Virtual Wallet Fo Cryptocurrency

Virtual wallet fo cryptocurrency

Regulation of Cryptocurrency Around the World

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This report surveys the legal and policy landscape surrounding cryptocurrencies around the world.

This report covers 130 countries as well as some regional organizations that have issued laws or policies on the subject. The past four years have seen cryptocurrencies become ubiquitous, prompting more national and regional authorities to grapple with their regulation.

The expansive growth of cryptocurrencies makes it possible to identify emerging patterns.

Full Report (PDF, 1.4MB)
Map: Legal Status of Cryptocurrencies (PDF, 404KB)
Map: Regulatory Framework for Cryptocurrencies (PDF, 696KB)
Map: Countries that Have or Are Issuing National or Regional Cryptocurrencies (PDF, 638KB)

Please also see Regulation of Cryptocurrency in Selected Jurisdictions for more detailed reports on Argentina, Australia, Belarus, Brazil, Canada, China, France, Gibraltar, Iran, Israel, Japan, Jersey, Mexico, and Switzerland.

Comparative Summary

This report surveys the legal and policy landscape surrounding cryptocurrencies around the world.

While not dissimilar in form to the 2014 Law Library of Congress report on the same subject, which covered forty foreign jurisdictions and the European Union, this report is significantly more comprehensive, covering 130 countries as well as some regional organizations that have issued laws or policies on the subject.

This expansive growth is primarily attributable to the fact that over the past four years cryptocurrencies have become ubiquitous, prompting more national and regional authorities to grapple with their regulation.

The resulting availability of a broader set of information regarding how various jurisdictions are handling the fast-growing cryptocurrency market makes it possible to identify emerging patterns, some of which are described below.

The country surveys are also organized regionally to allow for region-specific comparisons.

One interesting aspect of the fast-growing cryptocurrency market is the fluidity of the terms used to describe the different products that fall within its ambit. While the various forms of what are broadly known as “cryptocurrencies” are similar in that they are primarily based on the same type of decentralized technology known as blockchain with inherent encryption, the terminology used to describe them varies greatly from one jurisdiction to another.

Some of the terms used by countries to reference cryptocurrency include: digital currency (Argentina, Thailand, and Australia), virtual commodity (Canada, China, Taiwan), crypto-token (Germany), payment token (Switzerland), cyber currency (Italy and Lebanon), electronic currency (Colombia and Lebanon), and virtual asset (Honduras and Mexico).

One of the most common actions identified across the surveyed jurisdictions is government-issued notices about the pitfalls of investing in the cryptocurrency markets.

Such warnings, mostly issued by central banks, are largely designed to educate the citizenry about the difference between actual currencies, which are issued and guaranteed by the state, and cryptocurrencies, which are not. Most government warnings note the added risk resulting from the high volatility associated with cryptocurrencies and the fact that many of the organizations that facilitate such transactions are unregulated.

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Most also note that citizens who invest in cryptocurrencies do so at their own personal risk and that no legal recourse is available to them in the event of loss.

Many of the warnings issued by various countries also note the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism. Some of the countries surveyed go beyond simply warning the public and have expanded their laws on money laundering, counterterrorism, and organized crimes to include cryptocurrency markets, and require banks and other financial institutions that facilitate such markets to conduct all the due diligence requirements imposed under such laws.

For instance, Australia, Canada, and the Isle of Man recently enacted laws to bring cryptocurrency transactions and institutions that facilitate them under the ambit of money laundering and counter-terrorist financing laws.

Some jurisdictions have gone even further and imposed restrictions on investments in cryptocurrencies, the extent of which varies from one jurisdiction to another.

Some (Algeria, Bolivia, Morocco, Nepal, Pakistan, and Vietnam) ban any and all activities involving cryptocurrencies. Qatar and Bahrain have a slightly different approach in that they bar their citizens from engaging in any kind of activities involving cryptocurrencies locally, but allow citizens to do so outside their borders.

There are also countries that, while not banning their citizens from investing in cryptocurrencies, impose indirect restrictions by barring financial institutions within their borders from facilitating transactions involving cryptocurrencies (Bangladesh, Iran, Thailand, Lithuania, Lesotho, China, and Colombia).

A limited number of the countries surveyed regulate initial coin offerings (ICOs), which use cryptocurrencies as a mechanism to raise funds.

Of the jurisdictions that address ICOs, some (mainly China, Macau, and Pakistan) ban them altogether, while most tend to focus on regulating them. In most of these latter instances, the regulation of ICOs and the relevant regulatory institutions vary depending on how an ICO is categorized. For instance, in New Zealand,  particular obligations may apply depending on whether the token offered is categorized as a debt security, equity security, managed investment product, or derivative.

Similarly, in the Netherlands, the rules applicable to a specific ICO depend on whether the token offered is considered a security or a unit in a collective investment, an assessment made on a case-by-case basis.

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Not all countries see the advent of blockchain technology and cryptocurrencies as a threat, albeit for different reasons. Some of the jurisdiction surveyed for this report, while not recognizing cryptocurrencies as legal tender, see a potential in the technology behind it and are developing a cryptocurrency-friendly regulatory regime as a means to attract investment in technology companies that excel in this sector.

In this class are countries like Spain, Belarus, the Cayman Islands, and Luxemburg.

Some jurisdictions are seeking to go even further and develop their own system of cryptocurrencies. This category includes a diverse list of countries, such as the Marshall Islands, Venezuela, the Eastern Caribbean Central Bank (ECCB) member states, and Lithuania.

In addition, some countries that have issued warnings to the public about the pitfalls of investments in cryptocurrencies have also determined that the size of the cryptocurrency market is too small to be cause for sufficient concern to warrant regulation and/or a ban at this juncture (Belgium, South Africa, and the United Kingdom).

One of the many questions that arise from allowing investments in and the use of cryptocurrencies is the issue of taxation. In this regard the challenge appears to be how to categorize cryptocurrencies and the specific activities involving them for purposes of taxation. This matters primarily because whether gains made from mining or selling cryptocurrencies are categorized as income or capital gains invariably determines the applicable tax bracket.

Understanding How a Cryptocurrency Wallet Works

The surveyed countries have categorized cryptocurrencies differently for tax purposes, as illustrated by the following examples:

Israel

taxed as asset

Bulgaria

taxed as financial asset

Switzerland

taxed as foreign currency

Argentina & Spain

  subject to income tax

Denmark

subject to income tax and losses are deductible

United Kingdom:

corporations pay corporate tax, unincorporated businesses pay income tax, individuals pay capital gains tax

Mainly due to a 2015 decision of the European Court of Justice (ECJ), gains in cryptocurrency investments are not subject to value added tax in the European Union Member States.

