Table of Contents
In August 2015, the Australian Parliament’s Senate Economic References Committee published a report titled “Digital Currency – Game Changer or Bit Player,” following the completion of an inquiry into “how to develop an effective regulatory system for digital currency, the potential impact of digital currency technology on the Australian economy, and how Australia can take advantage of digital currency technology.” The government responded to the Committee’s recommendations in May 2016. This included responses regarding the tax treatment of cryptocurrencies, which noted aspects of the following actions of the Australian Taxation Office (ATO).
The ATO has published a guidance document on the tax treatment of virtual currencies. The general guidance follows the finalization, in December 2014, of various rulings relating to the application of tax laws to bitcoin and other cryptocurrencies. According to the guidance, transacting with cryptocurrencies is “akin to a barter arrangement, with similar tax consequences.” This is because, in the view of the ATO, such currencies are “neither money nor a foreign currency.” Individuals who engage in cryptocurrency transactions are advised to keep records of the date of transactions; the amount in Australian dollars (“which can be taken from a reputable online exchange”); what the transaction was for; and who the other party was (“even if it’s just their bitcoin address”).
Cryptocurrencies may be considered assets for capital gains tax purposes, with the guidance stating: “Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less.”
With regard to business transactions, the ATO guidance states that the Australian dollar value of bitcoins (being the fair market value) received for goods and services must be recorded as part of ordinary income, in the same way as receiving non-cash consideration under a barter transaction. A business that purchases items using bitcoin is “entitled to a deduction based on the arm’s length value of the item acquired.” Goods and services tax (GST) is also payable and is calculated on the market value of the goods or services, which is “ordinarily equal to the fair market value of the bitcoin at the time of the transaction.” When a business disposes of bitcoin, there may be capital gains tax consequences. If a business gives bitcoin to an employee this may be considered either a fringe benefit (if there is a valid salary sacrifice arrangement in order to receive the bitcoin) or normal salary and wages. If an entity is in the business of mining bitcoin, or buying and selling bitcoin as an exchange service, any income derived must be included in its assessable income, and any expenses incurred may be deducted.
The ATO has also published separate guidance on the application of the goods and services tax (GST) with respect to transactions involving digital currency. A previous ruling regarding GST was withdrawn in December 2017 following the passage of amendments to A New Tax System (Goods and Service Tax) Act 1999 and associated regulations, which apply to transactions after July 1, 2017. Under the amendments, sales and purchases of digital currency are not subject to GST. If a person is carrying on a business in relation to digital currency or accepting digital currency as a payment as part of a business, then there are GST consequences. The changes were aimed at removing “double taxation” of digital currencies under the GST system.
According to news reports from January 2018, the ATO is consulting with tax experts “to help it identify and track cryptocurrency transactions and ensure all taxes are being paid.”
The Australian Securities and Investments Commission’s (ASIC’s) MoneySmart website provides information on virtual currencies and sets out various risks associated with buying, trading, or investing in such currencies. These include the fact that there are few safeguards because the exchange platforms are generally not regulated; large fluctuations in value; possible theft by hackers; and the popularity of virtual currencies with criminals. A separate page provides information about initial coin offerings, which ASIC calls a “high-risk speculative investment.”
In the area of anti-money laundering and counterterrorism financing (AML/CTF), the government introduced a bill in Parliament in August 2017 in order bring digital currency exchange providers under the AML/CTF regulatory regime, as recommended by the Senate committee referred to above. The bill was enacted in December 2017 and the relevant provisions came into force on April 3, 2018.
Under the amendments, digital currency exchanges will be required to enroll in a register maintained by AUSTRAC (Australian Transaction Reports and Analysis Centre) and implement an AML/CTF program “to mitigate the risks of money laundering as well as identify and verify the identity of their customers.” They will also be required to report suspicious transactions and maintain certain records.
