Cryptocurrencies and regulations around the globe: What you need to know


Cryptocurrency regulations around the world vary widely, as this 2018 survey by the US Library of Congress illustrates. But while regulators in different countries take very different approaches – they often can’t even agree on the same terminology to describe cryptocurrencies – they’re pretty consistent in one way: in their notes of caution for investors.

“One of the most common actions identified across the surveyed jurisdictions is government-issued notices about the pitfalls of investing in the cryptocurrency markets,” the Library of Congress states in its report summary. “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 organisations that facilitate such transactions are unregulated. 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.”

Beyond such words of warning, however, regulators take a wide range of stances on cryptocurrencies. Some – such as those in Algeria, Bolivia, Egypt, Iraq and a handful of other countries – ban virtual currencies completely. Others like China and Russia don’t specifically prohibit cryptocurrencies but outlaw transactions in such currencies. China has also barred domestic cryptocurrency exchanges, ICOs, bank funding of cryptocurrency-related activities and access to overseas platforms for ICOs and cryptocurrency trading.

Among countries where cryptocurrency transactions are allowed or even encouraged, regulations also vary considerably. For example, countries like Spain, Belarus, the Cayman Islands, and Luxemburg might not recognise cryptocurrencies as legal tender, but they do seek to create an investment-friendly environment for the crypto sector. And various regulators take different spins on cryptocurrencies, choosing to focus more on, say, restricting their uses in money laundering or funding terrorism (the Cayman Islands, Isle of Man and Singapore choose this approach) or on the appropriate tax regimes for cryptocurrencies (this is the approach favoured in places like Austria, Sweden and the UK). In the US, the Treasury Department has said it will treat individuals and organisations that use virtual currencies as money services businesses.

Just as the crypto world itself changes quickly, though, so too do the rules and regulations applied to them. Recent moves to change how cryptocurrencies are regulated have been undertaken in Bahrain, India, Indonesia, Iran, the Philippines and Russia, among other countries. And continued changes will certainly be on their way during the year ahead.

“While it remains unclear as to whether the US will continue with its piecemeal approach or whether Congress will act to establish a new regulatory framework, it is clear that interest in regulating this space is continuing to grow,” PwC noted in a recent regulatory brief. “If a new framework in the US emerges, other global regulators will likely follow with similar requirements. Going forward, a smart first step for issuers and exchanges –regardless of their location –is to establish sound sales and registration practices, responsible market conduct rules, robust cybersecurity programs, anti-fraud procedures, and cohesive AML [anti-money laundering] programs as these areas will continue to be key areas of concern from regulators both domestic and abroad.”

Increased regulation is “a very good thing”, the Brookings Institution noted late last year. “A cryptocurrency market that is effectively regulated will mean a decrease in the herd-driven volatility exciting the market – even as the value of cryptocurrencies continues to rise.”

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