Money or property? How global governments define cryptocurrencies


Cryptocurrencies: what are they? Money? Raw material? The titles? Utility token? Or something else? Few national governments seem to agree on this matter somehow, and for now, at least, their divisions have given currencies such as Bitcoin and Ethereum an indeterminate and floating status on the global stage.

As a result, cryptocurrencies lack a single defined existence, with some nations treating them as money (for example, Japan, Germany) and others treating them as an unregulated and speculative resource (for example, Mexico , Denmark), making them the financial equivalent of Schrödinger's cat. However, as this review of crypts classifications across the world will demonstrate, cryptocurrencies are all these and other things, which is why they deserve to be classified by future legislation according to their unique qualities.

United States: securities, commodities, property, money

As an indication of how difficult it can be for world governments to reach a global consensus on the status of cryptocurrencies, it is worth pointing out that currently # 39; is little consensus within nations – leaves alone among them This is nowhere more obvious than in the United States, where five separate agencies have all their competing rankings of cryptocurrencies.

The first is the Securities and Exchange Commission (SEC), which – until June – defined cryptocurrencies in general as securities, ie assets in which someone invests in the expectation of receiving a return. In March, for example, he issued a public statement stating that he would regulate anything that was traded via an exchange platform as security.

"A number of these platforms provide a mechanism to exchange resources that meet the definition of" security "according to federal securities laws. If a platform offers the negotiation of digital assets that are securities and operates as one" exchange "as defined by federal securities laws, the platform must register with the SEC as a national stock exchange or be exempted from registration. "

Bitcoin declined 10% as a result of this announcement, but statements by other US authorities and agencies differ from the SEC's statement that cryptocurrencies are titles." Because, again in March, a federal judge New York has ruled that the Commodities and Futures Trading Commission (CFTC) can regulate BTC and other currencies as commodities, putting them at the same level of gold, oil and coffee.

If this were not already quite confusing, the & # 39; Internal Revenue Service (IRS) has defined cryptocurrencies as a taxable property since March 2014, when it stated:

"For federal tax purposes, virtual currency is treated as property."

Observers would be forgiven for assuming that three separate definitions were sufficient, however two additional agencies deal with cryptocurrencies as money.The US Office of Foreign Assets Control (OFAC) is the office of US Treasury Department responsible for the application of economic sanctions, which may include sanctions against certain cryptocurrencies (for example, Petro). In April, he announced that he would treat "virtual currencies" in the same way as the fiat currency, making any individual who ran a cryptocurrency covered by an economic penalty punishable by law.

Likewise, the Network for the Application of Financial Crimes (FinCEN) presides over the illegal use of money, including money laundering and terrorist financing. He updated his regulations in March 2013 to cover all "people who create, obtain, distribute, exchange, accept or transmit virtual currencies", which required exchanges (classified as "money transmitters") to implement Know Your Customer (KYC) and Anti-Anti-Money Laundering Measures (AMC). Expanding its regulations, he brought cryptocurrencies under the concept of money, in contrast to other government agencies that classified him as commodity, security or property.

Of course, these classifications are not mutually exclusive, yet they introduce confusion and complexity for individuals and companies who want to understand only where they are legally found in cryptocurrencies. Fortunately, there are growing signs that some of the agencies mentioned above are beginning to converge on shared definitions.

In June, the SEC finally clarified that it considers neither Bitcoin nor Ethereum – as they are the two largest currencies in the cap market – as securities and that it would instead focus on Initial Coin Offerings (ICOs). This move came a month after CFTC Commissioner Rostin Behnam delivered a speech that underlined the growing collaboration between his commission and the SEC.

