The Financial Supervisory Authority (FSA) and the central bank have publicly declared that bitcoin is legal but not an official form of payment or legal tender. From a tax perspective they are viewed as an asset, not a currency or cash.
The FSA has warned of the risks associated with cryptos and investment products with cryptos as underlying assets such as exchange-traded products (ETPs). Sweden has imposed registration requirements that mean custodians, wallet providers and exchanges must comply with the Swedish Currency Exchange Act. The act requires certain types of financial institutions (which are otherwise largely unregulated and unsupervised) to comply with AML provisions.
The scope of the Currency Exchange Act now includes custodian wallet providers and providers of virtual currency exchange services in accordance with the implementation of AMLD5.
Mining activities are not regulated under Swedish law. There are no licensing or registration requirements specifically applicable to virtual currency mining activities.
Sweden’s Central Bank, the Riksbanken, has been a leader in developing a CBDC, the e-krona.
Swedish income tax law has different categories of income such as employment income, self-employment income, business income and investment income. Capital gains are treated as investment income. Sweden imposes capital gains tax on cryptocurrencies at a flat rate of 30%. Losses are deductible up to 70%. Income tax is based on a progressive model with average rates around 32%.
Switzerland is known as one of the most cryptocurrency-friendly nations in the world. Switzerland’s financial markets regulator, the Swiss Financial Market Supervisory Authority (FINMA) has defined licensing requirements for cryptocurrency businesses of all types including bitcoin kiosk operations, and has created requirements for blockchain companies.
Cryptocurrency businesses are subject to AML regulations and licensing requirements under FINMA. FINMA’s regulatory environment complies with the FATF’s digital asset regulation issued in June 2019.
Switzerland further improved its regulations surrounding tokens with the July 2021 implementation of the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (the DLT Act).
In Switzerland capital gains arising from a “private wealth asset” are exempt from income tax. This applies to capital gains from cryptos. Realized gains arising from the disposal of cryptocurrency are therefore not subject to tax. Losses arising from the disposal of cryptocurrency assets are not tax-deductible. Under Swiss tax law, cryptocurrencies are considered items that can be valued and traded. They are therefore assets that are subject to wealth tax. Tax rates vary.
In the midst of a financial, currency and debt crisis, Turkey’s regulatory environment surrounding cryptos is a very mixed picture. Although it is not “illegal” to own cryptos, authorities have demanded user information from crypto trading platforms and regulators frequently cite crypto as a form of evasion for capital controls and taxes.
In April 2021, Turkey’s Central Bank banned the use of cryptocurrencies saying they may be used, directly or indirectly, to pay for goods and services.
In May 2021, President Erdoğan issued a decree that added cryptocurrency exchanges to a list of institutions that must operate under AML/CTF regulations. Despite the harsh rhetoric, bans on use in payments, and lack of any regulatory supervisory authority, public interest by Turkey’s citizens has soared as they are increasingly adopting and using cryptocurrencies.
The Financial Crimes Investigation Board (MASAK) oversees crypto service providers on AML and compliance issues. The Capital Markets Board (SPK) governs the crypto market, including ICOs and token offerings.
MASAK published a guide for crypto asset service providers and President Erdogan have announced that a bill regulating digital assets is forthcoming.
Turkey is developing a digital central bank currency.
Ukraine is one of the top countries in usage of cryptocurrencies. In September 2021, the Ukrainian Parliament adopted a draft Law No. 3637 “On Virtual Assets” which introduced a basic regulation regarding all virtual assets. The law establishes general provisions regarding ownership, conduct of businesses, their circulation, and liabilities. The law uses the term “virtual asset” as which covers any type of crypto asset. Under the law, a virtual asset means a set of electronic data which has certain value and exists in the system of virtual assets circulation.
The law stipulates and distinguishes cryptos as assets and that they are not to be used as instruments of payments. It further distinguishes between “secured” or “unsecured” virtual assets. Secured virtual assets are secured by fiat currency and unsecured are any other type of virtual asset. Secured assets presumably would include stablecoins and unsecured would include other cryptos such as bitcoin.
The bill was passed in February 2022 and signed into law by President Volodymyr Zelensky in March 2022. After the Russian invasion of Ukraine, the country received more than $100 million in crypto donations to support the country’s defense effort.