In most of the countries surveyed for this report that have or are in the process of devising taxation rules, the mining of cryptocurrencies is also exempt from taxation. However, in Russia mining that exceeds a certain energy consumption threshold is taxable.

In a small number of jurisdictions surveyed cryptocurrencies are accepted as a means of payment. In the Swiss Cantons of Zug and a municipality within Ticino, cryptocurrencies are accepted as a means of payment even by government agencies.

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The Isle of Man and Mexico also permit the use of cryptocurrencies as a means of payment along with their national currency. Much like governments around the world that fund various projects by selling government bonds, the government of Antigua and Barbuda allows the funding of projects and charities through government-supported ICOs.

The three maps visually represent findings from the report on the legal status of cryptocurrencies, the regulatory framework surrounding cryptocurrencies, and countries that have launched their own cryptocurrencies or are planning to do so.

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The Americas

Argentina

Under the National Constitution of Argentina[1] the only authority capable of issuing legal currency is the Central Bank.[2]  Bitcoins are not legal currency strictly speaking, since they are not issued by the government monetary authority and are not legal tender.[3]  Therefore, they may be considered money but not legal currency, since they are not a mandatory means of cancelling debts or obligations.[4]  Although bitcoins are not specifically regulated, they are increasingly being used in Argentina, a country that has strict controls over foreign currencies.[5]  According to some experts[6] a bitcoin may be considered a good or a thing under the Civil Code,[7] and transactions with bitcoins may be governed by the rules of the sale of goods under the Civil Code.[8]

The latest amendment to the Income Tax Law provides that the profit derived from the sale of digital currency will be considered income and taxed as such.[9]

A more detailed report is available.

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Belize

Belize does not appear to have any legislation that specifically regulates cryptocurrencies.[10]  Trading businesses in Belize are regulated by the International Financial Services Commission of Belize.

The Commission does not appear to issue licenses for companies to engage in cryptocurrency exchanges.[11]

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Bermuda

Bermuda does not have legislation or regulations that specifically govern cryptocurrencies.

The government is, however, in the early stages of crafting legislation and regulations that aim to establish Bermuda as an international destination for digital currencies, similar to its position in the insurance and reinsurance sectors.[12]

In late 2017, the government of Bermuda launched a task force to “advance the regulatory environment and develop Bermuda as a destination for Utility Tokens, Tokenized Securities, Cryptocurrencies and Coin Offerings.”[13]  The aims of the task force are as follows:

  • Creating a Crypto Currency Association with a defined Code of Conduct and Rules of Operation.

    The Bermuda Crypto Association is in the process of being formed and our aim is for this Group to be self-governing.

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  • The Bermuda Monetary Authority in conjunction with the Ministry of Finance will work together to draft a letter or document confirming; Utility Tokens are not a security as long as there is no promise of future value. The will allow companies from all over the world to set up in Bermuda for Crowd Funding.

Most importantly, the Legal and Regulatory Working Group will provide confirmation that Utility Tokens are not prohibited or contravening any local legislation.[14]

The task force has two working groups, directed by the Minister of National Security.

One group is the Blockchain Legal and Regulatory Working Group and is tasked with ensuring that Bermuda’s legislation and regulations are conducive for the development of cryptocurrencies. The other is known as the Blockchain Business Development Working Group, which is tasked with aiding in the development of technology for cryptocurrencies.

The Business Development Agency is also partnering with the government in this endeavor to help bring new business to the island, create new jobs, and boost its gross domestic product.[15]

The government is also aiming to introduce a framework to regulate distributed ledger technologies (DLT) this year, to regulate firms that operate in or from Bermuda and use DLT to “store or transmit value belonging to others, such as virtual currency exchanges, coins and securitized tokens.”[16]  This would cover “the promotion and sale of utility tokens, aligned with the DLT framework.”[17]  There have been no further statements on the government of Bermuda’s public website that discuss the proposed regulatory framework.

On January 17, 2018, the Bermuda Monetary Authority issued a press release warning of the risks of initial coin offerings, noting that whether such offerings fall within its regulatory boundaries is determined on a case-by-case basis, but that most such offerings are “unregulated because there are no requirements with which they are required to comply at this time.”[18]

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Bolivia

The use of virtual currencies is prohibited in Bolivia.[19] The Central Bank has stated that the use of currency not issued by the monetary authority is not allowed in the country.[20] Cryptocurrencies such as Bitcoin are not regulated and therefore, the Central Bank warns about the possible losses that people using them are exposed to.[21]

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Brazil

On November 16, 2017, the Brazilian Federal Reserve Bank (Banco Central do Brasil) issued Notice No.

31,379 alerting citizens to the risks arising from the custody and trading operations of virtual currencies. The notice stated in part as follows:

Considering the growing interest of the economic agents (society and institutions) in so-called virtual currencies, the Brazilian Federal Reserve Bank warns that these are neither issued nor guaranteed by any monetary authority, so they have no guarantee of conversion to sovereign currencies, nor are they backed in real assets of any kind, being the entire risk of the holders.

. . .

4.

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Companies that negotiate or keep so-called virtual currencies on behalf of users, natural persons or legal entities are not regulated, authorized, or supervised by the Brazilian Federal Reserve Bank. There is no specific regulation on virtual currencies in the legal and regulatory framework related to the National Financial System. The Brazilian Federal Reserve Bank, in particular, does not regulate or supervise operations with virtual currencies.

5.

So-called virtual currency is not to be confused with the definition of electronic money referred to in Law 12,865 of October 9, 2013, and its regulation by means of normative acts issued by the Brazilian Federal Reserve Bank, according to the guidelines of the National Monetary Council.

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. . . .[22]

A more detailed report is available.

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Canada

Canada allows the use of cryptocurrencies, including Bitcoin.

Regulation of Cryptocurrency Around the World

According to a Financial Consumer Agency of Canada webpage on digital currencies, “[y]ou can use digital currencies to buy goods and services on the Internet and in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital currency or cryptocurrency exchanges.”[23] However, cryptocurrencies, including Bitcoin, are not considered legal tender in Canada; “[o]nly the Canadian dollar is considered official currency in Canada.”[24] The Currency Act defines legal tender as

  • bank notes issued by the Bank of Canada under the Bank of Canada Act
  • coins issued under the Royal Canadian Mint Act[.][25]

Canada’s tax laws and rules also apply to digital currency transactions, including those made with cryptocurrencies, and digital currencies are subject to the Income Tax Act.[26] The Canada Revenue Agency (CRA) “has characterized cryptocurrency as a commodity and not a government-issued currency.”[27] Accordingly, the use of cryptocurrency to pay for goods or services is “treated as a barter transaction.”[28] According to the Financial Consumer Agency,

[g]oods purchased using digital currency must be included in the seller’s income for tax purposes.

GST/HST also applies on the fair market value of any goods or services you buy using digital currency.

How to open an account for cryptocurrency

. . .