"I talked about my position in the CFTC and SEC's efforts to harmonize the rules: overlapping time-based and market participants in the market, there is a real opportunity for CFTC and SEC to harmonize the redundant rules and let it be market participants are regulators in a stronger position. "

These steps are modest and preliminary, but given that the SEC no longer considers currencies such as Bitcoin and Ethereum as securities, they at least restrict the scope of what the cryptocurrencies are in the United States. That said, they have not yet legal tender, although this has not prevented thousands of US companies from accepting Bitcoin and other currencies as a means of payment

Canada, Mexico and South America: raw materials, goods virtual, legal currency

Like the United States, Canada does not consider cryptocurrencies as legal tender. However, its approach to virtual currencies is slightly more unified, with the Inland Revenue of Canada (CRA) which currently defines them as commodities – a definition that would appear to apply generally in most government agencies. This is the reason why purchases involving encryption are regulated by the credit rating agency as if they were trading transactions, with the relevant applicable taxation. That said, a parliamentary act approved in June 2014 defined cryptocurrencies as a "money service company" for the purpose of updating anti-money laundering laws, while the Canadian Securities Administrators (CSA) announced in August 2017 that "many" ICO "entail sales of securities."

In Mexico the emphasis is also on cryptocurrencies as commodities. On March 1, the government approved the law to regulate financial technology companies, which includes a section on "virtual resources", or cryptocurrencies. Compared to the previous definitions of securities, goods, property and money, this is a vague term and the provisions of the March law do not currently limit its application (since the law is, in effect, pending secondary legislation). However, previous observations of the main Mexican personalities indicate that the government would be inclined to translate it into "merchandise", with the governor of the Banco de Mexico, Agustín Carstens, who declared in August 2017 that since the Bitcoin is not regulated from a central bank, it is a commodity rather than a currency.

Traveling further south, the image is mixed. In Venezuela the government (in) announced the famous Petro in December, and in April ruled that the cryptocurrency must become legal for all financial transactions involving government ministries. However, while all other cryptocurrencies were immediately classified as financial assets and securities as a result of the decree establishing the Petro, none was declared legal. Even more confusing, the Venezuelan parliament opposed the Petro on every occasion. In March, he even declared that the currency backed by the state is actually illegal, because it was created without congressional approval and without the involvement of the Central Bank of Venezuela.

While classifications of one kind or another generally apply to the above American nations, cryptocurrencies suffer from partial non-existence in others. In Brazil the Securities and Exchange Commission (CVM) stated in January that cryptocurrencies can not be legally classified as financial assets, despite the fact that the Brazilian Inland Revenue has established earlier in 2017 which should be considered as such for tax purposes. In Chile cryptocurrencies are neither securities nor money, although the central bank has recently started to consider a specific regulation.

And in Colombia the Financial Superintendent also stated that digital currencies donate "Counting as money or securities, while, for tax purposes, it can be considered a" high risk investment ". more acceptable than Ecuador, where cryptocurrencies are not only not legal, but are also prohibited as a means of payment

While South America often takes a restrictive stance towards cryptocurrencies, some countries of the continent are slightly more accepting.In Argentina the cryptocurrencies have no legal tender and have no regulation specifically applied to them.That said, they are considered assets under the civil code of the nation, while a December update of the tax regulation classifies them as income derived from shares and securities.

What these variations indicate is that, when it comes to the classification of cryptocurrencies, the economic and political situations of the nations involved make the difference. The intrinsic abstractness of cryptocurrencies makes them adaptable in terms of function, so their particular classification and use all depend on the prevailing political and economic conditions in a particular nation and what the nation wants to use them. This is why, in countries where the national currency and the economy are relatively weak – or where freedom is limited – cryptocurrencies tend to be denied to legal status.

Europe: private currency, unit of account, contractual means of exchange, transferable value

This trend becomes more evident when the status of cryptocurrencies in Latin America is compared to their status in Europe. In Germany the continent's largest economy, Bitcoin was recognized as "private money" by April 2014. Previously, its finance ministry recognized cryptocurrency as "unit of account" in the # 39; August 2013, making it a financial instrument subject to taxation and requires the companies that exchange it to register with the Federal Supervisory Authority. And this February, the government took a further step in recognizing cryptocurrencies as real money, exempting tax encryption holders when they use their coins as a means of payment – as established by the European Court of Justice in 2015.

United Kingdom cryptocurrencies were generally left undisturbed by regulation and what is interesting to note is that the government has recognized that the comparison with currencies, commodities, securities or any other pre-existing financial instrument would be inaccurate. In 2014, his HM Revenue & Customs department wrote:

"Cryptocurrencies have a unique identity and can not therefore be directly compared to any other form of investment activity or payment mechanism."

