Cryptocurrency regulation in the world today

Against the backdrop of the tendency of financial institutions to escape the effects of the negative outflow of financial crises following the 2008 global financial crisis, the idea of a decentralized financial system has attracted massive attention. While cryptocurrency users have the ability to bypass financial intermediaries to validate financial transactions, in practice we see intermediaries in the crypto sector trying to incorporate, for example, virtual wallet services or the traditional cryptocurrency exchange functions.

Some such companies also manage to access their own customer fund and manage the resources in the fund like the banking sector.

The problem, however, is that these intermediaries, unlike the banking sector, are insufficiently regulated. The legal status of cryptocurrencies is quite unclear. There is a view within the EU that cryptocurrency regulation can be framed in the e-money directives (2009/110 / EC). But cryptocurrency fails to meet the e-cash recognition criteria set out in the Directive in the acquisition part.

The second European law in the context of which the regulation of cryptocurrencies is considered is the Tax Services Directive (2007/64 / EC), which regulates the principles of monetary payment, including the direction of electronic money, but says nothing about the issue of electronic money issuance and prudential regulation. Recently, the price of cryptocurrencies has undergone significant changes. This is largely due to the issue of regulation.

Statements about possible regulation of cryptocurrencies in China, the United States, Canada, Russia and other major countries will have a direct impact on cryptocurrency prices. Lack of regulation is an important part of the current price of Bitcoin. However, many countries have begun to adopt regulations.

The regulations mainly cover the status of cryptocurrencies and taxation. The three main tax models discussed below are the most discussed. The first approach uses income tax. Most countries tax cryptocurrency as a traditional income derived from employment or the sale of production. In most cases, revenue from cryptocurrency mining or trading is defined as “other economic activity”. Most European countries, including Latin America and Asia, use the same approach to income tax.

The second method of taxation is based on capital gains tax and applies to all “traders” who have invested in cryptocurrency to earn future profits. Profit tax on equity varies depending on short-term and long-term returns.

The idea behind this approach is that cryptocurrency is mainly used for its ownership and trading, like stocks, bonds, real estate and other property. Consequently, like any other asset, the value of a cryptocurrency may increase or decrease. The third method of taxation can be called mixed, because some countries do not use an unambiguous tax approach to cryptocurrency. In Sweden, for example, the exchange or sale of cryptocurrency is subject to capital gains tax. Mining cryptocurrency is even taxed as income from business operations.

A similar approach is used in Australia, in particular for tax purposes cryptocurrency belongs to “other business assets” and is subject to income tax (up to 0-55%, depending on income level). Companies that trade cryptocurrencies are required to pay a 25% retained earnings tax (45% in case of profit sharing). British tax law treats Bitcoin as an asset and not a legal currency. This gives rise to an obligation to pay income or return on equity (the “trader” pays the income and the investor pays the return on equity).

“Extraction” is considered part of the business, so it is subject to a standard 20% business tax. Individuals pay capital gains tax. Cryptocurrency investors in the US must submit earnings information to the Revenue Service. In the United States, the Revenue Service treats cryptocurrency as an asset.

Cryptocurrency may be classified as business property, investment property or personal property based on its taxpayer status. In legal terms, this means that an investment in cryptocurrency will be subject to capital gains tax. The amount of the tax depends on how long the investor holds the digital currency before making a profit from it. If an investor withdraws cryptocurrency in a short period of one year, he / she will have to pay a high return tax on capital (25%).

Approaches to taxation of cryptocurrencies in different countries are far from universal, but are similar to traditional taxation approaches and differ significantly from country to country. Despite their similarities to traditional approaches, some countries have introduced some innovations in cryptocurrency taxation and viewed cryptocurrency as a source of income or an asset that generates capital gains.

Time will tell which approach is better and only then will there be a logical conversation about unified tax approaches worldwide or regionally. Until then, global leaders in cryptocurrency regulation (USA, Canada, Australia, China) have a rather complex approach, while some Eastern European countries (Romania, Hungary, Lithuania) are leaders in ease of taxation.

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