The UK Financial Conduct Authority (FCA), HM Treasury and the Bank of England make up the country’s Crypto-assets Taskforce.
The FCA has created regulations to cover KYC, AML and CFT tailored for crypto-assets. It has also created regulations to cover VASPs, but has been careful to not stifle innovation.
Crypto exchanges must register with the FCA unless they have applied for an e-money license. Cryptocurrencies are not considered legal tender and taxes are levied based on activities. The FCA has banned the trading of cryptocurrency derivatives.
The Law Commission published a call for evidence on digital assets in April 2021. The request seeks input from stakeholders ahead of publication of a consultation paper on digital assets which will make proposals for new legislation.
In February 2022, the UK government and the FCA published complementary reform proposals to bring financial promotions for some “qualifying crypto-assets” into HM Treasury’ financial promotions regime and into the FCA financial promotions rules.
There is no specific UK regulatory regime that captures the activities of crypto miners.
Although there is no specific UK tax legislation applicable to cryptos, HM Revenue and Customs has set out its view of the treatment based on normal principles. Receipt of cryptos from an employer are treated as “money’s worth” and are taxed as income based on the value of the assets at the time of receipt. Where cryptos are held as personal investments, capital gains tax applies upon disposal. In cases where frequent trading is involved, income tax rather than capital gains may apply.
Pacific region, Asia, and Australia
In 2018 new laws for digital currency exchange providers were implemented by the Australian Transaction Reports and Analysis Centre (AUSTRAC), the financial intelligence agency and AML/CTF regulator.
Firms are required to register and implement KYC policies, report suspicious transactions and comply with AML legislation.
In December 2021, Australia said it will create a licensing framework for cryptocurrency exchanges and consider launching a retail CBDC as part of an overhaul of its payment industry. Josh Frydenberg, the Treasurer, said the government would begin consultation in early 2022 on establishing a licensing framework for digital exchanges, allowing the purchase and sale of crypto-assets by consumers in a regulated environment.
The government would also consult on regulating businesses that hold crypto-assets on behalf of consumers, and on the feasibility of a central bank digital currency, Frydenberg said.
Taxes on cryptos in Australia, generally are subject to capital gains taxes which range from 19 to 45%.
The Bangladesh Central Bank issued warnings in 2014 and 2017 related to transactions in cryptocurrencies and warned violations could be punishable by up to 12 years in jail under existing money laundering and terrorist financing regulations. Despite prohibitions on the use of cryptocurrencies, Bangladesh has proposed a national blockchain strategy, perhaps signaling a change in the future. Concerns about a foreign flight of local capital are a major concern hindering cryptos, however.
Despite an international reputation for being hostile to cryptos, some attorneys argue that the acts of parliament fall short of criminalizing or even banning cryptos. Despite the restrictions, there are no verified reports of arrests, charges or convictions, related to the use of cryptos.
The People’s Bank of China banned financial institutions from dealing in cryptocurrencies in 2013 and later expanded the ban to cover crypto exchanges and ICOs. China was the epicenter for mining because of low electricity costs. At its peak it was estimated that more than 65% of bitcoin mining was taking place in China.
The government considered a ban on crypto mining, but in 2019 reconfirmed that it would remain legal. In May 2021, China’s Financial Stability and Development Committee, the financial regulatory agency under Vice-Premier Liu He, said the Chinese government would “crack down on bitcoin mining and trading behaviour, and resolutely prevent the transfer of individual risks to the society.”
Most experts now estimate Chinese mining to be, in effect, near zero.
Despite the PBOC’s embrace of blockchain technology and efforts to be on the forefront of developing the central bank’s digital currency, the digital yuan, the ban on mining and all other crypto-related activities was one of the most noteworthy events in cryptos in 2021.
Hong Kong has long been vying to establish itself as a fintech innovation hub. The Hong Kong Securities and Futures Commission (SFC) has, however, enacted a strict regulatory framework and licensing requirements for VASPs.
It has also proposed a ban on crypto trading for retail investors under which only professional investors who have more than HK$8 million in assets would be allowed to trade.