When you file your taxes you must report any gains or losses from selling or buying digital currencies.[29]

On the issue of taxation, the Canada Revenue Agency adds that,

[w]here digital currency is used to pay for goods or services, the rules for barter transactions apply. A barter transaction occurs when any two persons agree to exchange goods or services and carry out that exchange without using legal currency.

For example, paying for movies with digital currency is a barter transaction. The value of the movies purchased using digital currency must be included in the seller’s income for tax purposes. The amount to be included would be the value of the movies in Canadian dollars.[30]

On June 19, 2014, the Governor General of Canada gave his assent to Bill C-31 (An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014, and Other Measures),[31] which includes amendments to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

The new law treats virtual currencies, including Bitcoin, as “money service businesses” for the purposes of the anti-money laundering law.[32] The Act is regarded as the “world’s first national law on digital currencies, and certainly the world’s first treatment in law of digital currency financial transactions under national anti-money laundering law.”[33]

On August 24, 2017, the Canadian Securities Administrators (CSA) published CSA Staff Notice 46-307 on Cryptocurrency Offerings,[34] “which outlines how securities law requirements may apply to initial coin offerings (ICOs), initial token offerings (ITOs), cryptocurrency investment funds and the cryptocurrency exchanges trading these products.”[35] On February 1, 2018, The Globe and Mail reported that the Ontario Securities Commission had approved the country’s first blockchain fund—Blockchain Technologies ETF.[36]

The Bank of Canada, Payments Canada, and R3, a distributed database technology company, are involved in a research initiative called Project Jasper “to understand how distributed ledger technology (DLT) could transform the wholesale payments system.”[37] Phases 1 and 2 of the project are “focused on exploring the clearing and settlement of high-value interbank payments using DLT.” Phase 3 explores “the potential benefits from integrating this “cash on ledger” with other assets such as foreign exchange and securities.”[38]

A more detailed report is available.

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Chile

According to an unofficial statement from the Central Bank of Chile virtual currencies have no specific legal recognition in the country and trade and transactions involving cryptocurrency are not subject to the regulation or supervision of the monetary authority.[39]

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Colombia

The Superintendencia Financiera (SF) (Financial Superintendency) of Colombia warned in a June 2017 circular that bitcoin is not currency in Colombia and therefore may not be considered legal tender susceptible of cancelling debts.[40] The SF further emphasized that the Colombian peso is the only legal currency, and that the Banco de la República has the exclusive authority to issue money in Colombia.[41] According to the SF, cryptocurrencies have no value under capital market laws and therefore are also not recognized as a security.[42] The SF warned controlled financial institutions that they are not authorized to protect, invest, broker, or manage virtual money operations.[43] The SF called on persons to become informed and assume the risks related to virtual currencies if they choose to trade them, since these currencies do not have any private or state guarantee.[44]

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Costa Rica

The Central Bank of Costa Rica and its decentralized agencies (órganos de desconcentración máxima) issued a statement in October 2017 to participants in the financial, stock, securities, insurance, and pension markets, and to exchange houses, remittance agencies, the economic sector, and the general public, warning them about the risks associated with the acquisition of cryptocurrencies with the intention of using them either as financial savings or as a means of payment in Costa Rica.

The statement explained that articles 42-51 of the Organic Law of the Central Bank establishes the colón as the monetary currency in Cost Rica. The statement also asserted that the Law designates the Central Bank as the sole issuer of bills and coins and establishes the unlimited power of the colón to liquidate all kinds of pecuniary obligations, both public and private.

Due to this, the statement said, Bitcoin and similar cryptocurrencies are not recognized as legal tender in the country and do not have the backing of the Central Bank or the state of Costa Rica. Moreover, cryptocurrencies’ effectiveness or use as a means of payment in the economy of the country cannot be guaranteed, nor can any person be forced to accept them as a means of payment for the transaction of goods and services.

The statement also asserted that because cryptocurrencies are not issued by a foreign central bank, they cannot be considered a foreign currency under the monetary exchange regime, and for this reason they do not have the security offered by the free currency convertibility provisions of articles 48 and 49 of the Organic Law of the Central Bank.

In the statement, the Central Bank and its decentralized agencies emphasized that they do not in any way regulate or supervise cryptocurrencies as a means of payment; moreover, they emphasized that transactions with cryptocurrencies cannot be made through the National System of Electronic Payment (SINPE) used in Costa Rica.

The statement warned that if any financial entity becomes directly or indirectly involved with its customers in the commercialization or use of any of these digital assets, such operation are undertaken at the financial entity’s own risk and responsibility, as well as that of its customers.

The statement added that the foregoing is in accordance with the obligation established by prudential regulations on the prevention of money laundering and the financing of terrorism, which imposes a duty on financial entities to carry out the necessary risk analysis with respect to new technologies.

The statement reiterated that any person who acquires digital currencies, either as a form of savings or with the interest of using them as means of payment, and those who accept them with this function in commercial transactions, also do so at their own risk and responsibility, warning that they will be participating in operations not contemplated by the banking regulations or the payment mechanisms authorized by the Central Bank of Costa Rica.

The statement concluded by saying that the warnings it contains are not limiting and do not exclude other risks inherent in the use of digital currency, and that the Central Bank will continue to study the issue.[45]

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Ecuador

The Central Bank of Ecuador has stated that Bitcoin is not an authorized payment method in Ecuador.[46] It further clarified that the bitcoin, as a cryptocurrency, is not backed by any authority, because its value is based merely on speculation.[47] Furthermore, financial transactions with bitcoins are not controlled, supervised, or regulated by any Ecuadoran entity, and therefore they represent a financial risk for those who invest in them.[48]

The Central Bank also stated, however, that the purchase and sale of cryptocurrencies such as bitcoin through the internet are not forbidden,[49] but it reiterated that bitcoin is not legal tender and is not an authorized payment method for goods and services according to the Código Orgánico Monetario y Financiero (Organic Monetary and Financial Code).[50]

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El Salvador

The Central Reserve Bank of El Salvador issued a statement on November 6, 2017, expressing its position on cryptocurrencies, which can be summarized as follows:  

  • At the international and national level there is a discussion about the use of cryptocurrencies.
  • Cryptocurrencies are not legal tender in any jurisdiction; they, unlike the conventional currencies issued by a monetary authority, are not controlled or regulated and their price is determined by the supply and demand of their market.
  • In accordance with articles 36–37 of the Organic Law of the Central Reserve Bank of El Salvador, and articles 3 and 6 of the Monetary Integration Law of El Salvador, the colón and the United States dollar are the only unrestricted legal tender that can be used for the payment of monetary obligations in the national territory.