On December 22, 2017, the Central Bank of Brunei, Autoriti Monetari Brunei Darussalam (AMBD), released a statement reminding the public that “cryptocurrencies are not legal tender in Brunei Darussalam and are not regulated by AMBD,” and advising the public “to be vigilant and exercise extreme caution when dealing with such currencies that are privately issued.” The press statement also added that
AMBD would like to remind the public to be careful when participating in any investment plans or financial transactions. The public is advised not to be easily enticed by any investment or financial activity advertisements, and to conduct due diligence and understand the financial products properly before participating.
China’s central bank, the People’s Bank of China (PBOC), has been conducting a study of digital currency for over three years, and has set up an Institute of Digital Money within the PBOC. Zhou Xiaochuan, the then governor of the PBOC, addressed the current regulatory status of virtual currencies in a press conference held during the annual National People’s Congress session in March 2018, when he was stepping down. According to Zhou, Chinese regulators are not recognizing virtual currencies such as bitcoin as a tool for retail payments like paper bills, coins, or credit cards. The banking system is not accepting any existing virtual currencies or providing relevant services, he said.
Previously, on September 4, 2017, seven central government regulators—the PBOC, the Cyberspace Administration of China (CAC), the Ministry of Industry and Information Technology (MIIT), the State Administration for Industry and Commerce (SAIC), the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC), and the China Insurance Regulatory Commission (CIRC) —jointly issued the Announcement on Preventing Financial Risks from Initial Coin Offerings, which banned initial coin offerings (ICOs) in China. According to the Announcement, ICO financing that raises “so-called ‘virtual currencies’ such as Bitcoin and Ethereum” through the irregular sale and circulation of tokens is essentially public financing without approval, which is illegal. The Announcement warned that tokens or virtual currencies involved in ICO financing are not issued by monetary authorities and therefore not mandatorily-accepted legal tender, and thus do not have equal legal status with fiat currencies and “cannot and should not be circulated and used in the market as currencies.”
As early as December 3, 2013, the PBOC, MIIT, CBRC, CSRC, and CIRC jointly issued a notice warning the public about the risks of bitcoin, the Notice on Precautions Against the Risks of Bitcoins. The circular defined bitcoin as “by nature a special virtual commodity,” which “does not have equal legal status as currencies” and “cannot and should not be circulated in the market as a currency.” According to the notice, banks and payment institutions in China are prohibited from dealing in bitcoins. Financial and payment institutions are prohibited from using bitcoin pricing for products or services or buying or selling bitcoins, nor can they provide direct or indirect bitcoin-related services, including registering, trading, settling, clearing, or other services; accept bitcoins or use bitcoins as a clearing tool; or trade bitcoins with Chinese yuan or foreign currencies.
The status of cryptocurrencies in Cambodia is ambiguous. The National Bank of Cambodia (NBC) “signed an agreement with a Japanese firm... to develop a blockchain-based project for its own internal use, which would track interbank lending and transactions” in April 2017. However, it only addresses interbank transactions. The NBC has “asked banks in Cambodia not to allow people to conduct transactions with cryptocurrencies.”
At the Fourth Annual NBC Macroeconomic Conference on December 5, 2017, NBC Director General Chea Serey stated that activities of a handful of companies operating in Cambodia that tried to persuade people to use cryptocurrencies for everyday purchases and other financial transactions were “not legal as digital currencies are not issued or backed up by any government.” However, she also stated that “digital currencies are not illegal in the Kingdom” and “asked users to be wary of them and extremely careful when using them.” In a December 29, 2017, press release the NBC reaffirmed that it “never allowed the purchase-sale and circulation of any form of cryptocurrencies.”
On February 9, 2018, Hong Kong’s Securities and Futures Commission (SFC) alerted investors to the potential risks of dealing with cryptocurrency exchanges and investing in initial coin offerings (ICOs). In the alert, the SFC said it has taken regulatory action against a number of cryptocurrency exchanges and issuers of ICOs. The SFC has warned cryptocurrency exchanges in Hong Kong or with connections to Hong Kong that they should not trade cryptocurrencies, which it characterized as “securities” as defined in the Securities and Futures Ordinance, without a license. The SFC also wrote to seven ICO issuers and most of them confirmed compliance with the SFC’s regulatory regime or immediately ceased to offer tokens to Hong Kong investors. The SFC stated it would continue to police the market and engage in enforcement actions when necessary, and also urged market professionals to do proper gatekeeping to prevent fraud or dubious fundraising, and to assist the SFC in ensuring compliance with the law.