Hong Kong’s regulation of crypto has been unclear in recent years. China’s ban on cryptos has caused uneasiness in Hong Kong, with many fintech and crypto firms leaving or downsizing operations in the region.
Hong Kong began to take steps to close legal loopholes which have allowed crypto exchanges to operate. In January 2022, however, the Hong Kong Monetary Authority (HKMA) issued two papers: one on stablecoins and another on crypto-related exchange-traded funds.
Bitcoin is defined as a virtual commodity and not legal tender. There are no capital gains taxes and AML/CFT laws apply to every individual or business in Hong Kong, irrespective of activity and are in accordance with FATF requirements.
In Indonesia virtual currencies are not considered legal tender. In 2019 the Indonesian Commodity Futures Trading Regulatory Agency (Bappebti) approved regulation no. 5/2019, which legally recognizes and regulates bitcoin and other cryptocurrencies as commodities. Derivative transactions and cryptocurrency exchanges are also subject to regulatory requirements of Bappebti.
The regulation defines a crypto-asset as “an intangible commodity in the form of a digital asset that uses cryptography, a peer-to-peer network and distributed-ledger technology to regulate the creation of new units, verify transactions and ensure transaction security without the involvement of a third-party intermediary.”
Bank Indonesia, the country’s central bank, has banned the use of cryptocurrencies as a payment tool.
Indonesia has also banned financial firms from facilitating crypto sales. Indonesia’s Financial Services Authority (OJK) said it has “strictly prohibited financial service institutions from using, marketing and/or facilitating crypto asset trading,” the regulator said in a statement posted on Instagram.
The ministry is facilitating the establishment of a separate bourse for digital assets, called the Digital Futures Exchange, which officials say will be launched in the first quarter of 2022.
It warned that the value of crypto-assets often fluctuates and that people buying into the digital assets should fully understand the risks.
The warning follows similar concerns by the central banks of Thailand and Singapore.
Japan has one of the most progressive and developed regulatory regimes for cryptocurrencies. Cryptocurrency exchanges must be registered and comply with traditional AML/CFT and other regulations. They are regulated under the Payment Services Act (PSA), which defines “cryptocurrency” as a property value and not a legal tender. The PSA defines “crypto-assets” as payment methods that are not denominated in fiat currency and can be used to pay unspecified persons.
In December 2017, Japan’s National Tax Agency ruled that gains on cryptocurrencies should be categorized as “miscellaneous income” and taxed accordingly. There have been several new regulations and amendments to the PSA, and to the Financial Instruments and Exchange Act (FIEA), introducing the term “crypto-asset,” and regulating crypto derivatives trading. Cryptocurrency custody service providers (that do not sell or purchase crypto-assets) fall under the scope of the PSA, while cryptocurrency derivatives businesses fall under the scope of the FIEA.
In April 2020, Japan was the first country to create self-regulatory bodies, the Japanese Virtual Currency Exchange Association (JVCEA) and the Japan STO Association. The JVCEA and the STO Association promote regulatory compliance and play a significant role in establishing best practices and ensuring compliance with regulations.
In Japan, gains associated with cryptos are considered miscellaneous income. Tax rates on crypto gains vary and depend on individual income. Rates can be as high as 55%.
The Securities Commission Malaysia (SC) issued guidelines on the regulation of various digital currency platforms operating in the country. The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 ruled that digital tokens are “securities” for purposes of securities laws.
Digital currency is defined as “a digital representation of value recorded on a distributed digital ledger that functions as a medium of exchange and is interchangeable with any money, including through the crediting and debiting of an account.” All exchange offerings and digital asset custodians are required to register and “assess and conduct the necessary due diligence on the issuer, review the issuer’s proposal and the disclosures in the whitepaper, and assess the issuer’s ability to comply with the requirements of the Guidelines and the SC’s Guidelines on Prevention of Money Laundering and Terrorism Financing.”
The position on the taxation of cryptos in Malaysia is unclear. The Inland Revenue Board of Malaysia (IRB) has not issued definitive guidelines on the taxation of cryptos.
With regards to cryptocurrency transactions, the IRB has cited Section 3 of the Income Tax Act 1967 and indicated that the provision can be applied to active cryptocurrency traders.