  • Any transaction that is made with virtual currency is the responsibility and risk of the person who carries it out.
  • Fundraising using digital currencies is prohibited. According to article 184 of the Banking Law, all public fundraising with or without advertising, and in any form, is prohibited by those who are not authorized in accordance with the Banking Law, or other laws in force that regulate fundraising.
  • According to the Central Reserve Bank, as the monetary authority, regulator of the financial system, and watchdog of payment systems, there is currently no legal or regulatory framework applicable to cryptocurrencies or their equivalents.
  • The Central Reserve Bank will remain vigilant on this and other related issues.[51]

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Guatemala

In December 2017 the acting President of the Bank of Guatemala, Sergio Recinos, confirmed that both Bitcoin and other types of cryptocurrencies are not legal tender in the country and do not have regulatory backing.

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He stated that according to Guatemalan legislation, the quetzal is the national currency and the Bank of Guatemala is the only issuer of bills and coins within the national territory, in accordance with articles 1 and 2 of the Monetary Law (Ley Monetaria).

In this sense, virtual currencies are not recognized as a currency in Guatemala and neither are they recognized as foreign currency; therefore, they do not constitute a means of legal payment. Recinos added that due to their anonymous origin, cryptocurrencies can easily be used for illicit activities, such as money laundering, terrorism, drug purchases, and tax evasion, among others, to a degree that could be higher than with cash.

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Moreover, he said that cryptocurrencies are exposed to cyberattacks or hacking, which could lead to irreversible loss for the user.

Lastly, Recinos warned that cryptocurrencies are not backed by any government and do not depend on a central bank issuer; therefore, no one is trying to maintain their value over time. He recommended that persons carefully examine the issue before deciding to invest in cryptocurrencies.[52]

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Honduras

In January 2018, the Honduran Central Bank issued a statement in response to inquiries made by economic and financial agents in relation to the use of cryptocurrencies within the national territory, either as an investment or as a means of payment for goods and services.

The response stated that cryptocurrencies such as bitcoin, ethereum, litecoin, and other similar cryptocurrencies do not have the backing of the Central Bank of Honduras. Therefore, the Central Bank does not regulate or guarantee their use and such cryptocurrencies do not enjoy the legal protection granted by the laws of the country in terms of the payment system. As a result, any transaction that is made with this type of currency or virtual assets is the responsibility and risk of the person who conducts the transaction, the statement said.[53]

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Mexico

Mexico’s Law to Regulate Financial Technology Companies, enacted in March 2018, includes a chapter on operations with “virtual assets,” commonly known as cryptocurrencies.[54] This chapter defines virtual assets as representations of value electronically registered and utilized by the public as a means of payment for all types of legal transactions, which may only be transferred electronically.[55]

In addition, Mexico has enacted a law extending the application of its laws regarding money laundering to virtual assets, thereby requiring financial institutions that provide services relating to such assets to report transactions exceeding certain amounts.[56]

Mexico’s Central Bank is granted broad powers under the Law to regulate virtual assets, including

  • specifying those virtual assets that financial companies are allowed to operate with in the country, defining their particular characteristics, and establishing the conditions and restrictions applicable to transactions with such assets; and
  • authorizing financial companies to perform transactions with virtual assets.[57]

Pertinent regulations applicable to these assets must be issued by Mexico’s Central Bank within a year from the enactment of the Law.[58]

Financial companies that carry out transactions with virtual assets must disclose to their clients the risks applicable to these assets.[59] At a minimum, these companies must inform their clients, in a clear and accessible manner on their respective websites or through the means that they utilize to provide services, of the following:

  • A virtual asset is not a legal currency and is not backed by the federal government nor by Mexico’s Central Bank; 
  • Once executed, transactions with virtual assets may be irreversible;
  • The value of virtual assets is volatile; and
  • Technological, cybernetic, and fraud risks are inherent in virtual assets.[60]

A more detailed report is available.

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Venezuela

Under Decree 3196 of December 8, 2017,[61] the government of Venezuela was authorized to create its own cryptocurrency, the petro, which would be physically backed by Venezuelan barrels of oil.[62] One petro would be backed by a purchase-sale contract for one barrel of Venezuelan oil as quoted in the OPEC Reference Basket, as well as other commodities, including gold, diamond, coltan, and gas.[63]

Decree 3196 mainly provides for the operational details of the petro, including its issuance, mining, and trading in Venezuela according to the rules on purchase and sale contained in the Civil Code.[64] According to a legal expert on information technology law, all cryptocurrencies are considered a financial asset subject to the rules applicable to such assets under Decree 3196 and none of its provisions declare them illegal.[65] The Decree also creates the Superintendencia de los Criptoactivos y Actividades Conexas Venezolana (Superintendency of Venezuelan Crypto-Assets and Related Activities) as the supervisory authority of cryptocurrencies.[66]

Decree 3196 states that the holder of petro will be able to exchange the market value of the cryptoasset for the equivalent in another cryptocurrency or in bolívares (the traditional currency of Venezuela) at the market exchange rate published by a national cryptoasset exchange house.[67]  The holder of each petro would also own a virtual wallet, which was to be his/her own responsibility, along with the risks related to its custody and management.[68]

According to Decree 3196, an initial coin offering will be made through auction or direct assignment by the Superintendence of Cryptoassets and Related Venezuelan Activities.[69]

On March 8, the Asamblea Nacional (National Assembly, the Venezuelan Congress), declared that the issuance of a domestic cryptocurrency such as the petro is illegal, because in order to enter into a public debt and borrow on behalf of the Venezuelan government, congressional approval and a special law is required under the National Constitution.[70]  In addition, only the Central Bank of Venezuela may issue national currency.[71]  The Asamblea National further stated that oil reserves are public national assets that belong to the Republic and are non-transferrable assets, and therefore cannot be used as guarantee for any debt.[72]

Despite these declarations by the Asamblea National, the Government has said the petro will become legal tender for all transactions involving government institutions within 120 days of April 9, 2018.[73]

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The Caribbean

I.

Top 5 Best Cryptocurrency Wallets

Eastern Caribbean Central Bank

The Eastern Caribbean Central Bank (ECCB) is the monetary authority for eight island economies in the Eastern Caribbean Currency Union that use a common currency known as the Eastern Caribbean dollar[74]—Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines.[75]  On March 9, 2018, the ECCB signed a memorandum of understanding with the Barbados-based financial technology company Bitt Inc.

agreeing to participate in a pilot program that will enable it to issue a digital currency. Expected to start at the end of 2018, the pilot will specifically involve

the development of a digital Eastern Caribbean Dollar using distributed ledger technology with a blockchain platform specifically designed for a safe and secure digital financial ecosystem.

Essentially, [it] would be a proof of concept, designed to demonstrate the viability and functionality of the ECCB issuing Digital Eastern Caribbean Dollars.[76]

The ECCB will work closely with Bitt Inc. to

develop, deploy and test technology which focuses on data management, compliance and transaction monitoring system for Know Your Customer, Anti-Money Laundering, and Combating the Financing of Terrorism.

