Cryptocurrency Classifications from Around the World: How Different Countries Classify Crypto Assets
Cryptocurrencies are here to stay, and countries around the world have started noticing this. While many of them have been attempting to deal with cryptos in different ways, only a few have seen any real success when it comes to bringing proper regulations and guidance, as of yet.
Some believe that the reason for this may lie in uncertainty surrounding the crypto space, while others think it might be due to the lack of trying. Whatever the case may be, here is how countries around the world have been dealing with cryptocurrencies so far.
The United Kingdom
The UK has been making steps towards bringing proper crypto regulations recently, with one of the biggest one occurring less than a week ago, on January 23rd. This is when the UK regulator, the FCA, released a consultation paper called “Guidance on Cryptoassets.”
The paper is 50 pages long, and it shows that the UK is considering taking a neutral approach to crypto. The document is mostly focused on bringing some level of regulatory clarity to traders and investors. It seems that the FCA attempted to help investors understand whether or not their chosen cryptocurrency complies with the country's current regulations, and other similar details.
The regulator has also presented several potential definitions of crypto assets by the current UK laws, such as “Specified Investments.” Furthermore, the paper has divided cryptocurrencies into three categories — exchange tokens, utility tokens, and security tokens. Exchange tokens, according to the paper, are not issued and backed by central authorities, while they are created and intended to be used as a means of exchange. Utility tokens are coins that give access to a certain product but are not covered by the regulatory regime. As for the security tokens, they are classified as tokens similar to traditional instruments, such as shares.
Meanwhile, the country's crypto industry remains relatively modest, with only 15 exchanges which have a total daily trading volume of around $200 million. This amount represents only 1% of the total daily crypto trade on the global level. Even so, the UK regulators remain strict and have recently announced an investigation of 18 companies that use cryptocurrencies.
The situation is noticeably different in Japan, which is one of the largest crypto markets in the world. Japan's financial regulator, the FSA, has noted that there are around 3.5 million crypto traders in Japan, with the annual transaction volume exceeding $97 billion. While the majority of traders appear to be businessmen around 30 years of age, there is also a significant increase in young traders, around 14%.
Furthermore, Japan's regulator has been among the most active regulatory authorities around the world. As a result, the local crypto market has grown to be one of the most regulation-oriented and compliant markets, globally. It is also noteworthy that Japan was among the first countries to recognize and start using Bitcoin, since May 2016.
Even so, cryptos are still not a legal tender in Japan, although they can be legally used as a form of payment. In late 2018, Japan has proclaimed that all cryptocurrencies are to be considered “crypto assets.”
China has taken a completely opposite approach to cryptocurrencies, even going as far as to ban the crypto trade after the government crackdown on ICOs and local exchanges in 2017. While the country used to be a big player in the crypto market, and the largest mining pools are still located there, regulatory repression prevents China's citizens from exchanging cryptocurrencies for traditional money, even though they are still allowed to have cryptos in their possession.
The United States
While the regulatory agencies in the US are typically subjected to the US Congress, the situation gets a bit more complicated when it comes to cryptocurrencies. The main reason for this is the fact that the Congress did not attempt to define or regulate cryptos in any way, leaving such matters to the SEC and CFTC.
The SEC is in charge of overseeing security transactions, and the regulator mostly views cryptos as securities. They did, however, announce that Bitcoin and Ethereum are not securities, which will keep their ICOs outside of regulators' reassessment, while others have been mostly shut down. As for CFTC, this is an agency in charge of overseeing the commodity derivatives, and it believes that tokens should be considered commodities. In other words, they see Bitcoin as an asset closer to gold than fiat currencies and securities.
There is also the Financial Crimes Enforcement Network, or FinCEN, which is in charge of KYC and AML procedures, and which views cryptocurrencies as money. As for the IRS, it also believes that cryptos are not real currencies, and the service would rather describe them as properties, which should be subjected to taxation. For the most part, the crypto situation in the US currently remains unresolved, especially now, due to the government shutdown which has been lasting for over a month.
Germany has recognized cryptocurrencies as private money, although they have yet to receive the status of a legal tender. With the status of money, cryptocurrencies are subjected to a capital gains tax in this country, although they become tax-exempt if held for longer than one year.
In Switzerland, cryptocurrencies are considered to be properties, and the country continues to remain one of the crypto-friendliest areas in the world. As such, it started attracting investors, companies, and all other crypto-dealing entities, such as Hong Kong-based crypto wallet Xapo. However, Switzerland also does not allow the acceptance of cryptocurrencies as legal tender.
Italy, Singapore, And South Korea
In Italy, South Korea, and Singapore, cryptocurrencies remain unregulated, although Singapore is considered to be an excellent market for crypto. As such, it started attracting investors and companies, similarly to Switzerland.
Meanwhile, Italy had made a move towards regulating crypto less than a week ago, when the Italian Senate committee approved amendments regarding the blockchain industry. The document is currently only providing some basic terms regarding the crypto industry and defining them. The next step for the document is to gain approval from the Italian parliament, Chamber of Deputies, and the Senate of the Republic.
As for South Korea, the country has been known for being one of the crypto industry's leader ever since the surge of late 2017. In fact, in 2017, the country was the third largest crypto market in the world, after the US and Japan. In 2018, however, the country cracked down on ICOs, similarly to China. Even so, they are still among the biggest blockchain hubs in the world, and while there is quite a lot of regulatory uncertainty yet, things might change for the better in the near future.