Back to Index of Cryptoasset Regulations

I. Introduction

The Law Library of Congress has previously produced two major multinational reports related to the regulation of cryptocurrencies. The first, published in January 2014, surveyed statements issued by government authorities regarding Bitcoin and similar cryptocurrencies in 41 jurisdictions.[1] That report demonstrated that the debate over how to regulate cryptocurrencies was still in its infancy, with authorities primarily warning the public about the risks of acquiring or transacting with cryptocurrencies.

The second report, published in June 2018 and covering 130 countries, revealed that many more jurisdictions had issued statements and guidance regarding cryptocurrencies, and that some countries had enacted or were considering regulations or legislative amendments in certain areas.[2] This included, for example, clearer indications of the tax treatment of cryptocurrencies, the application of anti-money laundering and counter-financing of terrorism (AML/CFT) laws to cryptocurrency exchanges and other businesses engaged in cryptocurrency activities, and new warnings to consumers regarding the risks of investing in cryptocurrencies. The broad survey of the policies of 130 countries was accompanied by detailed reports on fourteen jurisdictions.[3]

The following report covers 46 jurisdictions, including the European Union (EU), and focuses primarily on regulatory approaches to cryptoassets created through blockchain, or distributed ledger technology (DLT), in the context of financial market and investor protection laws. It also contains updated information regarding the application of tax and AML/CFT laws to cryptocurrencies in the countries covered. Additional countries not covered in this report may also have taken actions in one or both of these areas, but were not included due to there being no existing policies, or new or pending laws, related to financial regulation and oversight of cryptocurrency activities. Some countries may also have issued more recent public warnings than those included in the 2018 report. 

The report shows that a number of countries are currently applying existing legislation to cryptoassets that have the characteristics of securities or other financial products or instruments, with regulators providing guidance on this issue. However, around a dozen countries have enacted legislation that specifically governs cryptoassets and the entities that deal with them, including exchange platforms and businesses providing custodian services. In addition, a number of other countries are at various stages of developing legislation on cryptoassets, including in relation to establishing requirements for initial coin offerings (ICOs).

Although not covered in the report, we note that the Strategic Hub for Innovation and Financial Technology of the US Securities and Exchange Commission has recently issued information on the potential application of federal securities law to ICOs, indicating that the digital assets offered through an ICO should be assessed based on their particular characteristics.[4] Previously, in 2015, the Commodity Futures Trading Commission (CFTC) first found that virtual currencies are commodities under the Commodity Exchange Act.[5] The CFTC’s jurisdiction is therefore implicated “when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.”[6]

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II. Application of Financial Markets and Services Laws

Legislation governing financial markets, products, and services in various countries include requirements related to registration, licensing, and the disclosure of information to investors, such as through a prospectus. Relevant financial services in the area of cryptocurrencies may include, for example, exchanges, custodial services, advisory services, and brokering.

A. Application Dependent on Characteristics of Particular Cryptoasset

The financial regulatory authorities in a number of countries covered in this report have formally stated that existing financial market, products, and services laws are applicable to cryptocurrencies and/or to ICOs if the relevant tokens have certain characteristics. The authorities have published guidance on determining the applicability of the laws on a case-by-case basis. The jurisdictions that have taken this approach include Australia, the Bahamas, Canada, Denmark, Finland, Germany, Israel, Jersey, Liechtenstein, Lithuania, New Zealand, Singapore, Sweden, Switzerland, Taiwan, and the United Arab Emirates (UAE) (with respect to the Abu Dhabi Global Market). The United Kingdom (UK) is currently consulting on guidance in this area. In addition, it appears that a similar approach would be taken in the Cayman Islands, although no official guidance has been published.

Several of the relevant authorities have established “innovation hubs” or “sandboxes” to assist entities in the financial technology (fintech) sector navigate regulations and to encourage or enable innovation. This includes Australia, Canada, Hong Kong, and Switzerland, with such an entity also proposed in Israel.

B. Specific Extension of Securities Laws to Cryptoassets

A few jurisdictions have specifically brought cryptocurrencies into the regulatory framework applicable to financial products and services through regulations or official statements. This includes Hong Kong, Israel (where “virtual currency” is included in the definition of “financial asset”), Luxembourg (which has officially recognized tokenized securities as securities), and Malaysia (where recent regulations bring all digital assets and tokens created by blockchain within the securities regulatory framework, with specific requirements applying for the registration of digital asset platforms).

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III. Specific Laws on Cryptocurrencies

Several countries have recently enacted specific laws or regulations that govern various activities related to cryptoassets, including exchanges and wallets. These cover matters such as technical requirements, governance structures, risk management, information disclosure, and other investor protection issues. There has been some regulation specific to ICOs, and this is an area in which several countries are currently considering possible regulatory approaches.

The following countries have enacted new laws or regulations specifically on cryptocurrency businesses or activities: Anguilla (in relation to tokens that are not considered securities), Belarus (where the regulations are applicable to residents of a government-established technology park), Bermuda, Gibraltar (in relation to DLT services, with officially regulated blockchain exchanges established), Indonesia (in relation to recognizing cryptocurrencies as commodities that can be subject to futures trading), Malta, Mauritius (in relation to custodian services), Mexico, Singapore (in relation to payment services), UAE, Uzbekistan, and Venezuela (including the establishment of a national cryptocurrency).