The new alert follows a statement on ICOs issued by the SFC on September 5, 2017. That statement explained that, depending on the facts and circumstances of an ICO, digital tokens that are offered or sold may be “securities” as defined in the Securities and Futures Ordinance, and therefore subject to the securities laws of Hong Kong. According to the statement,
where the digital tokens involved in an ICO fall under the definition of “securities”, dealing in or advising on the digital tokens, or managing or marketing a fund investing in such digital tokens, may constitute a “regulated activity”. Parties engaging in a “regulated activity” are required to be licensed by or registered with the SFC irrespective of whether the parties involved are located in Hong Kong, so long as such business activities target the Hong Kong public.
On January 8, 2014, in replying to a question raised at the meeting of the Legislative Council on the use of bitcoin, the Secretary for Financial Services and the Treasury said virtual currencies such as bitcoin are not considered as legal tender but are virtual commodities in Hong Kong, and warned about the risks of using virtual currencies. According to the Secretary,
it would be quite risky to convert, trade or hold such virtual currencies as their value is not backed by any physical items, issuers or the real economy. There are specified upper limits to the overall size of the issue of such virtual currencies, but no guarantee of their convertibility into a legal tender or commodities in the real economy. Also, the price of virtual currencies may be susceptible to significant fluctuations due to individual speculative activities.
On March 25, 2015, the Secretary responded to another question on the regulation of bitcoin trading activities raised at the meeting of the Legislative Council. In the statement, the Secretary reiterated there were no specific regulatory measures on virtual commodities such as bitcoin in Hong Kong, but existing laws provide for sanctions against unlawful acts such as money laundering, terrorist financing, fraud, pyramid schemes, and cybercrimes, with or without virtual commodities being involved. The police will take enforcement action if they find criminal conduct involving virtual commodities by conducting patrols, including searching for relevant information via public platforms on the Internet, the Secretary said. The Hong Kong Government and financial regulators will also keep a close watch on the development of bitcoin and other virtual commodities, he said.
On January 13, 2018, Bank Indonesia (Indonesia’s central bank) released a statement that warns against buying, selling, or otherwise trading in virtual currencies. The statement includes the following:
Bank Indonesia affirms that virtual currencies, including bitcoin, are not recognized as legitimate instrument of payment, therefore not allowed to be used for payment in Indonesia. This is in line with Act No. 7/2011 on The Currency, which states that currency shall be money of which issued by the Republic of Indonesia and every transaction that has the purpose of payment, or other obligations which need to be fulfilled with money, or other financial transactions conducted within the territory of the Republic of Indonesia, has to be fulfilled with Rupiah.
The statement goes on to say that ownership of virtual currency is “highly risky,” “vulnerable to bubble risks,” and “susceptible to be used for money laundering and terrorism financing.” Bank Indonesia therefore considers that such currencies “can potentially impact financial system stability and cause financial harm to society.” It also refers to Bank Indonesia Regulation No. 18/40/PBI/2016 on Implementation of Payment Transaction Processing and Bank Indonesia Regulation No. 19/12/PBI/2017 on Implementation of Financial Technology in affirming that, as the payment system authority, the Bank forbids all payment system operators and financial technology operators in Indonesia from processing transactions using virtual currencies.
This statement was supported by the Minister of Finance who, in a press conference on January 23, 2018, warned that virtual currencies are a high-risk and speculative investment and said that “[w]e will also continue to function as a government that conveys the view that it is not in accordance with the Law to be used as a means of transaction.”
The Bank’s statement follows an earlier press release in 2014, in which it encouraged caution with respect to virtual currencies and stated that “in view of the Act No. 7 Year 2012 [sic] concerning Currency and Act No. 23 Year 1999 which has been amended several times, the latest with Act No. 6 Year 2009, Bank Indonesia states that bitcoin and other virtual currency are not currency or legal payment instrument in Indonesia.”
