Cryptocurrency Law: How is the Market Regulated in Different Countries?

Cryptocurrencies such as Bitcoin, Ethereum and many others began to develop in the early 2010s and have since attracted the attention of both investors and governments around the world. Blockchain technology, which underlies cryptocurrencies, promised a revolution in the financial sector, but also raised many questions, especially in the field of regulation. Cryptocurrency regulation varies widely across countries, with each country trying to find its own balance between supporting innovation and protecting economic stability.

1. USA

In the United States, cryptocurrencies are regulated at several levels. At the federal level, two main bodies deal with cryptocurrency issues:

• US Securities and Exchange Commission (SEC). The SEC regulates cryptocurrencies as securities if they meet certain conditions. For example, an ICO (Initial Coin Offering) may be considered an offering of securities, and issuers are required to comply with federal securities laws.
• Commodity Futures Trading Commission (CFTC). The CFTC views cryptocurrencies as a commodity and regulates their futures trading.

Each state in the US may also have its own local laws regarding cryptocurrencies. Some states, such as Wyoming and New York, have more favorable legislation for cryptocurrency companies.

2. European Union

In the European Union, regulation of cryptocurrencies is still at the development stage, but certain measures have already been taken:

• Cryptocurrency Regulations. In 2023 the EU adopted MiCA (Markets in Crypto-Assets Regulation), which became the first common regulation for all member countries. MiCA aims to protect investors and ensure financial stability. Specifically, it requires cryptocurrency companies to register and comply with consumer protection standards.
• Anti-Money Laundering (AML). As part of the fight against money laundering, cryptocurrency companies are required to comply with European AML and KYC (Know Your Customer) standards, which includes verifying customers and recording their transactions.

Despite common efforts, each EU country may introduce additional measures depending on its needs.

3. China

China has taken a strict stance towards cryptocurrencies. In 2021, Chinese authorities completely banned the use of cryptocurrencies for payments and mining. The Central Bank of China has announced that any transactions with cryptocurrencies, such as trading and investing, are illegal.

However, despite severe restrictions, China is actively developing its Central Bank Digital Currency (CBDC) — digital yuan, which should become the official state cryptocurrency.

4. Japan

Japan is one of the first countries to recognize cryptocurrencies as legal tender. In 2017, the country passed a law that allows the use of Bitcoin and other cryptocurrencies for payments. Japan has also implemented strict regulations for cryptocurrency exchanges, including registration, compliance with KYC and AML standards, and protection of customer funds.

In general, Japan supports cryptocurrency innovation, but requires a high degree of regulation and security standards.

5. Russia

On November 29, 2024, Russian President Vladimir Putin signed Law No. 418-FZ, amending the Tax Code of the Russian Federation aimed at regulating the taxation of cryptocurrency transactions. 

Main provisions of the law:

Recognition of digital currency as property: The law establishes that digital currency is recognized as property for tax purposes. 

Taxation of mining income: Mining income will be subject to income tax at a standard rate of 25% starting in 2025. 

Taxation of income from transactions with cryptocurrency: Income from transactions with cryptocurrency will be included in the general tax base with income from transactions with securities. Income up to 2.4 million rubles per year is subject to personal income tax at a rate of 13%, above this amount – at a rate of 15%. 

Exemption from VAT: Operations related to the mining of digital currency and its sale are exempt from VAT. 

Responsibilities of mining infrastructure operators: Mining infrastructure operators are required to report to the tax authorities about miners using their infrastructure. For failure to fulfill this obligation, a fine of 40 thousand rubles is provided. 

The law comes into force on the date of official publication, and its main provisions will come into force on January 1, 2025. 

6. India

India has been actively discussing the issue of regulating cryptocurrencies in recent years. In 2023, the Supreme Court of India declared cryptocurrencies legal for use, but the government is also considering introducing strict laws to regulate cryptocurrency transactions.

In addition, India is actively developing a project digital rupee, which also creates additional difficulties for cryptocurrency companies.

7. Singapore

Singapore is one of the most progressive financial centers in relation to cryptocurrencies. The country operates Payment Services Law, which regulates cryptocurrency exchanges and companies offering cryptocurrency services. Singapore provides a stable legal platform for cryptocurrency startups, including tax incentives and clear regulations.

8. Ukraine

In Ukraine, the legal status of cryptocurrency has undergone significant changes in recent years.

Legislative initiatives:

On February 17, 2022, the Verkhovna Rada of Ukraine adopted Law No. 2074-IX “On Virtual Assets,” which established the status of cryptocurrency as an object of property. However, the law will come into force only after changes are made to the Tax Code regulating the taxation of transactions with virtual assets. In November 2023, two bills aimed at clarifying the regulation of cryptocurrencies were registered in the Verkhovna Rada:

• Bill No. 10225: developed with the support of the National Securities and Stock Market Commission.
• Bill No. 10225-1: represents the position of the Ministry of Digital Transformation and business representatives.

Both documents are at the discussion stage and are aimed at creating clear rules for working with virtual assets in Ukraine. 

Taxation of cryptocurrencies:

The head of the tax committee of the Verkhovna Rada of Ukraine, Danilo Getmantsev, said that it is highly likely that cryptocurrency will be legalized in the first quarter of 2025. At the same time, you should not count on preferential tax conditions. Taxation will be applied according to the securities model, that is, tax will be levied on profits when withdrawing assets into foreign currency. 

At the moment, cryptocurrencies in Ukraine do not have a clear legal status. Individuals can buy and sell cryptocurrency, but businesses do not have clear rules for dealing with virtual assets.

Conclusion

Cryptocurrency regulation varies around the world, and in each country it depends on many factors, including the economic situation, security, anti-money laundering and support for innovation. While some countries, such as Japan and Singapore, have created favorable conditions for the growth of cryptocurrency companies, others, such as China and India, continue to develop their domestic regulatory approaches. In the coming years, we can expect further harmonization of cryptocurrency regulation, especially within international organizations such as the European Union.

The cryptocurrency market continues to develop, and the future will tell how laws and regulations will develop.