Comparing Cryptocurrency Regulations Around the World

TLDR;

USA: Disjointed crypto regulation, SEC and CFTC oversee different aspects; State policies differ.
EU: MiCA regulation aims for unified crypto laws emphasizing transparency and protection.
China: Banned cryptocurrencies, promotes digital yuan (CBDC) for State control. Hong Kong is an exception.
UK: FCA regulates crypto businesses, focusing on Stablecoins and consumer protection.
Japan: Advanced crypto regulation with the Payments Services Act, focusing on legality and consumer protection.
UAE: Pro-crypto policies, VARA oversees digital assets, with a sandbox for innovation.
El Salvador: Bitcoin as legal tender, facing adoption challenges and volatility concerns.
India: Imposes a 30% tax on crypto, exploring digital rupee (CBDC), but lacks clear regulations.
Africa: High crypto adoption due to instability but struggles with regulation and infrastructure.

Cryptocurrencies are reshaping global finance, and it’s becoming increasingly more mainstream. However, with the adoption of cryptocurrencies around the world, there is also now a need for policies to regulate this ever-evolving technology. Different countries have their unique views when it comes to cryptocurrencies. While some embrace it with an open mind and actively encourage it, others are not keen on adopting cryptocurrencies.

The United States Aims For a Balance

USA seems to be pro-cryptocurrency as it has the highest number of crypto users in the world, with recent reports stating that over 70% of U.S. states have issued legislation addressing cryptocurrency or blockchain. Also, the country has a huge cryptocurrency market that holds some of the biggest crypto exchanges, such as Kraken and Coinbase. But in truth, USA itself regulates these cryptocurrencies nationally in a very disjointed way. This is because different states and agencies handle it in their own way.

The U.S. federal oversight includes two main agencies: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC regulates cryptocurrencies classified as securities, ensuring compliance with strict rules, whereas the CFTC oversees those classified as commodities. This dual oversight can lead to overlapping jurisdictions, causing ambiguity and confusion about which agency governs specific assets.

Then, we have different states with varying levels of strictness in their policies regarding cryptocurrencies. For instance, the State of New York has highly strict rules such as the BitLicense which imposes a thorough checklist crypto firms have to fulfill before launching into the market. But some states are not that strict and allow easier entry for crypto firms.

European Union: Towards Unified Regulation

In the European Union, there has been pro-crypto sentiment similarly to the USA. Countries like Germany and France recognize cryptocurrencies as proper financial assets and offer solid market regulation policies. These countries are all part of the European Union, meaning they already have shared laws and policies that provide a way to ensure economic cooperation. For that very purpose, the European Union countries have one currency: the Euro.

Following that approach, the European Union also wants to harmonize the cryptocurrency regulations across all of its member States. The Union is attempting to do that through its Markets in Crypto-Assets (MiCA) regulation. The MiCA regulation will ensure a focus on transparency, laws to protect consumers and methods to counter anti-money laundering.

Furthermore, the European Security and Markets Authority (ESMA) is also consulting with the public on adding regulations under the MiCA regulation. The new rules set forth stated that any new company which is issuing or trading cryptocurrency will require a license. Starting from January 2026, all the service providers will need to obtain names of the senders as well as the beneficiaries, along with the amount that is being transferred. Moreover, any self-hosted wallets in ownership of over 1,000 euros will be required to go through wallet ownership verification for the transactions.

China Completely Bans Cryptocurrencies

Although China took part in the cryptocurrency market initially, the People’s Bank of China (PBOC) declared all cryptocurrency transactions illegal, basically banning them from taking place. This decision was part of a bigger crackdown aimed at reducing financial crime and preventing capital flight from the country.

The PBOC had concerns that cryptocurrencies allow for public financing without State approval. The bank believed this risks the country’s financial stability. The ban was also influenced by fears that cryptocurrencies were being used to bypass China’s strict capital controls. Alongside the ban on transactions, China also banned Bitcoin mining in 2021, resulting in many miners relocating to countries with more favorable regulations.

China is one of the few countries that has not embraced decentralized currencies. But China has doubled down on the State-backed Digital Yuan currency. This is not a cryptocurrency but a central bank digital currency (CBDC). The CBDC allows the State to retain control while offering a modernized currency.

Note: CBDC is a digital currency owned and controlled by a country’s central bank. This means that the government retains authority over it.

Britain Has Its Own Regulation Regarding Stablecoins

Since 2020, Britain is no longer part of the European Union. Hence, the country has its own rules that govern the financial markets. Britain is also actively building proper regulatory frameworks for the cryptocurrency sector. A notable policy of the country has stated that any company that is offering digital currency must be authorized by the country’s official Financial Conduct Authority (FCA). The FCA has emphasized that firms dealing directly with UK retail consumers need to be authorized, regardless of their location.