. . . The pilot will also focus on developing a secure, resilient digital payment and settlement platform with embedded regional and global compliance; and the issuance of a digital EC [Eastern Caribbean] currency which will operate alongside physical EC currency.[77]

While this summarizes the regional effort to adopt a common digital currency, national efforts by ECCB member states to deal with emerging cryptocurrencies are discussed below, along with the efforts of other Caribbean countries that are not participating in the ECCB pilot.

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II.

Country Surveys

Anguilla

The Anguillan government announced at the end of 2017 that it would introduce legislation, known as the Anguilla Utility Token Offering Act (the AUTO Act), to regulate initial offerings of certain types of cryptocurrencies (ICOs).[78]  The government has noted that some types of tokens are considered to be securities, and thus are already regulated under the existing securities framework,[79] but that

there remained a large swath of non-security tokens with no clear guidance as to where they would fit in the emerging blockchain economy.

Therefore, we focused our efforts on creating a safe and effective regulatory framework for non-security token offerings, which appear to represent a majority of the current capital raising activity within the blockchain community.[80]

The new legislation will serve to provide a regime for Anguillan entities to register in order to conduct an offering of non-security tokens, which are tokens that do not have the same features securities do, but that “have one or more ‘utility’ features within the issuer’s current or proposed blockchain platform.”[81]

The AUTO Act is structured in a way to regulate utility tokens, while avoiding the burden imposed by securities regulations and the “higher levels of regulatory scrutiny that would have to take place were the tokens to fall under securities laws.”[82]  As such, utility tokens are categorized as those that may be redeemed for consumer goods or services, rather than a share in profits or an interest in technology connected to the offering.[83]

In order to become registered, the entity must put together a “white paper,” along with its disclosure documents, which must undergo a technical and legal review that must include information about the companies structure, location, business status, description of the project, a technical and legal description of the tokens that will be offered, how any proceeds made will be used, and anti-money laundering provisions along with any risk factors present for purchasing the tokens.[84]  The Anguillan government will financially benefit from the legislation by collecting a registration fee, along with a “1.5 percent levy on the total amount raised by a token offering.”[85]

The government of Anguilla has stated as follows:

We believe this new AUTO Act will help Anguilla become the leader in establishing best practices for cryptocurrency offerings, to protect the people of Anguilla and the participating public.

. . . We believe the AUTO Act would be a significant step in the right direction, to provide clearly defined rules and increased safety for the blockchain community.[86]

On December 13, 2017, the Executive Council of Anguilla stated that officials should formulate a regulatory regime for Utility Token Offerings that would be submitted to the Governor.[87]  No further information about the status of this bill has been located.

Anguilla has also signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

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Antigua and Barbuda

Antigua and Barbuda currently does not have any legislation that specifically regulates the use of cryptocurrency.

Newspapers on Antigua and Barbuda have reported that the government of Antigua has instructed its Attorney General to “draft laws for the implementation of bitcoin.”[88]  No specifics or further information on this reported proposed legislation was located.

The government of Antigua and Barbuda has reportedly permitted the funding of projects and charities in the country through an Initial Coin Offering for Development[89] by selling a state-supported (not state-sponsored) Antigua and Barbuda Development Coin, based on the Ethereum cryptocurrency.[90]  No further information on this offering via a government source was located.

Antigua and Barbuda has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

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Bahamas

The Bahamas does not have any legislation that specifically applies to cryptocurrencies. Regulation of cryptocurrencies in the Bahamas currently varies according to whether the currency is considered to be a security, currency, or commodity.[91]  Despite not having legislation specifically designed to addresses cryptocurrencies, the Central Bank of the Bahamas has stated that regulations it issued in 2017, which provide a framework for a system of national electronic payments services, also apply to cryptocurrencies.[92]  The regulations “apply best international standards for the provision of local payments services” and define “electronic money” as

electronically stored monetary value as represented by a claim on the issuer, which is issued on receipt of funds for the purpose of making payment transactions and which is accepted as a means of payment by persons other than the issuer, and includes monetary value stored magnetically or in any other tangible or intangible device (such as a SIM card or software).[93]

The Central Bank further stated that converting instruments in and out of the Bahamian currency would be governed by Exchange Control Regulations, and that “[t]he Securities Commission of The Bahamas would reserve the right to supervise any non-payments aspect of crypto currency operations domiciled in The Bahamas.”[94]

The Bahamas is actively looking at developing blockchain technology to use on the Island to help create efficient and simplified transactions.

Specifically, the government has noted that “[t]he Bahamas is also currently developing programs for block chain-based solutions, fin-tech and crypto-currency companies, and we intend to promote block chain as a sub-industry within ICT.”[95]

The Bahamas is in the process of considering a bill that would bring virtual currencies within the ambit of the proceeds of crime legislation.[96]  Clause 2 of the bill defines “virtual currency” as

a digital representation of value which can be digitally traded and functions as – (a) a medium of exchange; (b) a unit of account; or (c) a store of value, that does not have legal tender status or carry any security or guarantee in any jurisdiction.[97]

If enacted, the bill’s provisions on money laundering and counterterrorism financing would apply to cryptocurrencies.[98]

It also appears that the Bahamas might act to both bring cryptocurrency exchanges within the remit of the Central Bank of the Bahamas and introduce a “digital version of the Bahamian dollar.”[99]

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Barbados

Barbados does not appear to have any laws that specifically regulate cryptocurrencies.

In 2015, the Central Bank of Barbados (CBB) issued a paper that discussed whether cryptocurrencies should be included in its portfolio of international reserves, but it does not appear to have acted to do this.[100]

Barbados is home to Bitt Inc., the financial technology startup that has signed a Memorandum of Understanding with the ECCB to launch a pilot of blockchain technology, which will enable eight Caribbean countries to test the use of cryptocurrencies alongside their national currencies (see ECCB discussion, supra).

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While Barbados is not a party to this Memorandum of Understanding, there have been reports that Bitt Inc. is to create a digital Barbadian dollar that would be tied to the value of the country’s physical currency, but the government has not yet issued a statement on this subject.[101]

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British Virgin Islands

The British Virgin Islands has yet to issue any guidance that applies to cryptocurrency and does not appear to have legislation or regulations that specifically apply to this area,[102] with the government instead appearing to opt for a wait-and-see approach.[103]  One commentator has noted that its existing laws appeal to companies that wish to do initial coin offerings (ICOs), and a number of companies have already registered under the country’s company laws and then conducted ICOs.[104]

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Cayman Islands

The Cayman Islands appear to have a fairly flexible regulatory environment for cryptocurrencies and blockchain technologies.

