Blockchain and Cryptocurrency Regulations in Developed Countries with the Largest Crypto Markets
Japan; Cryptocurrencies as a Legal Payment Method
Japan has one of the largest cryptocurrency markets in the world. According to gathered data by Japan’s Financial Services Agency (FSA, a financial, legislative body in Japan), this country has about 3.5 million cryptocurrency businessmen, and the annual trades of this country are as a whole more than $97 billion. In these reports, the age of most of these people is about 30, and about 14 percent of the youth of this country have invested in the cryptocurrency industry.
Given the considerable number of cryptocurrency markets in Japan, FSA has a lot of activities in return. The domestic policies of Japan are such that the digital markets in this country are known as one of the most powerful and compatible digital markets in the world. Moreover, Japan is one of the first countries that has legalized the Bitcoin cryptocurrency. As such, from May 2016 until today, Bitcoin and other alternate cryptocurrencies available in the market are proposed as legal payment methods in this country; nonetheless, cryptocurrencies are still not known as legal in this country. In the April 2017, legislation sources of the local payment services in Japan published documents according to which cryptocurrencies are proposed as a payment method, and there are more legislative measures set to be in place for cryptocurrency exchanges and ICOs. In December 2018 the FSA decided to put Bitcoin and other cryptocurrencies in a unified group called the “cryptocurrency assets.” The Japanese government was worried about this categorization because cryptocurrencies are known with the name of “virtual money,” and this confuses businessmen and makes them think they are purchasing licenses that are recognized by the government.
China; Trading Cryptocurrencies Prohibited and Unlegislated
China has one of the most important cryptocurrency markets in the world and is considered an important player in this global industry because China alone has a bigger share in mining Bitcoin and the volume of Bitcoin trades. In 2017 it was estimated that about 50 to 70 percent of the global Bitcoin mining process happens in China; nevertheless, after banning the activity of crypto exchanges and ICOs in China in September 2017, Bitcoin mining and the volume of its trades has a considerable decrease. However, China has not let go of the cryptocurrency industry altogether and is turning to one of the biggest Blockchain powers in the world.
Currently, there is a legal suppression wave in China and by virtue of that people can own cryptocurrencies, but are not allowed to exchange them with fiat money. According to local government reports, Chinese legislators do not recognize cryptocurrencies as legal money or a tool for payment operations, and the banking system of China has not recognized cryptocurrencies under any circumstances.
United States of America; Various legislations, Based on Agencies’ Different Approaches
Compared with other legislative federal agencies, United States Congress such as U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), has the upper hand and thus can force the legislative organizations to issue licenses. United States Congress does not interfere in legislating cryptocurrencies and offering a clear and precise definition of them; instead, it’s chosen to be silent. In such conditions, different legislative agencies have taken this upon themselves, and each legislative body imposes its own different and unique attitude toward cryptocurrencies. According to a 70-year test called Howey, which was used by the SEC to determine the legal limit of its jurisdiction, securities include investing money in a joint corporate in which an investor gains most of his profits based on another person’s endeavors. Despite this fact, SEC said that the Bitcoin and Ethereum cryptocurrencies do not fit into the security tokens category. This means that during the seizure and ending the activities of unregistered securities, the ICO of these assets will be reevaluated by the SEC.
U.S. Commodity Futures Trading Commission (CFTC) is the agency in charge of controlling the trades of derivative goods and claims that tokens are a type of good. From the point of view of this legislative body, the performance of the Bitcoin cryptocurrency is not similar to conventional money or securities, and acts more like gold, since the government does not back it, and there are no responsibilities tied with this cryptocurrency.
The Financial Crimes Enforcement Network (FinCEN) which is fully in charge of the Know-Your-Customer process and Anti-Money Laundering matters, recognizes cryptocurrency tokens as money. According to the opinion of this legal body, offering ICOs comes under the laws for banking secrets and money transfer laws; thus, they are registered in government documents, and they should gather the information of their customers, and suspicious financial behavior must be reported immediately.
The Internal Revenue Service (IRS) believes that cryptocurrencies are not considered to be a kind of money as well; rather, that they are a type of property. This means that while selling cryptocurrencies in order to gain profits, the resultant profits must be taxed.
In this situation, the legislative condition in the U.S. has become very complicated and may undergo changes in the future. In December 2018, a two-sided bill with the title of “categorizing tokens in order to avoid excessive control over cryptocurrencies in this country” was proposed by two representatives in the Congress. These documents were, in fact, a way of bringing more scrutiny and transparency in registering ICOs and the related tax policies. (part 3)