This would explain why the government still has to propose or stipulate a status defined for crypto, even if the United Kingdom is part of the G20 group of countries that defined cryptocurrencies as assets rather than currencies in a March document, and even if Cryptographic investment is subject to capital gains tax in the UK – making

Throughout the Channel, France has also withheld the application of any specific cryptocurrency regulation, although it has made concerted efforts with Germany to propose laws that would have international reach. However, while it seems to be moving towards creating a favorable regulatory framework, the Banque de France has – since 2013 – the position that cryptocurrencies are neither currencies nor means of payment. On the other hand, the "Financial Markets Regulator" (AMF) launched a public consultation at the end of 2017 which led to the definition of two categories of cryptocurrencies: utility tokens and security tokens. In addition, cryptographers – both private and commercial – are subject to taxation on their earnings, with the government defining Bitcoin in 2016 as a "unit of account" for the purpose of collecting this tax.

Elsewhere in the EU, the picture varies considerably, although there seems to be a recurring agreement that cryptocurrencies are not money, except when the authorities want to bring them into the anti-money laundering legislation. In Sweden the central bank declared in March that "[Bitcoins] are not money". This contradicted a preliminary decision of October 2013 issued by the Swedish tax council that Bitcoin is not subject to sales tax when it is traded, falls within the jurisdiction of the regulations of the Financial Supervisory Authority and should be considered a currency.

In Denmark the Financial Supervisory Authority issued a declaration in December 2013 stating that Bitcoin (and other currencies) were not currencies, while in March 2014 the Danish central bank issued his own declaration declaring the same thing. As for what they are, the Danish tax council finally decided at the beginning of 2018 that the profits of the crypto-negotiation are taxable, which implies that cryptocurrencies are considered (speculative) assets.

In the Netherlands the central bank also denies the currency status of Bitcoin and other cryptocurrencies, having written in a January position paper:

"We do not consider the criptos as money."

On the contrary, a Dutch court ruled in March that Bitcoin can be considered a "transferable value", which makes it equivalent to property. This has some similarity with a definition elaborated by the Italian Ministry of Economics and Finance in a draft decree that describes cryptocurrencies as a "digital representation of value […] used as an exchange tool for purchases of goods or services ". This classification does not absolutely establish cryptocurrencies as currencies or as properties, but has parallels in some other EU states. For example, in Latvi a, the State Revenue Service and the Bank of Latvia have both stated that cryptocurrencies represent a "contractual" means of payment – a state that is short of money but close enough in terms functional.

Beyond the EU, Switzerland is perhaps the most significant European nation when it comes to crypts, not least because it has aggressively positioned itself as a desirable place for cryptologists and businesses. In 2014, the federal government published a report in which cryptocurrencies were defined as assets, rather than as currencies or means of payment. But since then, the landlocked nation has introduced several "regulatory simplifications" in order to attract fintech companies, and it is in this climate that new approaches to cryptocurrencies have emerged. In November 2017, the Zug regional district began accepting Ethereum and Bitcoin as payment for administrative costs and municipal services, effectively recognizing both as money. Soon after, the city of Chiasso (in Ticino), which announced in February that it would start accepting Bitcoin as a tax payment for amounts up to 250 Swiss francs.

These examples from Europe offer two important takeaways. The first is that EU (and non-EU) nations – just like the United States and Canada – are holding a specific regulation focused on cryptography, thus giving the cryptocurrencies space and time to solidify in definite and stable forms. As such, nations are reluctant to attribute any single "definition" or "state" to digital currencies. Correspondingly, the current application of many different categorisations is simply the result of attempts to enforce any relevant pre-existing law which, in lieu of specific legislation, could curb crypt abuse. These categorisations are firm points and in general should not be taken for what some nations or governments "really think" about encryption.

Secondly, although many European states are working to announce the tailor-made cryptocurrency legislation, it would seem unlikely that many will advance to actually recognize Bitcoin, Ethereum or any other major currency as legal tender. With the notable exceptions of Switzerland and Germany, most European states deny that cryptocurrencies are money and as jealously governments and central banks tend to safeguard their financial powers, they are unlikely to move from this position at any time.

