Are you curious about NFTs making rounds on twitter memes? Non-Fungible Tokens or NFTS are a form of cryptocurrency that is becoming popular among the investors. With the craze around cryptocurrency rising throughout the world, it is essential that we learn about it. Is crypto a legal tender? Or, can you invest in it? The speculative investment in cryptocurrency in increasing and the cryptocurrency regulation around the world in 2022 is also gaining pace. 

What is cryptocurrency?

Cryptocurrency is a digital asset that is being popularly used as tradable commodity and currency designed to act as a medium of exchange through a web-based network and is independent of any government, bank or authority. The ownership records of cryptocurrency are stored in form of digital ledgers. The trading of cryptocurrency in the world surged as cryptocurrency acts as an alternative to the traditional exchange system and provides autonomy to the traders to mine, and transfer digital currencies on their own accord.

What is blockchain?

 The idea behind the functioning of cryptocurrency is a concept called blockchain. A blockchain can be described as an open ledger which records transactions between two parties in a verifiable and permanent way. It is essentially a database that stores information except that it stores data in groups called blocks which are linked to each other, thus the name Block- Chain. 

Reasons for regulation?

Governments across jurisdictions are trying to assess how to regulate the cryptocurrencies that are becoming all pervasive and pose issues that are novel. The regulatory landscape surrounding cryptocurrencies is constantly evolving and requires more international cooperation for better policy. This article explores the current laws regulating cryptocurrency in some jurisdictions along with the upcoming laws. 

United Kingdom:

The United Kingdom was the first country to come with a form of regulation of cryptocurrencies as per the Crypto Assets Taskforce report. As per the report, cryptocurrencies fall under the exchange tokens which is a subset of crypto asset. In UK, the cryptocurrency is regulated by a taskforce called the Financial Conduct Authority (‘FCA’), Her Majesty’s Treasury, and the Bank of England. In UK, any type of regulated crypto assets/exchange must be registered with the FCA. As per the Guidance on Crypto assets, exchange tokens come under the ambit of unregulated tokens. Though exchange tokens can be used to facilitate regulated payment services, the government does not consider cryptocurrencies as legal tender in UK. Moreover, the government has also banned the sale/trading of cryptocurrencies derivatives.

The government of UK has issued a response to the consultative paper on the regulation of cryptocurrencies and intends to bring some stablecoin activities under the ambit of the Banking Act, 2009 of UK. To implement that same, the government has proposed a financial market infrastructure sandbox. 

Knights Plc, an Interlegal member in the United Kingdom legal expertise and specialises in securities, capital markets and banking- finance to deliver a full experience to its customers in an evolving world of blockchain technology.

India 

Current Law

The Reserve Bank of India, in the past, showed an apprehensive attitude towards regulation of cryptocurrency by restricting Indian banks from authenticating cryptocurrency transactions. This decision was however struck down by the Supreme Court of India. Thereafter, the government of India has proposed many laws for the regulation of cryptocurrencies, but no proper regulation governing digital assets has been enforced till now. Presently, there is no ban on cryptocurrencies; however, taxes are also levied on cryptocurrency exchanges. As per the National Strategy on Blockchain issued in 2021, a National Level Blockchain Framework has been proposed by the government of India. 

Future Law in India

Pursuant to the Payment Vision, 2025 issued by the Reserve Bank of India (RBI), RBI aims to introduce Central Bank Digital Currencies (‘CBDC’) in India. 

Ahlawat & Associates, Interlegal’s India member has lawyers with specialized knowledge or banking, finance and capital markets with a team that is well versed with the upcoming trends in evolving modes of exchange and can provide a full experience to their clients. 

Singapore 

Current Law 

Cryptocurrencies in Singapore are regulated by the Monetary Authority of Singapore (‘MAS’) and is a ‘digital payment token’ as per the Payment Services Act, 2019 of Singapore. Pursuant to the Guide of Digital Token Offerings, the companies involved in a digital token offering have to provide details in relation to target size, offering, terms and conditions of offering and other relevant details as prescribed by the Guide. The tax on cryptocurrencies is leviable levied as per the tax laws of Singapore.

Future Law 

Despite being at the forefront of having the most sought-after regulation of cryptocurrencies, the MAS has shown a reserved attitude towards the use and exchange of cryptocurrencies. This can be inferred from the fact that the digital payment token service providers cannot promote or market their services to the general public. As per the recent speech of Mr Ravi Menon, the Managing Director, the MAS approach to cryptocurrencies shall be based on growing digital assets capabilities and on managing the risks effectively. The MAS is also intending to collaborate with other regulatory banks to enable real-time settlement through digital currencies. 

 UAE

Current Law

On a federal level, the Securities and Commodities Authority (‘SCA’) of Singapore is the concerned authority for the governance of cryptocurrencies. Pursuant to SCA’s decision, regulations for trading crypto assets were issued. For the exchange of crypto assets, the operator has to obtain a licence. It is mandated as per the law that all the offerings of the crypto assets should be fair and accurate, should include rights and features of the assets and must be recorded. The governance of Cryptocurrency in Dubai is regulated by the Dubai Financial Services Authority (‘DFSA’).  

Future Law

Fast forward to 2022, Dubai has finally launched directions on virtual assets. As per the regulation, a Virtual Assets Regulatory Authority (‘VARA’) is to be established. Now, any exchange in digital assets can be conducted without taking explicit permission from VARA.

Canada

Current Law 

Cryptocurrencies are presently not valid in Canada. The regulation of cryptocurrencies as of now is regulated by the Securities Market. Pursuant to the framework, issued by the Canadian Securities Administrators (‘CSA’), a crypto contract has to be entered between the parties based taking into consideration the key risks associated with the exchange.

Future Law 

The Canadian authorities have introduced the bill titled encouraging the growth of Crypto asset Sector Act which aims to develop a national framework for the cryptocurrency market. Further, Canada has issued various papers on Central Banking Digital Currencies (CBDC) with the aim to introduce the same in the financial market.

YULEX, Attorneys and Strategists, LLP, an Interlegal member in Montreal, Canada offers services in cryptocurrency and is associated with new age technology-based clients allowing it to grasp the nuances of techno-based evolutions like cryptocurrency.

Conclusion 

 As the world is progressing towards a new-age order with evolving fields that need novel regulations by the governments across the world, Interlegal as an association comes as a boon. Cryptocurrency is one of these fields that is at different stages of regulation. As the governments and law-makers come up with full-fledged laws and regulations, global community of lawyers like Interlegal serve as a significant source to contact lawyers for services or even advise on the status of cryptocurrency in your jurisdiction. 

Frequently asked questions 

1. Are cryptocurrencies energy inefficient?

Yes, cryptocurrency mining is an energy inefficient activity and may raise concerns in the changing world dynamics when environmental audits are becoming a norm. 

2. Do cryptocurrencies have any inherent value? 

Cryptocurrencies can have an inherent value depending upon the governing jurisdiction. If crypto is declared as legal tender in a jurisdiction, it shall be deemed to have inherent value.

3. Where is cryptocurrency used as currency?

El Salvador and Central African Republic use cryptocurrency as legal tender. 

4. Where is cryptocurrency banned?

There are many countries with an implicit ban on cryptocurrency due to no implicit regulation. However, countries that have imposed explicit ban on cryptocurrency are jurisdictions like Algeria, Bangladesh, China, Iraq, Nepal, Morocco, Tunisia, Qatar.

5. What makes a cryptocurrency legal?

If the central or federal banks of countries pass directives declaring so, the very same legislation would make the cryptocurrency a legal asset.