The IRB has said further that several factors may determine whether profits from crypto activities would be subject to income tax.
The Financial Markets Authority of New Zealand (FMA) has determined that additional obligations will apply to certain activities considered “financial services” include exchanges, wallets, deposits, broking and ICOs involving crypto-assets that are classed as “financial products” under the FMC Act of 2013.
However, the FMA said in September 2021, “Cryptocurrencies are not legal tender (money that must be accepted as payment) in most countries and do not exist physically as notes and coins. They are also not viewed as financial products so are not regulated in New Zealand.”
The Inland Revenue Department of New Zealand considers cryptocurrencies as “property,” with gains and losses taxable as income.
The Philippine Central Bank, the Bangko Sentral ng Pilipinas (BSP) requires VASPs to register. The BSP has developed an AML framework in line with FATF guidelines.
The BSP licensing requirements include exchanges of virtual assets and fiat currency. All transactions are treated as cross-border wire transfers and crypto service providers are expected to comply with relevant BSP rules. Additionally, BSP licensed firms must comply with rules for money service businesses such as liquidity risk management, IT risk management and consumer protection.
The BSP has published and updated FAQs for the public related to virtual currencies.
The National Internal Revenue Code (NIRC) of the Philippines states that any income of an individual or corporation, in whatever form, obtained in the Philippines is taxable.
Cryptocurrencies are regulated by the Monetary Authority of Singapore (MAS). The Payment Services Act of 2019 regulates traditional and cryptocurrency payments and exchanges. The Securities and Futures Act is also applicable to public offerings and issues of digital tokens.
A May 2020 Guide to Digital Token Offerings published by the MAS details the regulations surrounding digital tokens and their applicability to securities, collective investments, derivative contracts and the determination of whether a token is a type of “capital market product.” The AML/CFT provisions under the PSA address the risk of financial crimes and promotes best practices, including KYC, to help crypto businesses comply with the new regulatory framework.
In February 2022, the MAS issued Guidelines to Discourage Cryptocurrency Trading by General Public. The new guidelines clarify the expectations that digital payment token (DPT) service providers should not engage in marketing or advertising of DPT services to the general public in Singapore.
The Inland Revenue Authority has said, “Businesses that choose to accept digital tokens such as bitcoins for their remuneration or revenue are subject to normal income tax rules. They will be taxed on the income derived from or received in Singapore. Tax deductions will be allowed, where permissible, under our tax laws.”
 https://www.iras.gov.sg/taxes/corporate-income-tax/income-deductions-for-companies/taxable-non-taxable-income#:~:text=Trading%20in%20 Digital%20Tokens,-Businesses%20that%20buy&text=Businesses%20that%20buy%20digital%20tokens,are%20not%20subject%20to%20tax.
South Koreans were early bitcoin pioneers and have been enthusiastic traders and investors in cryptos. In 2021, total trading volumes for cryptos in South Korea surpassed that of the domestic equities market. Regulators in South Korea have taken a cautious approach to cryptocurrency exchanges and companies. Companies are subject to equivalent AML and tax obligations as other financial institutions.
Following several large crypto-exchange hacks, South Korea passed the “Act on Reporting and Using Specified Financial Transaction Information,” also known as the Financial Transaction Reports Act (FTRA), which requires VASPs to register and comply with AML regulations.
South Korea has sought to ensure market integrity compliance with the FATF. Regulators have also emphasized the importance of safety of trading platforms. New rules went into effect in 2021 requiring all crypto service providers to register with the Korean Financial Services Commission. Platforms must also comply with AML obligations and acquire an Information Security Management System (ISMS) certificate from the Korea Internet & Security Agency (KISA).
In South Korea virtual assets are categorized under “other income” for tax purposes. In late 2020, South Korea authorized an initiative to tax crypto trading profits in 2022. Gains will be taxed at a rate of 20%. Korea’s National Tax Service has also widened the crypto tax law to include foreign crypto exchanges and businesses.
The amended law will tax 20% of profit from crypto transactions in excess of 2.5 million Korean won, or about $2,200. Korea’s National Tax Service (NTS) has since expanded the crypto tax law on accounts by domestic investors to foreign crypto exchanges and businesses.
