Although EXMO.com does not expand its list of cryptocurrency pairs as often as other exchanges do, it offers its users low transaction fees and demonstrates high trade volumes, in comparison to the exchange’s size. In addition, EXMO’s newsfeed often features interesting general knowledge articles. We are taking the liberty of reposting one of them.
The issue of cryptocurrency legalization (which means that cryptocurrencies get the legal status both in the particular countries and international financial institutions) appeals not only to the crypto-community. The solution of the stated issue will also predetermine the perspectives of the digital economy development, which is getting more and more powerful in the global economy as well as in life of every individual person.
EXMO experts have summarized the information on the issue of cryptocurrency legalization, its aspects, and importance of this process for the whole market participants.
Legal status of cryptocurrencies. Control and difficulties
|Legal regulation of the cryptocurrency market will protect the interests of every user, who have become the bitcoin owner, altcoins owner, or ICO investor, in many aspects.|
The regular users are quite uncertain whether they may rely on the law in case of any problem concerning crypto-exchanges, ICO, or cryptocurrency management in general. The miners and traders are also rest in the risk-area, due to the fact that they are concerned with the issue of the crypto-profit “nature”. The continual difficulties with supplies of the new equipment for the mining farms is another problem. Remind that mining, as a kind of activity also requires the initial investment, which cannot be legally protected at the moment.
Legal systems of many countries cannot clearly determine whether cryptocurrency is legal or not. One the one hand, it is not forbidden, on the other – it is not allowed due to the accurate identification of “What is cryptocurrency?” does not yet exist. Thus, the legal environment governing cryptocurrency has not been worked up.
The large businesses working with cryptocurrencies one way or another need not only the general legal certainty but favorable governmental position as well concerning the issues of crypto-economy legal control.
A lot of market participants including active market traders, regulatory institutions, international financial institutions, banks, which are participating indirectly in the market activities would approve the measures taken for cryptocurrencies exit from the “legal shade”.
Here below we will discuss countries, where cryptocurrency is allowed, and how some governments and financial regulators reacted on the availability of digital money in the financial payment system.
What is also important is that mostly developed countries have supported cryptocurrencies one way or another. These are the countries that are open to the innovations and contribute to them; they also point out the long-term perspectives of the global economy development.
Be support or be banned
The active spread of interest to cryptocurrencies suggests the innovative economics to make specific decisions and actions, which is likely to have a positive impact on the market and its further perspectives. There are also people, who are ambitious about leading the “trendy” movement among the international market participants. Through creating the favorable and transparent conditions for business and market participants, attracting investment, these countries are pressing the gear even now. That is the case of Switzerland.
Switzerland tried to legalize bitcoin yet in late 2013, when BTC was acclaimed to be the foreign currency de facto. The Swiss launched an experimental program to pay although with a limited amount in bitcoins many governmental and municipal services in 2016. The laws favoring the creation of crypto-start-ups through providing them with a range of taxation and administrative immunities were adopted in February 2017.
The tokens, which were emitted in course of ICO, are equating with the securities.
The extraordinary way to legalize Bitcoin was chosen in Finland. Bitcoin legal status was determined as a financial service.
In fact, the convenient and rapid money transfer is one of bitcoin core characteristics. The favorable legal environment attracted a range of crypto-startups to Finland. As a result, LocalBitcoins, a widely recognized P2P platform, as well as a few cryptocurrency exchanges have set businesses here.
The Swedish regulatories characterized all types of cryptocurrencies as the fully functional payment means. According to the local laws, the online platforms enabling to exchange cryptocurrencies to fiat (regular) money are to be licensed more severely. These platforms also must apprehend the personalities of their clients more accurately than the platforms providing only the opportunity to exchange one cryptocurrency to the other.
The tries to draw a line between cryptocurrencies and other financial instruments were made in Israel. Thus, from the legislative point of view, cryptocurrencies mostly serve as the payment means giving no specific rights (it is typical for Bitcoin and major altcoins). The coins characterized by, first, centralized emission, and second, owner rights typical for the stockholders rights (for example, on the central emitemt share) cannot be classified as cryptocurrencies as defined by law. That is the case of tokens, first of all.
Digital money of the first type will be defined as property, of the second – securities.
As it follows from the above, this classification partially corresponds to the traditional division of crypto-money into cryptocurrencies and tokens (the idea of token is described in the article). The difference is that the coins group, defined by Israel as property, combines a lot of tokens that does not provide dividends or voting rights, but can be used as the payment means for the goods and services produced by the token emitent.
The acknowledgement of bitcoin and major altcoins as products was automatically followed by the application of the appropriate taxation system to them. Thus, if the company receives payment in bitcoin, then it should effect a deal as a barter (bitcoin=product). When selling bitcoins, the individuals have to pay the capital gains tax (25%) and prove the cost of purchasing cryptocurrency. Trading and mining, as the types of activity, require taxpaying, including profit tax and VAT (17%).
The United States
A thorough and detailed work on the legal regulation of cryptocurrency sphere was managed in the US. It was combined with the establishment of the substantial, even excessive, to some extend tax control and purposeful attempts to link all of the crypto-addresses with individuals to effectively monitor their financial activity.
Today some states in the US are about to apply bitcoins as an alternative payment means for taxpaying, or State License charges paying.
The measures taken in the US in he relation to the cryptocurrencies are quite logic and understood – there has yet never been such a massive and uncontrollable sphere of activity in the history.
Obviously, the regulated cryptocurrency business environment does not appeal to many. However, the situation will stay unchangeable while there are the countries that do not regard cryptocurrencies as a branch of economic activity.
You can learn more about the way cryptocurrencies are getting legalized worldwide in our next materials.
Remind that EXMO cryptocurrency platform has expanded the number of its payment instruments. It has also integrated the international payment systems Skrill (Rapid Transfer) and Simplex (Visa/MasterCard) to enable deposits in USD, EUR, PLN.
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