In Japan, cryptocurrency exchange businesses are regulated. The Payment Services Act was amended in June 2016 and the amendment took effect on April 1, 2017. The amended Payment Services Act defines “cryptocurrency” as
- property value that can be used as payment for the purchase or rental of goods or provision of services by unspecified persons, that can be purchased from or sold to unspecified persons, and that is transferable via an electronic data processing system; or
- property value that can be mutually exchangeable for the above property value with unspecified persons and is transferable via an electronic data processing system.
The Act also states that cryptocurrency is limited to property values that are stored electronically on electronic devices; currency and currency-denominated assets are excluded.
Under the Payment Services Act, only business operators registered with a competent local Finance Bureau are allowed to operate cryptocurrency exchange businesses. The operator must be a stock company or a “foreign cryptocurrency exchange business” that is a company, has a representative who is resident in Japan, and an office in Japan. A “foreign cryptocurrency exchange business” means a cryptocurrency exchange service provider that is registered with a foreign government in the foreign country under a law that provides an equivalent registration system to the system under the Japanese Payment Services Act.
The Act requires cryptocurrency exchange businesses to separately manage customer’s money or cryptocurrency apart from their own. The state of such management must be reviewed by certified public accountants or accounting firms. The exchange business must have a contract with a designated dispute resolution center with expertise in cryptocurrency exchanges. The exchange business must keep accounting records of its cryptocurrency transactions and submit a report on the business to the Financial Services Agency (FSA) annually. The FSA is authorized to inspect exchange businesses and issue orders to improve their practices. The FSA may rescind the registration of a cryptocurrency exchange business or suspend its business for up to six months in cases where
- the exchange business loses one of the requirements for registration.
- it turns out that the exchange business made the registration illegally; or
- the exchange business violates the Payment Services Act or orders based on the Act.
On January 26, 2018, Coincheck, one of Japan’s biggest cryptocurrency exchange businesses, lost about $400 million in NEM (cryptocurrency) tokens. The local Finance Bureau ordered Coincheck to submit a report on the same day, examined it, and issued an order of business improvement on January 29, 2018. The following day the FSA requested all cryptocurrency exchange businesses to review their system-risk management plans and report the results to the FSA. On March 2, 2018, the FSA conducted an on-site inspection of Coincheck. On March 8, 2018, the local Finance Bureaus issued business-improvement orders to seven exchange businesses, again including Coincheck.
A group of cryptocurrency exchange businesses publicized their decision to form a new self-regulating body on March 2, 2018, that all registered exchange businesses will join. The body aims to obtain authorization from the FSA under the Payment Services Act.
In addition, under the Act on Prevention of Transfer of Criminal Proceeds, cryptocurrency exchange businesses are obligated to check the identities of customers who open accounts, keep transaction records, and notify authorities when a suspicious transaction is recognized.
According to the National Tax Agency (NTA), the profit earned by sales of cryptocurrency is, in principle, considered miscellaneous income, rather than capital gains, under the Income Tax Act. The NTA compiled questions and answers regarding the tax treatment of cryptocurrency and posted it online on December 1, 2017. Miscellaneous income is added to the amount of other income, excluding specified capital gains, when a person’s taxable income is calculated and taxed.
The Monetary Authority of Macau (AMCM) issued a statement on September 27, 2017, warning the financial industry and the public about the risks of virtual commodities and tokens. “Any trading of these commodities involves considerable risks, including but not limited to those relating to money laundering and terrorism financing, against which all participants should remain vigilant,” the statement said. According to the statement, the AMCM had issued a notice to banks and payment institutions in Macau to warn them not to participate in or provide, directly or indirectly, any relevant financial services, following a similar ban by Chinese authorities on the mainland on initial coin offerings (ICOs).
Previously, on June 17, 2014, the AMCM issued a statement warning about the risks of bitcoin transactions. According to that statement, bitcoin is a type of virtual commodity that is neither legal tender nor a financial instrument subject to the supervision of the AMCM. The AMCM warned the general public that trading in virtual commodities such as bitcoin “involves considerable risks, including but not limited to those relating to money laundering and terrorist financing.”