Taiwan’s Central Bank and Financial Supervisory Commission (FSC) have warned that cryptocurrencies are not currencies, but rather commodities and have no legal protection. The FSC has been empowered under the country’s Money Laundering Control Act and Terrorism Financing Prevention Act to require users on trading platforms to register their “real names.” The FSC implemented new money laundering regulations for the nation’s cryptocurrency exchanges, requiring them to report transactions valued at more than NT$500,000 ($17,770),
The FSC has required platform operators operating STO business to obtain a securities dealer’s license and comply with the securities business prevention system Money Laundering and Anti- Terrorism (AML/CFT) regulations. Banks must report suspicious anonymous transactions.
There are no regulations on crypto mining.
With the exodus from China following the government crackdown, many expected Taiwan to be a beneficiary; but, many still view Singapore as more crypto-friendly.
The trading of cryptos on a platform within Taiwan may be deemed a sale of services and thus subject to Taiwan business tax.
The Securities and Exchange Commission of Thailand regulates cryptocurrencies under an Emergency Decree on Digital Asset Businesses B.E. 2561 issued in 2018. Under the decree, digital asset businesses are required to apply for a license, monitor for unfair trading practices, and are considered “financial institutions” for AML purposes among others.
The Thailand Central Bank has said repeatedly that it does not support use of crypto as payments. In January 2022, the central bank and market regulator announced plans to ban digital asset operators from facilitating use of crypto as a means of payment for goods and services.
Digital asset business operators have expanded their businesses to cover services related to the use of digital assets as payments, which may result in a wider adoption of such activity, they said in a joint statement.
That could potentially affect financial stability and the overall economic system, they said in the statement.
A public hearing on the new rule will be held until February 8 before it will be effective, Charuphan Intararoong, assistant secretary-general at the Securities and Exchange Commission (SEC), told a news conference. It will not yet cover use of digital assets as payments between merchants and customers, while trading of crypto assets is still allowed, Charuphan said.
“Investors, consumers, and citizens can still trade digital assets for investment as usual,” she said.
The central bank and relevant agencies will consider allowing digital assets that are beneficial to the country to operate, however, said Siritida Panomwon Na Ayudhya, assistant central bank governor, without elaborating.
Trading and use of cryptocurrencies have gained momentum in Thailand, with retailers and real estate developers accepting digital assets as payments.
Gains are taxed as income and subject to the highest tax bracket of 35%.
Russia, Middle East, Africa, and other countries
The 2018 Financial Law of Algeria prohibits the use of any cryptocurrencies as well as the purchase, sale, use, and possession of virtual currencies.
In 2020 the Bahamas passed the Digital Assets and Registered Exchange Bill (DARE) putting in place a framework for digital assets. The law creates opportunities for FinTech firms and facilitates the registration of exchanges and other business involved with digital tokens.
The legal framework is being heralded as one of the most comprehensive regulatory structures and standards in the world while also welcoming to the industry.
The Bahamas Central Bank was the first to launch a CBDC, the Bahamian “Sand Dollar” in October 2020.
The Bahamas are considered an investor-friendly tax haven where there is no income or capital gains tax.
The offshore finance and insurance center Bermuda, has adopted a business-friendly approach to the oversight of cryptos and related businesses. The Digital Asset Business Act and the Companies and Limited Liability Company Initial Coin Offering Amendment Act, passed in 2018, defines digital assets and provide standards governing ICOs and digital asset businesses.
The Bermuda Monetary Authority (BMA) has issued requirements through the Digital Asset Business Act creating a licensing regime for custodians, service providers, trading platforms and other crypto businesses.
Initial coin offerings are classified as a restricted business activity that requires approval from the BMA. Digital asset businesses are required to register and comply with AML/CTF regulations, specifically, the Proceeds of Crime Acts.
There are no specific taxes on income, capital gains, or other taxes on digital assets in Bermuda.
In May 2020, Cayman Islands lawmakers enacted several new legislative acts regulating the cryptocurrency industry. The centerpiece, the Virtual Asset Service Provider (VASP) Law, makes it mandatory for digital asset businesses to be registered with the Cayman Islands Monetary Authority (CIMA).