The following countries are currently at various stages of considering proposals for specific legislation related to cryptoassets: Australia (recently consulted on possible ICO regulation), the Bahamas (proposed payment instruments legislation), France (currently considering an ICO bill plus additional regulations), Germany (considering proposals to regulate blockchain securities, non-security ICOs, and DLT), Gibraltar (regulation of ICOs and tokens), Israel, Italy (considering a bill containing restrictions on token anonymization), Japan, Liechtenstein, Malaysia (in relation to ICOs), Philippines (ICOs), South Africa, Switzerland, and Ukraine.

Ireland appears to be at an earlier stage in this process, having established a working group to monitor developments and consider whether policy recommendations are required. The UK has also established a task force and is working on developing relevant proposals for consultation.

In addition, the EU is currently reviewing whether existing financial legislation applies to cryptoassets and ICOs and whether regulatory action is needed. There are currently divergent approaches in the EU Member States, and the European Securities and Markets Authority has indicated that it supports the introduction of EU-wide rules to ensure investor protection.

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IV. Regulation of Cryptoassets Not Considered Securities

Where cryptoassets are not considered securities or other financial products, government authorities have indicated that other types of laws may be applicable, or have stated more broadly that such cryptoassets are unregulated. For example, general consumer protection legislation is applicable in relation to cryptocurrency activities in Australia, Canada, Finland, and New Zealand. In other jurisdictions, payment services laws may be applicable, which requires entities to be licensed in order to perform certain activities. This includes the EU, France, Japan, Singapore, and the UK. In Italy, some cryptocurrency businesses may be treated as money exchange operators.

Jurisdictions that have indicated that non-security cryptocurrencies, such as utility tokens, and ICOs offering such tokens, are generally unregulated include Brazil, Gibraltar, Isle of Man, Jersey, Spain, and the UAE. China and Indonesia appear to have taken a stronger approach, essentially banning the use of all cryptocurrencies as a means of payment and prohibiting financial institutions from dealing in cryptocurrencies (except in relation to futures trading in Indonesia). However, other laws of general application, such as property and contract law, may be applicable to cryptoassets in China.

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V. Custodianship

Some of the new cryptocurrency laws referred to above contain requirements specifically applicable to entities that provide cryptoasset custodial or storage services, such as technical measures for protecting assets, transactions, and client information. This includes, for example, Bermuda, Indonesia, Mauritius, Norway, and the UAE. Specific measures proposed in other countries, such as Liechtenstein, also contain provisions setting out the obligations of providers of custodial services.

In Venezuela, the government has established the Crypto Assets Treasury with responsibility for the custody, collection, and distribution of cryptoassets in accordance with presidential instructions.

In other jurisdictions, cryptoasset custodial services may be considered a regulated financial service, with standard rules applying under the relevant legislation. This includes Australia (if the relevant assets are considered a financial product), Canada (where regulators expect certain technical measures), and Switzerland (if the tokens are considered financial instruments).

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VI. Application of AML/CFT Laws

Several of the countries covered in the report apply existing AML/CFT laws to entities that deal with cryptoassets, including the Cayman Islands (although this may depend on the nature of the particular assets), Israel, Lithuania (which is also considering regulatory changes in this area), Mauritius (in relation to custodian services), New Zealand, Norway, Philippines, Singapore, Sweden (depending on the nature of the assets involved), and Switzerland.

A number of other jurisdictions have made specific legislative changes to bring cryptoasset activities under the relevant laws. This includes Australia, Belarus, Bermuda, Canada, France, Gibraltar, Isle of Man, Italy, Malaysia, Malta, Norway, Japan, Jersey, Liechtenstein, Taiwan, the UAE, and Uzbekistan. Relevant legislative changes are currently being considered in the UK. The EU has also amended its Anti-Money Laundering Directive in order to bring wallet providers and exchange platforms within its scope. These changes are in the process of being implemented through legislative changes in the EU Member States.

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VII. Taxation

The tax authorities of several countries covered by this report have published guidance on the application of income or capital gains tax rules to cryptocurrency activities, including Australia, Brazil, Canada, Denmark, Ireland, Israel, Italy (in relation to corporate tax), Japan, Jersey (in relation to corporate tax), Lithuania, Luxembourg, New Zealand, Norway, and Switzerland.

France has enacted specific provisions regarding the taxation of cryptocurrencies, while there is a current bill in South Africa that covers this issue, as well as in Ukraine, where an extended tax break is proposed. Other countries that have stated that cryptocurrencies are not subject to tax include Belarus (in relation to residents of the government-established technology park), Gibraltar (although exchanges must pay corporate income tax), and Uzbekistan.

The application of value-added tax or goods and services tax has also been considered in several countries, with authorities stating that existing exemptions apply to the buying and selling of cryptocurrencies. This includes Australia (unless the entity involved in the transaction is a business) and EU Member States, following a European Court of Justice ruling on this issue.

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Prepared by Kelly Buchanan
Foreign Law Specialist
April 2019

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Last Updated: 12/30/2020