On January 2, 2014, Bank Negara Malaysia (Malaysia’s central bank) issued a statement saying that “the Bitcoin is not recognized as legal tender in Malaysia. The Central Bank does not regulate the operations of Bitcoin. The public is therefore advised to be cautious of the risks associated with the usage of such digital currency.”
On December 14, 2017, the Bank released, for the purposes of public consultation, a proposed policy “on the invocation of reporting obligations on digital currency exchange business as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).” According to the associated press release:
the proposed policy sets out the legal obligations, requirements and standards that digital currency exchangers, which will be defined under the First Schedule of the AMLA, must carry out as reporting institutions. This includes transparency obligations which are intended to provide relevant information for the public to better understand and evaluate risks associated with the use of digital currencies. Increased transparency will also serve to prevent the use of the digital currencies for criminal or unlawful activities. A digital currency exchanger must also declare its details to the Bank as a reporting institution.
Failure to declare its details as reporting institutions or comply with the reporting obligations may subject the digital currency exchangers to the enforcement and non-compliance actions as provided under the AMLA as well as the potential termination or denial of use of financial services in Malaysia.
The press release also affirms that digital currencies are not considered legal tender in Malaysia and digital currency businesses are not regulated by the Bank; the invocation of reporting obligations on digital currency exchange businesses does not connote any form of authorization or endorsement by the Bank. The statement goes on to again advise the public to “carefully evaluate the risks associated with dealings in digital currencies.”
The policy would require digital currency exchanges (being businesses that exchange digital currency for money, exchange money for digital currency, or exchange one digital currency for another), to comply with regulations relating to “the identification and verification of customers and beneficial owners, on-going monitoring of customers’ transactions, sanction screening, suspicious transaction reporting and record keeping”; transparency obligations; and “requirements for the submission of data and statistics to the Bank” for the purpose of managing money laundering and terrorism financing risks. Public comments on the draft policy were due by January 14, 2018; no date for its finalization was located.
In addition, a news report in February 2018 states that the Bank is going to release a concept paper on cryptocurrencies within the month, and this will neither recognize cryptocurrencies as money nor ban them altogether. The governor of the Bank stated, “basically, we will let the cryptocurrency promoters including bitcoin, ethereum and ripple to be more transparent, the methods to be more transparent and people behind the scene are to be more transparent too. By doing so, the public can decide on its own if they want to invest in cryptocurrencies.”
A further news report says that the Bank will require exchanges to “publish prices and the methodology used to determine those prices in a bid to boost transparency.” The report also states that the Securities Commission of Malaysia (SC) “plans to issue a cryptocurrency exchange framework and has stepped up oversight of the sector, issuing a cease-and-desist letter to a crypto start-up on January 9th for failing to follow the country’s securities regulations.” Previously, in September 2017, the Commission issued a statement in which it cautioned investors with respect to “the emergence of digital token based fundraising activities / investment schemes in Malaysia and elsewhere, which may be referred to as ‘initial coin offerings’ [ICOs], ‘initial token offerings’, ‘token pre-sale’, ‘token crowd-sale.’ ” Subsequently, in a speech in November 2017, the chairman of the Commission stated that
we continue to stand by our statement that such schemes [ICOs], in its current form poses significant risks to investors. Therefore, SC strongly encourages investors to fully understand the features of an ICO scheme, and carefully weigh the risks before parting with their monies. We are also now part of the IOSCO [International Organization of Securities Commissions] ICO Consultation Network where participating regulators are discussing the latest developments in this space.
At the same time, we note the growing interest of Malaysian investors in trading cryptocurrencies and digital assets. To facilitate such activities in our market and put in place appropriate einvestor safeguards, SC is reviewing relevant regulations and guidelines to facilitate functional and effective use cases of digital assets in the capital market, including secondary market trading of established crypto currency and digital assets.
