Governments have defined cryptocurrencies ever since their creation. The definitions vary from country to country and consensus isn’t easy to reach.
Germany and Japan treat cryptocurrencies as money, while others like Denmark and Mexico treat them as an unregulated, speculative asset. In the future, cryptocurrencies will need a unique classification for their unique qualities.
Reaching a global consensus is near impossible at the moment as some counties can’t reach a consensus within themselves.
In the U.S., the Securities and Exchange Comission (SEC), defined cryptocurrencies as securities. This would mean that cryptocurrencies were viewed as assets in which investors poured money expecting a return. This affected all exchanges as in March, the SEC stated it would regulate everything traded from an exchange platform and treat it as a security.
The Internal Revenue Service (IRS) has defined cryptocurrencies as taxable property. To add more to the confusion there are other US agencies who treat cryptocurrencies as money. The Office of Foreign Assets Control (OFAC) can impose sanctions against cryptocurrencies.
Back in April OFAC announced its decision to treat all virtual currencies as fiat. This allowed for individuals who owned crypto to be prosecuted. Now to the ordinary individual or business this would cause nothing but confusion. There was a clarification by the SEC in June that it will no longer regard Bitcoin and Ethereum as securities and will instead focus on ICO’s.
This happened shortly after Rostin Benham, the CFTC comissioner delivered a speech on increasing the collaboration between the two agencies. Communication and transparency between agencies is paramount as thousands of US businesses continue to accept cryptocurrencies and there needs to be a clear consensus on the governing bodies’ views.
The Canadian government has defined cryptocurrencies in a slightly different way
In Canada cryptocurrencies aren’t exactly easy legal material as well. At least the country’s agencies share more common grounds on how they view crypto. The Canada Revenue Agency (CRA) and most government agencies currently define cryptocurrencies as commodities. In 2014, a parliamentary act was passed which defined cryptocurrencies as “money service businesses” in order to update the anti- money laundering laws.
In Europe things are quite different.
Germany has recognized cryptocurrencies as “private money” since 2014 and before that all digital currencies were treated as “units of account”. This allowed the German government to tax and to require from companies that want to trade with cryptocurrencies to register with the Federal Financial Supervision Authority.
In the U.K. there has been a surprising amount of freedom when it comes to cryptocurrency regulation. The government has recognized the unique identity of cryptocurrencies and stated that they cannot be compared to other forms of payment.
France has also followed this trajectory of not applying a specific regulation to cryptocurrencies.
When it comes to comes to crypto in Europe, the most significant country will always be Switzerland. In 2014 the federal government defined cryptocurrencies as assets. In time Switzerland introduced many regulatory simplifications to attract fintech companies. In late 2017 the city of Zug was the first to accept Ethereum and Bitcoin as payment for municipal services and administration costs.
Many European countries are starting to show signs that they are prepared to accept cryptocurrencies as money but given how furiously central banks and governments protect their financial kingdom, it’s probably a long time away. Most governments are still having doubts of cryptocurrencies’ future development and most likely don’t want to jump the gun on recognizing decentralized money. This is most likely the reason why cryptocurrencies have been drowned by many different categorizations.
This wide variety of classifications proves the many unique and versatile qualities of cryptocurrencies. The lack of a control from a central body makes them immune to restraints regarding their usability.
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Tags:#ZugannoucedCanadacommoditiesCRAdefined cryptocurrenciesDenmarkEuropeGermanyIRSJapanMexicoOFACSECsecuritiesSwitzerlandThe U.S.U.S.