While there appears to be no specific legislation geared towards regulating cryptocurrencies, there are laws that in certain circumstances may be applicable. These include the Securities Investment Business Law (2015 Revision),[105] Anti-Money Laundering (AML) Laws and regulations,[106] Money Services Law (2010 Revision),[107] and Electronic Transactions Law (2003 Revision).

Lawyers Chris Humphries and James Smith predict that

more-specific legislation will eventually be created although, for the time being, the regulators and lawmakers in the Cayman Islands are keen to avoid rushing through any legislation before the potential benefits and pitfalls of blockchain technology, cryptocurrencies and ICOs are properly understood.[108]

On January 29, 2018, Cayman Islands’ Premier, Alden McLaughlin, reportedly spoke at a leading blockchain conference called “d10e” where he encouraged blockchain companies to establish themselves at Cayman Enterprise City, a “special economic zone that caters to tech-related entities.”[109] Cayman Enterprise City CEO Charlie Kirkconnell stated at the conference that some fifty blockchain companies have established or are in the process of establishing themselves in the zone.[110]

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Dominica

On March 14, 2015, Dominica was reportedly scheduled to host an event, officially titled “The Bit Drop,” which was meant to put bitcoins into the hands of Dominica’s entire population, reported to be 70,000 people, but the project was cancelled.[111] According to Dominica News Online, organizers indicated that they did not receive enough support from the government on the event, and an election cycle may have “complicated matters.”[112]

More recently, Dominica signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

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Dominican Republic

The Dominican Central Bank has indicated that virtual currencies are not backed by the Bank and are not legal currency under Dominican law.[113]Thus, financial institutions authorized to operate in the country may not engage in transactions that use these currencies, and individuals who acquire them or accept them as payment do so at their own risk.[114]

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Grenada

Grenada does not have any specific legislation to regulate cryptocurrencies.

It has, however, signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

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Jamaica

In a press release issued on February 5, 2018, the Bank of Jamaica warned the public to “exercise caution in the use of virtual currencies (cryptocurrencies) given the associated risks and the absence of appropriate governance and consumer protection arrangements,” according to the Jamaica Observer.[115]  While noting the advantages of virtual currencies in potentially promoting “financial inclusion,” the Bank warned that

.

. . the following risks need to be taken into consideration:

1.

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Virtual currencies are not legal tender in Jamaica.
2. Bank of Jamaica neither issues nor backs virtual currencies.
3. Virtual currencies are not foreign currencies as there is no monetary authority that issues or backs them.
4. Bank of Jamaica does not regulate or supervise virtual currencies.
5. Bank of Jamaica has not authorised any entity to operate a virtual currency platform.

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6. Transactions in virtual currencies, such as bitcoin, are susceptible to abuse by criminals and may facilitate money laundering and the financing of terrorism.[116]

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Montserrat

Montserrat does not have any specific legislation to regulate cryptocurrencies. It has, however, has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside its national currency (see ECCB discussion, supra).

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Saint Kitts and Nevis

Saint Kitts and Nevis does not have specific legislation to regulate cryptocurrencies. However, it has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

While the country has no specific legislation on the subject, the Saint Kitts and Nevis Citizenship by Investment Unit (CIU) reportedly issued a statement in June 2014 that it would not accept digital currency as a means by which applicants for citizenship through the Citizenship by Investment Program could participate in the program.

“We further emphasize that we do not accept Bitcoins, have never accepted Bitcoins, and will not accept Bitcoins,” the CIU was quoted as saying.[117]

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Saint Lucia 

Saint Lucia does not have specific legislation to regulate cryptocurrencies.

However, it has signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside the country’s national currency (see ECCB discussion, supra).

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Saint Vincent and the Grenadines

Saint Vincent and the Grenadines does not have any specific legislation to regulate cryptocurrencies.

It has, however, signed up to participate in the ECCB pilot, which will test the use of cryptocurrencies alongside its current national currency (see ECCB discussion, supra).

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Trinidad and Tobago

A February 24, 2018, news article reported that the Trinidad and Tobago Finance Ministry has distanced itself from a recent digital currency offering, and in clarifying its position emphasized in a statement that “[t]he Commission, has not as of this date approved any Initial Coin Offering.”[118]  According to the article, the Commission’s statement also identified the following risks and urged the public to exercise caution:

1) Heightened potential for fraud – the fact that the products and those selling them may in some cases not be subject to regulation, [may] expose the investors to fraud;

2) Cross-border distribution risks – the issuer may be operating the ICO from outside of the investor’s jurisdiction, therefore, following the money in the event of a collapse of the ICO as well as recovering invested funds, may prove extremely difficult [for the investor];

3) Information asymmetry – investors may not be able to understand the risks, costs and expired returns .

.

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. arising from their investment;

4) Liquidity risks – In some jurisdictions, cryptocurrency exchanges may also be unregulated and operate without oversight. Thus leaving investors vulnerable to dramatic price changes and possibility that they may not be able to exit their holdings (funds invested) . . . .

Based on the foregoing, the Ministry of Finance advises members of the public to exercise caution when engaging in any form of investment and when in doubt, seek the advice of the Regulatory Bodies – The Securities and Exchange Commission and/or the Central Bank of Trinidad and Tobago.[119]

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Europe

I.

EU Member States

European Union

On July 5, 2016, the European Commission presented a legislative proposal to amend the Fourth Anti-Money Laundering Directive (AMLD).[120] It suggested, inter alia, bringing custodian wallet providers and virtual currency exchange platforms within the scope of the AMLD, meaning they would be obligated to fulfill due diligence requirements and have in place policies and procedures to detect, prevent, and report money laundering and terrorist financing.

The proposal contains a definition of virtual currencies, which are described as “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.”[121] On January 29, 2018, the text agreed at the interinstitutional negotiations of the European Parliament and the Council was approved in committee.

The European Parliament adopted the text in plenary session on April 19, 2018.[122] The updated Directive will enter into force three days after its publication in the Official Journal of the European Union.

Furthermore, on March 8, 2018, the European Commission presented an Action Plan on how to take advantage of the opportunities presented by technology-enabled innovation in financial services (FinTech), like blockchain, artificial intelligence, and cloud services.[123] The FinTech Action Plan includes the recently launched EU Blockchain Observatory and Forum, which will report on the challenges and opportunities of crypto assets later in 2018 and is working on a comprehensive strategy on distributed ledger technology and blockchain addressing all sectors of the economy.[124]

On October 22, 2015, the European Court of Justice (ECJ) held in its decision Hedqvist that transactions to exchange a traditional currency for bitcoin or other virtual currencies and vice versa constitute the supply of services for consideration, but fall under the exemption from value-added-tax (VAT).[125] Buying or selling bitcoin is therefore exempt from VAT in all EU Member States.