With respect to tax treatment, in January 2018 Malaysia’s Inland Revenue Board (IRB) froze the Malaysian bank account of a UK-based cryptocurrency trading platform, apparently for the purpose of conducting an audit to determine whether the company has complied with the Income Tax Act 1967, which requires tax to be paid on the income of any person accruing in or derived from Malaysia. A request was made under section 81 of the Act as well as section 37 of AMLA for information on all of the company’s Malaysian customers. According to the IRB’s chief executive, “all traders should adhere to the Malaysian tax requirement by keeping proper records for audit purposes and disclose any transactions from the cryptocurrency trading when requested by IRB.”
The Marshall Islands has enacted legislation authorizing the launching of its own national cryptocurrency to serve as legal tender for citizens and businesses on the island. The currency will be known as the sovereign, or SOV, and will serve as “legal tender of the Marshall Islands for all debts, public charges, taxes, and dues.” It will circulate as legal tender in addition to the US dollar. The SOV will be introduced in a forthcoming initial currency offering (ICO), after which residents of the Marshall Islands will be provided with the means to hold, save, and conduct transactions with the SOV, and merchants in the Marshall Islands will be given access to a computer application that will enable them to receive payments made with the SOV. The Minister of Finance will appoint a person or corporation to conduct the ICO. News reports indicate a financial technology company named Neema, which spearheaded the initiative, is likely to be awarded the contract to conduct the ICO.
In October 2017, the Financial Markets Authority (FMA) published information on cryptocurrencies, and the risks associated with them, as part of its guidance on investment options. In particular, it highlights the following three points about cryptocurrencies:
- They’re high risk and highly volatile – the price can go up and down very quickly
- They’re not regulated in New Zealand
- Cryptocurrencies, crypto-exchanges and the people that use them are often the targets of online fraud and scams
The FMA has also published commentary on initial coin offers (ICOs) and cryptocurrency services (including exchanges, wallets, and brokering). The information relates to the application of the existing regulatory framework for financial products and services. With regard to ICOs, the guidance states that
The extent to which an ICO is regulated depends whether a ‘financial product’ is being offered to retail investors in New Zealand (ie a ‘regulated offer’ is being made). Whether a token offered via an ICO is a financial product, and if so, what type of product, depends on the token’s specific characteristics and economic substance.
The FMA then explains how a token may be considered one of the four types of financial products set out in the Financial Markets Conduct Act 2013 (being debt securities, equity securities, managed investment products, and derivatives), and if so, what the obligations of the issuer are. It also notes that ICOs and tokens that are not financial products “will still be subject to general consumer protection laws in New Zealand, for example prohibitions against misleading and deceptive conduct and fraud or other criminal conduct.”
With regard to cryptocurrency services, the FMA guidance states that businesses based in New Zealand that provide a “financial service” related to cryptocurrencies must comply with the Financial Service Providers (Registration and Dispute Resolution) Act 2008. It then explains how different types of businesses might be considered to be providing a financial service and the obligations of such businesses.
The Inland Revenue Department (IRD) has not yet issued any guidance or rulings regarding the tax treatment of cryptocurrencies. Its public rulings work program for the 2017–2018 financial year includes “GST and Income tax – Tax treatment of crypto-currencies” as being an item currently in progress, as of February 9, 2018, with “preparatory work on issuing public guidance” being underway.
According to a news report in January 2018, the IRD indicated that people should “treat money made buying and selling cryptocurrencies in the same, or similar, way they would money made buying and selling gold. That is, pay tax on the profit made by selling a currency, only if that currency was bought with the intention of resale.” It directed the author to an information sheet on gold, which explains that amounts derived from its disposal will be income if the gold was acquired for the dominant purpose of disposal.
In addition, a spokesman for the Reserve Bank of New Zealand (its central bank) was quoted in a December 2017 news article as stating that cryptocurrencies would be included in the bank’s major review of its currency operating model and supporting infrastructure, which is currently underway. He explained that
This project is focused on demand drivers, distribution models, and cash substitutes. It includes looking into crypto-currencies, blockchain technology and distributed ledgers.
The Reserve Bank doesn’t regulate bitcoin. Whatever legal status bitcoin has is under ordinary law relating to contracts, tax obligations etc.
An analytical note issued by the Reserve Bank in November 2017, which does not serve as an official policy position, discusses the technology involved in cryptocurrencies, their attributes and mechanics, and “the implications of cryptocurrencies for consumers, financial systems, monetary policy, and regulatory policy.”