The Cayman’s crypto regulations provided regulatory certainty for VASPs and align with international AML/CFT regulations to protect consumers and to meet the requirements of the FATF recommendations.
The Caymans have no income, inheritance, gift, capital gains, or corporate taxes with respect to the issuance, holding, or transfer of digital assets.
The Egyptian government banned trading of cryptos in 2018 because of religious decrees under Islamic law. Despite the ban, several international crypto trading platforms have reported significant user growth in the country in recent years. The Central Bank of Egypt has cited the importance of art 206 of the Central Bank and Banking System Law promulgated by Law No. 194 of 2020. The law prohibits the issuance, trading, promotion, platforms, and other activities related to cryptos.
In 2018 the Reserve Bank of India banned cryptocurrency trading and prohibited Indian banks from dealing with cryptocurrency exchanges following consumer protection, AML and market integrity concerns. In 2020, however, the Indian Supreme Court struck down the ban, and clarified that no prohibition exists.
Despite widespread concerns, skepticism, and prior bans on cryptocurrencies, India has encouraged innovation and the use of blockchain. It has also begun work on a state-backed CBDC, the digital rupee.
A proposed crypto regulatory framework was published on the website of the Lok Sabha in 2021. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was dropped in the final days of the session but will likely resurface in the future.
The Advertising Standards Council of India announced new guidance related to the advertising of cryptos and NFTs in February 2022. The new rules, which come into effect on April 1, prohibit the use of the words “currency, securities, custodian, and depositories” in advertisements, as consumers often associate the terms with regulated products.
The Iranian Central Bank has authorized banks and currency exchanges to use crypto-currencies mined by licensed crypto miners in the county. Although mining is legal, the country takes a heavy-handed approach requiring firms to sell cryptos to the central bank to fund imports.
The country has issued more than 1,000 licenses to crypto miners and shut down unlicensed firms. Trading outside the country has been banned, to stop capital flight. The use of cryptos for payments has also been banned.
In early 2022, the country said it was exploring the possible use of cryptos for international trade, which potentially would allow some businesses to make international payments using cryptos.
The Israeli Securities Authority has ruled that cryptocurrency is a security (link in Hebrew) subject to Israel’s Securities Laws.
The regulator has warned the public of the risks associated with cryptocurrencies.
On November 14, 2021, an anti-money laundering order regulating transactions in digital currencies came into effect. The new law is seen as the first step toward the need for entities dealing in digital currencies to have a permanent operating license.
The Israel Money Laundering and Terror Financing Prohibition Authority has taken a similar approach to AML/CTF requirements as FATF.
The Israel Tax Authority defines cryptocurrency as an asset and levies 25% on capital gains.
The Central Bank of Kenya issued a public notice in December 2015 warning that bitcoin and other cryptos are unregulated and not guaranteed by any government or central bank. The notice said no entity is licensed to offer money remittance services and products using virtual currencies.
Despite of lack of any regulatory framework, Kenya is considered as one of the leading markets for Bitcoin.
The Central Bank is reportedly considering a CBDC.
Despite a law in 2017 banning cryptos in Morocco, the public continues to operate underground, circumventing the restrictions.
The Morocco Foreign Exchange Office has said it does not support “hidden payment systems” not backed by government institutions. However, the country’s central bank has reportedly confirmed, that it is exploring a CBDC.
The two primary financial regulators in Nigeria view cryptos differently. The Central Bank of Nigeria has barred banks and financial institutions from dealing in cryptos. The central bank has argued that cryptos are unregulated and not legal tender. Meanwhile the Nigerian Securities and Exchange Commission (SEC) has sought to regulate cryptocurrency investments on the grounds that they qualify as securities transactions.
Both regulators said they had identified certain risks within the digital asset sector, without explaining further.
The central bank has argued that cryptocurrencies, which are unregulated and not legal tender, are risky for the user.
Use of bitcoin, the original and biggest cryptocurrency, has boomed in Nigeria in recent years, especially among small businesses, as the weakening naira currency makes it difficult to get the U.S. dollars needed to import goods or services.
The Central Bank of Nigeria officially launched the “eNaira,” its CBDC, on October 25, 2021.