Moreover, the Bank of England and FCA have suggested detailed regulations for stablecoins. The UK government is planning to propose a comprehensive regulatory framework for stablecoins, which involves recognizing them as legitimate and valid forms of payment. The coming regulations will address different aspects of stablecoin operations, such as issuance and custody, with a focus on treating them in the same way as traditional financial tools.

Note: Stablecoins are different from normal cryptocurrency coins because they have their value tied to that of another more stable asset. Learn more here.

Japan is A Regulatory Pioneer

Japan is currently the pioneer when it comes to regulating cryptocurrencies because it offers the most forward-thinking policies. It was one of the first countries that officially recognized cryptocurrencies as legal property via the Payments Services Act (PSA), which came into effect in 2017. This law created a regulatory framework for cryptocurrency exchanges, making it necessary for them to register with the Financial Services Agency (FSA) and follow certain regu l ations. The approach Japan used puts a focus on strict consumer protection laws that help users be safe from serious risks like theft and fraud.

Moreover, Japan has also put forth anti-money laundering measures, which make it necessary for crypto firms to verify customer identities before conducting business with them. The firms are also obligated to report possible suspicious activities. All these measures ensure that criminal and illegal activities associated with cryptocurrencies are prevented.

It also must be noted that Japan has high taxation rates for cryptocurrencies, with some rates reaching up to 55%. This definitely affects the cryptocurrency market as well.

As of late 2024, Japan’s FSA is thinking to further impose strict regulations on cryptocurrencies, possibly reclassifying them as financial assets under stricter supervision.

United Arab Emirates: Crypto-Friendly Policies

In UAE, Dubai is becoming one of the leading cities for Blockchain innovation and cryptocurrency. The government has specifically designed frameworks that attract all kinds of crypto businesses and those involved in digital assets. For instance, Dubai’s VARA (Virtual Asset Regulatory Authority) oversees all digital assets. VARA has established the Full Market Product (FMP) Rules, which outline clear-cut rules for investors and companies. This means anyone can operate their business in the city without worrying about fraudulent schemes.

Another innovative initiative adopted by UAE has been the sandbox initiative in places like the Abu Dhabi Global Market (ADGM). The sandbox is a controlled environment that allows businesses to easily test out new technologies and experiment. This allows companies to test new products without the risks associated with launching them in the market.

This encourages more original innovation and experimentation for crypto businesses. The businesses are complying with the legal rules and policies so no investor or crypto user needs to be worried.

El Salvador: Bitcoin as Legal Tender

El Salvador became the first ever country to officially adopt Bitcoin as legal tender on September 2021, following the Bitcoin Law passed by its Legislative Assembly. This initiative, led by President Nayib Bukele, aimed to enhance financial inclusion for the population and lower remittance costs for Salvadorans living abroad. The government promoted the use of Bitcoin through initiatives like the Chivo wallet, which offered $30 in Bitcoin to users who signed up.

While this was a bold and innovative move, it still was criticized. The IMF (International Monetary Fund) had concerns about this policy as the organization believes Bitcoin is still volatile. IMF believes that Bitcoin’s value can fluctuate randomly, leading to financial instability for countries that have adopted it as one of the currencies. IMF also warned El Salvador that adopting Bitcoin will make it difficult for the country to manage their national debt. Recently, IMF loaned the country $1.4 billion on the condition that the government make some changes in their Bitcoin Law.

India Went From Anti-Crypto to Pro-Crypto

Initially, the Reserve Bank of India (RBI) banned cryptocurrencies in 2018, saying it risked the country’s financial stability. However, this ban was then overturned by the Supreme Court in March of 2020, which allowed cryptocurrency trading to resume. The cryptocurrency market grew steadily in the country and as a result, the government introduced a 30% tax on income from cryptocurrency transactions in 2022.

In 2021, there was a proposed Cryptocurrency and Regulation of Official Digital Currency Bill, which aims to regulate the cryptocurrency sector by banning private cryptocurrencies and simultaneously paving the way for a state-controlled digital currency issued by the RBI. This bill demonstrates that India wants to create a structured regulatory environment for digital assets.

Inspired by global trends, India is looking to introduce its own Central Bank Digital Currency (CBDC), which the RBI will regulate. This initiative has the hopes to modernize India’s financial systems and enhance payment efficiency.

Africa: Rising Adoption Amidst Challenges

The African Continent has a highly diverse approach when it comes to cryptocurrency. Different countries are adopting different policies as per their economic state. For example, Nigeria seems to follow China’s model. Nigeria has also banned cryptocurrency transactions but is promoting its own CBDC, the eNaira. However, in December of 2023, the ban on cryptocurrencies was lifted by the Central Bank of Nigeria.

But looking at South Africa, a more progressive approach can be seen. South Africa is attempting to create regulations and policies that incorporate cryptocurrencies in its traditional financial systems. Doing this will help set out transparent and detailed rules on how these digital assets should be properly managed as well as taxed.