Bangko Sentral ng Pilipinas (BSP, i.e., the Philippines Central Bank) has issued guidelines concerning virtual currencies (VCs). Specifically, these Guidelines provide that since VCs are not backed by a central bank or a particular commodity and are not guaranteed by any country, they are not legal tender. However, since they are used as a conduit to provide certain financial services, such as remittances and payment transactions, entities that provide such services using VCs must register with the BSP and adopt adequate measures to mitigate and manage risks associated with such currencies. In addition, the Guidelines provide for penalties applicable to VC entities that conduct operations without the appropriate authorization from the BSP.
On June 12, 2017, the Central Bank of Samoa issued a statement in which it warned the public to be “very cautious and diligent” in dealing with digital currency investments. As part of a broader warning against get-rich schemes, it advised people to ensure that they fully understand how a venture works and the risks and benefits of investing, and to contact the Bank if they are uncertain.
No other government statements or regulatory actions were located.
In the wake of an increase in the number of initial coin offerings (ICOs) in Singapore as a means of raising funds, on August 1, 2017, the Monetary Authority of Singapore (MAS) issued a statement clarifying that the offer or issue of digital tokens in Singapore will be regulated by the MAS, if the digital tokens fall within the definition of “securities” regulated under the security laws. MAS’s position is not to regulate virtual currencies. “However, MAS has observed that the function of digital tokens has evolved beyond just being a virtual currency,” the statement said.
Following the August statement, the Deputy Prime Minister and Minister in Charge of MAS (DPM) responded to questions from the Parliament for its sitting on October 2, 2017, on the regulation of cryptocurrencies and ICOs. According to the DPM, although the MAS does not regulate virtual currencies per se, it regulates activities involving the use of virtual currencies that fall under MAS’s regulatory ambit, such as money laundering and terrorism financing. The MAS is working on a new regulatory framework for payments that will address the risks associated with virtual currencies, the DPM said. With respect to ICOs, the MAS has not issued specific legislation, but will continue to monitor developments and consider more targeted legislation when it becomes necessary, the DPM added.
With respect to the new payment regulatory framework, the MAS issued a consultation paper proposing the Payment Services Bill in November 2017. The proposed Bill would expand the scope of regulated payment activities to include virtual currency services and other innovations. Under the new framework, entities carrying out virtual currency services including buying or selling virtual currency would be required to be licensed.
The South Korean government implemented a rule that allows trades in cryptocurrencies only from real-name bank accounts (“real-name account system”) beginning January 30, 2018. Cryptocurrency dealers must have contracts with banks concerning cryptocurrency trades. The banks examine dealers’ management and cyber security systems before signing such contracts. In order to make a deposit into their e-wallet at a cryptocurrency dealer, a cryptocurrency trader must have an account at a bank where the cryptocurrency dealer also has an account. The bank checks the trader’s (customer’s) identity when it opens an account for the trader, and the trader reports his/her bank account to the dealer. The dealer also checks the identity of the trader and applies for registration of the trader’s account with the bank. Anonymous cryptocurrency traders may withdraw from their cryptocurrency accounts but cannot make a new deposit. Minors, as well as foreigners, regardless of their place of residence, are prohibited from trading in cryptocurrencies.
Under the Act on Reporting and Using Specified Financial Transaction Information, financial institutions are required to report financial transactions that are suspected, based on reasonable grounds, to be illegal or to involve money laundering. The Korea Financial Intelligence Unit (KFIU) issued guidelines on such reporting by banks to prevent money laundering via cryptocurrency transactions. The guidelines list the following examples of suspicious situations:
- When a trader deposits or withdraws 10 million won (about US$9,400) or more a day or 20 million won or more a week
- When a trader makes financial (banking) transactions five times or more a day or seven times or more a week
- When a trader is a corporation or organization
- When a trader who does not have a record of deposit for a cryptocurrency exchange account withdraws most of the funds sent from the cryptocurrency exchange account in cash
- When there are reasonable grounds for suspecting that a trader divides the amount of transaction money or the number of transactions to avoid reporting by financial institutions.