China and East Asia

Jealousy is particularly acute in China . In December 2013, the Chinese government issued a notice stating that Bitcoin is not a currency.

"In terms of nature, Bitcoin is a specific virtual product that does not have the legal status equivalent to the currency and can not and should not be used as a currency on the market."

However, the same notice also recognized that "[Bitcoin] transactions act as a way of buying and selling goods on the Internet", and since it did not attempt to prohibit or discourage such activities, it is questionable that the announcement served as a tacit recognition of cryptocurrencies as a means of payment. (ie as money).

Unfortunately, the position of the Chinese government has strengthened considerably since 2013. It banned the ICOs in September 2017, while the exchange of encryptions was banned the same month and subsequently blocked foreign trade, citing "financial risks" as motivation for both documents. In other words, he actually denied that cryptocurrencies are legitimate titles, goods or goods in China, just as he had denied their currency status four years earlier. And given that this year has taken steps to make mining even more difficult, the current political and regulatory climate in China is denying cryptocurrency in any kind of official status.

Things are not so dark for crypts in other parts of Asia. In Japan the government went through a process opposed to the Chinese one, classifying Bitcoin as "non-money" in 2014 and correcting its position in March 2016, when the law on payment services finally recognized cryptocurrencies as money. However, as an indication of the uniqueness of cryptography, the current definition included in the act described cryptocurrency more specifically as a "property value" that can be used to purchase goods and services, rather than as a currency.

Over in South Korea cryptocurrencies are recognized as a "resource with measurable value", a verdict provided by the Supreme Court of the nation on 30 May. It is consistent with the regulation and the guidelines issued by the South Korean authorities to date. These include a June update to AML laws that requires cryptographic exchanges to undertake Client Due Diligence (CDD) and Enhanced CDD (EDD) measures, which is good for February government's promise to encourage "normal" trading of cryptocurrency as an asset.

In Singapore the government is also inclined to consider cryptocurrencies as resources rather than money. In August 2017, the Monetary Authority of Singapore (MAS) warned the ICOs and cryptographic exchanges to have jurisdiction over those tokens that fall under the definition of securities, a warning that was repeated in September and also by May to eight exchanges that had not yet registered with it. This is also largely the approach taken in Hong Kong, where the Securities and Futures Commission (SFC) clarified in February that it considers cryptocurrencies as securities, requiring ICOs and exchanges to apply for licenses. He continued to close some ICOs as a result of existing securities laws, while he continued to remind the public that cryptocurrencies are not legal.

Unique Identity

Again, what underline these positions is that most nations are cautiously open to cryptocurrencies as a new financial tool, as a new means of generating income and raising capital and as a basis for a new technology. – that is to say, blockchain. However, it is clear that few currently want to recognize Bitcoin or any other money decentralized as money, especially if their governments are more authoritarian. This reluctance is particularly evident in some examples that we have missed: in Russia cryptocurrencies "are not a legal method of payment" but rather property, while the government in Turkey has previously declared that Bitcoin is "not considered as electronic money" under current law and is not compatible with Islam.

Because many governments are still unsure how cryptocurrencies will develop in the future, and perhaps because they do not want to recognize the radical implications of decentralized money, they have avoided establishing a distinct legal identity for encryption. Instead, many have attempted to apply all the relevant pre-existing laws they can, in the hope that this may curb those effects of cryptocurrencies that may not be desirable from the perspective of a national government. This is why, on an international level, cryptocurrencies have been invaded by a flood of various categorisations, from private money to property and "transferable value".

On the other hand, the variation of the classifications is also a product of the versatility of cryptocurrencies. Since they are generally not issued and controlled by a central body, there are some limitations on how they can be used. Some holders could then use them as a means of payment, others could treat them as a speculative financial instrument or as property, while the future could bring even more features. This adaptability to the needs of holders is one of the characteristics that define cryptography, and that is why the British government was probably right to say in 2014 that cryptocurrencies have a "unique identity". And it is also the reason why, when governments around the world finally come to introduce specific legislation for cryptocurrencies, it would be better not to try to subjugate them entirely to the existing legal categories.

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