On February 12, 2018, the European Supervisory Authorities for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) jointly issued a warning to consumers regarding virtual currencies, stating that they are “highly risky and unregulated products and are unsuitable as investment, savings or retirement planning products.”[126] The warning complements the earlier two statements by ESMA on initial coin offerings (ICOs) in November 2017[127] and a warning to consumers and two opinions on virtual currencies by EBA in December 2013, July 2014, and August 2016, respectively.[128] EBA welcomes the decision of the European Commission to bring custodian wallet providers and virtual currency exchange platforms within the scope of the Fourth AMLD and not to extend the EU Payment Services Directive 2015/2366 to virtual currency transactions for the time being.[129] EBA suggests a separate regulatory regime to mitigate all the risks arising from virtual currencies.[130]

The President of the European Central Bank (ECB), Mario Draghi, warned that bitcoin and other digital currencies are “very risky assets” due to their high volatility and speculative prices.[131] He stated that “digital currencies are not subject to a specific supervisory approach,” but that “[w]ork is under way in the Single Supervisory Mechanism[[132]] to identify potential prudential risks that these digital assets could pose to supervised institutions.”[133]  In addition, in December 2016, the ECB and the Bank of Japan (BOJ) launched a joint research project named “Stella,” which looks at the possible use of distributed ledger technology for financial market infrastructures.[134]

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Austria

The Austrian Ministry of Finance (Bundesministerium der Finanzen, BMF) does not qualify cryptocurrencies as legal tender or as financial instruments.

Instead, it classifies them as other (intangible) commodities.[135] It stated that cryptocurrencies are treated like other business assets for income tax purposes. According to the Ministry, “mining” generally is a commercial activity and is therefore treated like any other production of goods.

The same applies to the operation of online trading platforms and cryptocurrency ATMs.[136]

With regard to VAT, the BMF follows the jurisprudence of the ECJ in Hedqvist.[137] Transactions to exchange a traditional currency for bitcoin or other virtual currencies and vice versa are therefore exempt from VAT.

Bitcoin or other virtual currencies that are used as a means of payment for services or goods are treated the same as traditional means of payment.

Mining is not subject to VAT, because there is no identifiable recipient.[138]

The Austrian National Bank (Oesterreichische Nationalbank, OeNB) does not qualify bitcoin as a currency, because it does not fulfill the typical functions of money due to a strict limitation on quantity and no stabilizing central authority.[139] Bitcoin is currently not covered by the E-Money Act or the Payment Services Act.[140] Ewald Nowotny, governor of the OeNB, has pointed out the risks of cryptocurrencies.[141] He stated that “[b]itcoin & Co.

. . . are highly speculative investments which entail high risks for individuals.” He therefore welcomed the initiative of the Federal Minister of Finance, Hartwig Löger, to establish a Fintech Regulation Council to regulate cryptocurrencies. In addition, he voiced support for the amendment of the EU Money Laundering Directives, as well as the proposal of the Austrian Ministry of Finance to require prospectuses for ICOs and introduce licensing by the Financial Market Authority (FMA).[142] Finally he added that any regulatory initiative should be complemented by improving the financial education of the public.

Like the OeNB, the FMA has warned investors of the risks of cryptocurrencies.[143] It stated that virtual currencies like bitcoin and trading platforms are neither regulated nor supervised by the FMA.

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The FMA does not qualify them as legal tender payment instruments or as tradable foreign currencies. However, it pointed out that certain business models might require authorization from the FMA.[144] The FMA decides on a case-by-case basis whether an ICO requires authorization.[145]

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Belgium

Cryptocurrencies remain unregulated in Belgium, and there appear to have been very few official pronouncements on the subject.

In January 2014, the Belgian National Bank (Banque nationale de Belgique, BNB) and the Financial Services and Markets Authority (Autorité des services et marchés financiers, FSMA) issued a joint press release warning consumers about the risks of cryptocurrencies.[146]  Their main points were that cryptocurrencies are not legal tender, and that they are completely unregulated and do not fall within the purview of any monitoring or regulatory authority.[147] More recently, in December 2017, the governor of the BNB, Jan Smets, repeated in an interview that bitcoin is not an actual currency, as it is not guaranteed by a central bank or a government as a means of payment.[148]

The Belgian Finance Minister, in response to a question by a Belgian senator, stated in July 2013 that while bitcoin seems to be somewhat problematic as a tool for money laundering and other illegal activities, such problems should not be overstated.[149]  He also said that, based on studies by the BNB and the European Central Bank, bitcoin does not present any significant risks to price stability, to the financial system in general, or to its individual users.

Finally, in this same statement, the Minister of Finance indicated that government intervention with regard to bitcoin does not appear necessary given how small the bitcoin market was at the time.[150]

In April 2017, Belgian Minister of Justice Koen Geens announced that he plans to establish a legal framework for cryptocurrencies.[151]  One of the Minister’s main objectives is to set up a mechanism to verify the conversion and exchange rates of cryptocurrencies, similarly to what exists for traditional financial circuits.[152]  He also would like to better monitor those who promise unrealistic returns and conversion rates, as well as find ways around the anonymity of cryptocurrency payments so as to curtail their use as vehicles for money laundering.

Additionally, Geens would like to establish a mechanism for the courts to properly evaluate cryptocurrencies when they are seized as part of criminal investigations.[153]  This plan seems to be mostly aspirational, and no action appears to have been taken in furtherance of it so far.

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Bulgaria

On February 14, 2018, the National Bank of Bulgaria announced that it joins the position of the European supervisory authorities on the risks inherent in buying virtual currencies.

The Bank noted that such currencies show extreme price volatility and signs of a pricing bubble.[154] According to the Bank, consumers buying virtual currencies should be aware that there is a high risk that they will lose a large amount, or even all, of the money invested.[155]

Bulgarian tax authorities reportedly issued rulings in 2014 requiring individuals to pay taxes on gains from selling cryptocurrencies, similar to the sale of financial assets.[156]

In 2015 a Bulgarian court reportedly concluded that activities associated with buying, selling, and paying with cryptocurrencies are not subject to licensing requirements.[157]

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Croatia

On December 18, 2017, Croatia’s Financial Stability Council warned that individuals investing in virtual currencies bear sole responsibility for their losses and should be aware of possible taxation.[158] It stated that Croatian regulators are not responsible for the oversight of the individuals who issue virtual currencies or trade in them.

The Council noted that virtual currencies are associated with considerable risks, such as those of digital wallet theft and transaction misuse, fraud, etc. A similar warning was issued by the National Bank of Croatia on September 22, 2017.[159]

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Cyprus

The Central Bank of Cyprus has issued a warning stating that virtual currencies are not legal tender, that there are no specific regulatory protection measures to cover losses from their use, and that their prices are subject to volatility.[160]

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Czech Republic

On February 27, 2018, Mojmír Hampl, the Vice-Governor of the Czech National Bank (CNB) made the following statement:

The fact that cryptocurrencies are .

