Owning cryptocurrencies is legal in most parts of the world, but it’s worth it to know how your country regulates them.
RIGA, LATVIA, February 9, 2021 /EINPresswire.com/ — With cryptocurrencies getting more popular than ever before and a growing number of new investors looking to purchase bitcoin, it’s easy to see why the governments are quickly setting up regulations to control this market.
Owning cryptocurrencies is legal in most parts of the world, but it’s worth it to know how your country regulates them. That’s why we are going to discuss how the UK, Japan, and Switzerland are regulating cryptocurrencies nowadays.
How Does the UK Regulate Cryptocurrencies?
The UK actively regulates cryptocurrencies. For a crypto exchange to operate in the country, it needs to be registered with the FCA (Financial Conduct Authority). Furthermore, cryptocurrencies are considered as financial instruments under the Markets in Financial Instruments Directive II.
To buy cryptocurrencies such as BTC, UK crypto investors need to register with the FCA’s regulations, to prove that they are not funding terrorism or getting involved in money laundering.
Therefore, exchanges and crypto companies require their customers to go through KYC (Know Your Customer), to verify their identity to contribute to the FCA’s anti-money laundering efforts. This counteracts the anonymity factor of cryptocurrencies, but it’s the only way for many investors and enthusiasts to get involved in the crypto market.
Other than that, you also need to know that cryptocurrencies are taxable. Therefore, you need to track and report your transactions to pay the corresponding taxes. In most cases, you have to pay taxes on capital gain whenever you sell, and the amount will vary depending on your taxpayer tax rate (for example, 25% for a higher rate taxpayer).
Cryptocurrency Regulations in Japan
Similar to the UK, Japan has also started to regulate the crypto market. Therefore, the government has forced exchanges to meet the regulations, standards, and procedures of the Payment Services Act, in order to operate legally in the country.
The even that provoked the government to regulate the crypto market and activities was the Mt. Gox case. It became the largest exchange in 2014 because they handled 70% of the bitcoin available worldwide. However, after the theft of 850,000 bitcoins that happened in their problem, they claimed insolvency. Therefore, all of their customers’ bitcoins were lost.
Under Japanese law, cryptocurrencies or crypto assets are not deemed as real money, and hence, they cannot be equated with fiat currencies.
Further, the Japanese government also enabled the Act on Prevention of Transfer of Criminal Proceeds, to list the exchanges as companies subject to money laundering regulations. Similar to what is happening in the UK.
However, Japan hasn’t been aggressive towards exchanges or crypto companies, and that also extends to investors and traders. Japan taxes the following activities:
4. Selling (capital gain)
The tax rate for any of these activities can go as high as 55% for residents. On the other hand, non-residents can enjoy a 20% tax rate on income, which they will need to pay upon leaving Japan.
Unlike the UK, the taxation isn’t as exhaustive, and therefore, it’s easier to track and report. However, you should consult with an accountant.
The Regulations for the Crypto Market in Switzerland
Switzerland is one of the countries with the most friendly regulations and environment towards cryptocurrencies. They are even quite flexible when it comes to ICOs (Initial Coing Offering).
The Swiss Financial Market Supervisory Authority is positive about cryptocurrencies as they have expressed the potential of cryptocurrencies to innovate the financial services in the country.
Switzerland currently holds a specific federal regulatory framework for cryptocurrencies. Below, find the most important points.
Cryptocurrencies and its exchanges are subject to the Anti-Money Laundering Act, and hence, there might be a need to identify the beneficial owner and the contracting party. This extends to individuals who exchange cryptocurrencies for FIAT currencies as well as all cryptocurrencies. Therefore, traders are subject to the regulations in the country.
Furthermore, Switzerland is actively working to combat fake cryptocurrencies, such as the case of E-Coin. This is actually positive for the industry because it brings more transparency.
Also, it’s important to remember that cryptocurrencies are subject to wealth tax and income tax, depending on the circumstances. Furthermore, you might also need to pay capital gains tax and you can deduct losses when trading. For more information about the taxes that you need to pay, consult with an accountant specialized in cryptocurrencies.
Unlike Japan and the UK, exchanges can operate with more freedom in Switzerland. Hence, it’s a friendly environment for the crypto and blockchain industry that is attracting more companies and investors.
As you can see, governments around the world are trying to regulate the crypto market. As long as they don’t interfere directly, these regulations might help to add more transparency to the market and the industry. Let us know what you think in the comments!
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