The Act and the guidelines also mandate that cryptocurrency dealers and banks verify traders’ identification and other information.
On February 20, 2018, the chief of South Korea’s Financial Supervisory Service, Choe Heung-sik, said that the government would support “normal” cryptocurrency trading and encouraged financial institutions to facilitate transactions with cryptocurrency exchanges.
It was reported in March 2018 that the Ministry of Strategy and Finance is preparing a draft cryptocurrency taxation framework for release by the end of June 2018. The Ministry reportedly considers income from cryptocurrencies to be capital gains or miscellaneous income.
On December 19, 2017, Taiwan’s Financial Supervisory Commission (FSC) issued a statement warning the general public about the risks of investing in virtual commodities such as bitcoin. In the statement, the FSC reiterated that in Taiwan, virtual currencies such as bitcoin are considered “highly speculative virtual commodities.” According to the statement, whether tokens involved in initial coin offerings (ICOs) are securities under the Securities and Exchange Act will be examined case by case, and illegal fundraising will be sanctioned in accordance with financial laws.
Previously, on December 30, 2013, Taiwan’s Central Bank and the FSC jointly issued a statement warning the public about the risks inherent in dealing with bitcoin. In the statement, the regulators said bitcoin is not a real currency, but a “highly speculative virtual commodity.” The general public was warned about the specific risks associated with accepting, trading, or holding bitcoin. The Central Bank and the FSC will take necessary regulatory actions at the appropriate time on the provision of bitcoin-related services by financial institutions, the statement said.
Following the 2013 warning, the FSC issued a notice on January 6, 2014, that prohibited banks and financial institutions in Taiwan from accepting or exchanging bitcoin or providing bitcoin-related services at bank ATMs.
UPDATE (Jan. 22, 2019): On November 7, 2018, Taiwan’s Money Laundering Control Act was amended to include virtual currency platforms within the regulatory scope of the Act.
The Bank of Thailand issued a circular on February 12, 2018, asking financial institutions to refrain from doing any business involving cryptocurrencies. Bangkok Bank halted transactions involving the trading of cryptocurrencies with a private Thai company, Thai Digital Asset Exchange (TDAX), on February 24, 2018. On February 27, 2018, Krungthai Bank, a state-owned financial institution, halted transactions related to cryptocurrencies with TDAX through the bank’s accounts. According to a news article, the ban will continue even after a new regulation (discussed below) is issued.
Though the government expects new laws regarding cryptocurrencies will be enacted in the future, it decided to implement temporary measures to protect cryptocurrency investors. According to news articles, on March 13, 2018, the Cabinet approved the principles of the drafts of two Royal Decrees, one to regulate digital currencies, including cryptocurrencies, transactions, and initial coin offerings (ICOs), and the other to amend the Revenue Code to collect capital gains taxes on cryptocurrencies. The Decrees would require all digital asset transactions, including those of digital asset exchanges, brokers, and dealers, to be registered with the relevant authorities.
In October 2017 a number of news media outlets reported that Vanuatu would allow people to use cryptocurrency to pay the fee to obtain Vanuatu citizenship as part of its citizenship investment program. However, the Citizenship Office subsequently denied this, saying that there was no legal confirmation on the use of cryptocurrencies for this purpose and all payments were required to be in US dollars.
No other government statements or regulatory actions were located.
The State Bank of Vietnam issued a decree on cryptocurrency on October 30, 2017. According to news reports, the Bank
effectively determined that Bitcoin and other virtual currencies are not legal means of payment. That effectively also outlawed the issuance, supply and use of cryptocurrencies. Those found in violation of the decree and other relevant legal principles face fines of up to 200 million dong (around US$9,000).
Some news media also reported that the government is trying to establish a legal framework for cryptocurrencies. It was reported that the Governor of the State Bank of Vietnam (SBV) Le Minh Hung said that “ ‘from the perspective of treating it as an investment asset’, the SBV would co-operate with the justice ministry to ‘study the legal framework for managing’ Bitcoin.”