. . commodities [rather than currencies] also shapes our light-touch, liberal approach to regulation at the CNB. We do not want to ban them and we are not hindering their development, but we are also not actively helping or promoting them and we are not protecting them or the customers that use them.

Like in a casino, everyone investing in a cryptocurrency must be prepared to lose the entire bet. And central banks do not regulate casino visits.[161]

Amendments have been made to the Czech Republic’s anti-money laundering legislation, making it also applicable to persons providing services related to virtual currencies—i.e., those who buy, sell, store, manage, or mediate the purchase or sale of virtual currencies or provide other services related to such currencies as a business.[162]

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Denmark

Denmark has no laws specifically addressing cryptocurrencies, and no regulatory proposals on cryptocurrencies are pending in the Danish Parliament.

However, government agencies have issued a number of statements on cryptocurrencies.[163]

Denmark’s Finanstilsynet (Financial Supervisory Authority) issued a statement in 2013 rejecting the bitcoin as a currency and stating that it will not regulate bitcoin use.[164] In its statement the Financial Supervisory Authority emphasized that it has evaluated the use of the bitcoin system and found that it does not fall under any of the financial services categories, including the issuing of electronic money, payment for services, currency exchanges, or the issuing of mortgages; thus, bitcoin activity is not covered under current financial regulations.[165] In 2017 the Financial Supervisory Authority released a report on ICOs (Initial Coin Offerings) in which it stated that cryptocurrencies that are solely used as a means of payment continue to not be regulated by the Authority.[166] However, ICOs may be conducted in such a way as to fall under the purview of the Authority[167] and thus would be subject to Danish regulation—for example, “legislation on alternative investment funds, prospectuses, and money laundering.”[168]

The Danish Central Bank has been critical of cryptocurrencies.

In 2014, it issued an initial statement declaring that bitcoin is not a currency.[169] According to the statement, “[b]itcoin does not have any real trading value compared to gold and silver, and thus is more similar to glass beads.”[170] The Danish Central Bank went on to point out that bitcoins are not protected by any national laws or guarantees, such as a deposit guarantee.[171] Similarly, in a 2014 document the Danish Central Bank discussed virtual currencies, determining that virtual currencies are not regulated and therefore associated with high risks to consumers.[172] In 2017 the Director of the Danish Central Bank issued warnings against the use of bitcoin.[173] His critique of cryptocurrencies was reiterated in 2018.[174] In addition, the Danish Central Bank has made it clear that it is not in favor of the creation of an official Danish e-currency (issued by the Central Bank), unlike neighboring Sweden.[175]

SKAT (the Danish Tax Authority) has issued a number of statements on virtual and cryptocurrencies.

For example in 2014 it published a binding reply (a response to a public question from a taxpayer that is binding on the interpretation of the Tax Authority) in which it declared that an invoice amount cannot be issued in bitcoins, but must be issued in Danish kroner or another recognized currency.[176] The Authority went on to state that any bitcoin losses cannot be deducted as a cost of doing business when bitcoins are used as a means of payment.[177]  In 2016 the Authority discussed cryptocurrencies in relation to value-added tax (VAT) and found that cryptocurrencies are exempt from VAT.[178] The determination is consistent with the decision of the Court of Justice of the European Union in 2015.[179]  The Authority has also commented on how the mining of bitcoins should be treated from a VAT tax perspective.[180] The case involved a Danish person who wanted to sell hashing capacity on the electrical grid, an activity that was subject to VAT.[181]

The Danish Tax Council in 2018 declared that losses on sales of bitcoins purchased as an investment are tax deductible and that profits are subject to income taxation.[182]

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Estonia

On November 27, 2017, Estonia enacted amendments to its anti-money laundering legislation[183] that define cryptocurrencies (virtual currencies) as value represented in digital form that is digitally transferable, preservable, or tradable and that natural persons or legal persons accept as a payment instrument, but that is not the legal tender of any country or funds (banknotes or coins, scriptural money held by banks, or electronic money).

The anti-money laundering legislation now also applies to providers of a service for exchanging virtual currency with fiat currency and providers of a virtual currency wallet service, which is defined as a service in which keys are generated for customers or customers’ encrypted keys are kept, which can then be used for the purpose of keeping, storing, and transferring virtual currencies.[184] Virtual currency service providers are required to have a license.[185]

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Finland

Finland does not have specific regulations that deal with cryptocurrencies and there is no proposed legislation on cryptocurrencies pending in the Finnish Parliament.

However, a number of agencies have issued advisory statements on how they view cryptocurrencies.

The Finnish Financial Supervisory Authority issued an advisory in 2017 that cryptocurrencies are risk-filled investment alternatives.[186] It also noted that, depending on the initial coin offering (ICO), there may be regulatory effects of the purchase—for instance, EU rules on alternative investment funds.[187] In 2017 the Finnish Supervisory Authority also discussed the future of ICOs in a blog post.[188]

The Central Bank of Finland issued a statement in 2014 declaring that cryptocurrencies, especially bitcoin, are inherently associated with risks, noting that “[t]he use of Bitcoin is not currently supervised or regulated in any way,”[189] nor does it not amount to a payment service as defined in the Payment Services Act.[190] In a 2017 report published by the Central Bank, Central Bank affiliates were more positive, reportedly calling bitcoin “revolutionary” and “apparent[ly] functio[nal] and useful.”[191]

The Finnish Tax Authority (Vero Skatt) issued instructions for the income taxation of virtual currencies, including bitcoin, in 2013.[192]  When transferred to another currency, the rules on taxation of capital gains apply, the Tax Authority said.

When the currency is used as a form of payment for goods and services it is treated as a trade and the increase in value that the currency might have gained after it was obtained is taxable.[193] The sale of bitcoins at a loss in value compared to the original purchase price is not deductible under the Finish Income Taxation Act, because such a loss in value is not specifically described as deductible in the Act.[194] In 2017 the Tax Authority issued additional recommendations, stating that the exchange rate is determined at the time of realization of the bitcoin (i.e., when it becomes cash), and that cryptocurrency records should be kept for six years.[195]

Sales of bitcoins have reportedly resulted in millions in revenue for the Finnish Tax Authority.[196] The Tax Authority has monitored both those who trade and those who use cryptocurrencies.[197]

The Åbo Appeals Court is reported to have found that Finnish Customs may auction off bitcoins it has confiscated in relation to drug crimes, and as of February 2018 such bitcoins were estimated to be worth €19 million (approximately US$23.5 million).[198] The Finnish government is said to have issued guidelines on how to store confiscated bitcoins.[199]

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France

Cryptocurrencies remain largely unregulated in France, with two ordinances on blockchain technology being the only legislative action taken so far.

However, the French government is actively moving towards establishing a regulatory regime.