type of business if the state doesn’t require it. The first state that allowed using cryptocurrency is California. This law was implemented at the beginning of 2015. However, a cryptocurrency business wasn’t regulated in this state.

In New York state, this business was regulated in August of 2015. At that time, the license for cryptocurrency business was implemented and was called ‘BitLicense’. This license was criticized by a lot of famous companies that some time ago gave up. Only two cryptocurrencies got a license and only in one year. About 26 companies were waiting for the result of their request.

In Washington, digital currency is an object of money transfers. It means that companies can make cryptocurrency transactions only after getting a Washington license. This requirement is applied for both exchanges that exchange cryptocurrency to fiat and back.


The status of Bitcoin regulation is not defined in a lot of countries. We haven’t described many other countries, but in general, the status of Bitcoin and other cryptocurrencies is not clear. Since this sphere is developing, and there are a lot of difficulties associated with this cryptocurrency, we need to make a very long way before cryptocurrency becomes totally legal and clear.