There is no Nigerian legislation clarifying the tax treatment of transactions involving virtual currencies.
In 2020, Russian President Vladimir Putin signed a law that regulates digital financial asset transactions. Under the law, which took effect on January 1, 2021, digital currencies are recognized as a payment means and investment. The digital currency cannot be used to pay for any goods and services, however.
Digital currencies were previously banned. Russian banks and exchanges can become exchange operators of digital financial assets if they register with the Bank of Russia.
The Central Bank of Russia has also begun a pilot program to develop a digital central bank currency, the Digital Ruble. The central bank has staunchly opposed cryptos, while Russia’s Ministry of Finance has pushed for regulations on cryptos.
The Ministry of Finance introduced a bill “On Digital Currency” in February 2022, which creates a “mechanism for organizing the circulation of digital currencies.”
Despite the regulatory confusion, Russia is considered a significant player, and estimates peg Russian ownership of cryptos at approximately 12% of the international crypto economy.
The Saudi Central Bank and Minster of Finance have warned “against dealing or investing in virtual currencies including cryptocurrencies as they are not recognized by legal entities in the kingdom. They are outside the scope of the regulatory framework and are not traded by financial institutions locally. Such crypto currencies have been associated with fraudulent activities and attract concern that they may be used in illegal and illegitimate financial activities in addition to their high-investment risks related to frequent price fluctuations.”
While the Saudi Central Bank has warned the public of the risks associated with cryptocurrencies, and that they are not legal tender, bitcoin is accepted by small businesses and merchants, and the government has taken a very light regulatory approach thus far. In recent years, Saudi Arabia has worked with the United Arab Emirates to attract crypto companies to the region. Cryptos are sure to play and important role in the country’s long-term effort to diversify its economy and become an innovation hub — “Saudi Vision 2030.”
The Saudi Central Bank has begun to use blockchain technology in its activities in the banking sector and to keep pace with market trends. It has also created a regulatory sandbox for collaboration on new digital banking services and blockchain education programs.
The South African Reserve Bank, the Financial Sector Conduct Authority (FCSA) and the National Treasury, together with an Intergovernmental FinTech Working Group, have published plans to develop a registration regulatory framework. The plans would codify FATF AML recommendations.
The regulatory framework is expected in 2022 and comes as a response to major crypto scams where investors have been defrauded. The FCSA aims to also address how cryptos will interact with traditional financial services and overall financial stability. Virtual currency is not considered legal tender in South Africa.
The South African Revenue Service considers cryptocurrencies such as bitcoin to be intangible assets rather than currency or property. They are taxed as long-term or short-term income ranging from 18% to 40% allowing for deduction of costs.
United Arab Emirates
The UAE is estimated to be the third-largest crypto market in the Middle East, with total transaction values estimated at approximately $26 billion. The Dubai Financial Services Authority included a crypto regulatory framework in its 2021 business plan for firms operating in the Dubai International Financial Center.
In early 2022 the UAE announced a licensing program to be rolled out early in the year. The UAE also said it wants to build and attract a mining ecosystem in the region. The UAE Securities and Commodities Authority issued its regulation in 2020, which seeks to provide clarity as to how crypto and other digital assets may be used as a stored value when purchasing various goods and services.
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market has enhanced its “Guidance for the Regulation of Crypto Asset Activities.”
The UAE and Saudi Arabia are reportedly working on research for a CBDC dubbed “Project Aber.”
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About the authors
Susannah Hammond is Senior Regulatory Intelligence Expert for Thomson Reuters Regulatory Intelligence with more than 25 years of wide-ranging compliance, regulatory and risk experience in international and UK financial services. She is co-author of “Conduct and Accountability in Financial Services: A Practical Guide” published by Bloomsbury Professional.
Todd Ehret is a Senior Regulatory Intelligence Expert for Thomson Reuters Regulatory Intelligence. He has more than 25 years’ experience in the financial industry where he held key positions in trading, operations, accounting, audit, and compliance for broker-dealers, asset managers, private equity, and hedge funds. Before joining Thomson Reuters he served as a Chief Compliance Officer and Chief Operating Officer at a Registered Investment Adviser/Hedge Fund for nearly a decade.
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