Regulation of Cryptocurrencies

For many users, especially those who intend to invest extensively in digital currencies and blockchain, understanding the approach and regulatory conditions of the Islamic Republic of Iran regarding digital currencies and blockchain is vital. However, knowing the legislative conditions in various countries is also essential for understanding the position of this technology among developed or developing countries and gaining a relative perspective on the future of this field. Due to the nascent nature of this space and the lack of fundamental infrastructures, it is evident that the government’s approach in this regard is not transparent and conclusive. Still, by examining certain criteria, one can understand a government’s stance on digital currencies. Examining the regulatory conditions of different countries regarding digital currencies can assist users in various fields, such as investment, research and development, mining, etc., in making informed decisions. Furthermore, this issue can also aid government officials in making better decisions. For the reasons mentioned above, the ‘Digital Currency’ team has launched the comprehensive section ‘The Latest Status of Digital Currency Legislation Worldwide’ with the aim of raising awareness about digital currencies and the revolutionary blockchain technology among the dear people of Iran and officials. This section collects data from the most reputable sources mentioned at the end of the page, along with extensive research conducted by the ‘Digital Currency’ team, and will be regularly updated.

One interesting aspect of the digital currency market is the fluidity of terms used for its different segments and products. The terms used for their definition can vary from one country to another. For example, in Argentina, Thailand, and Australia, they are referred to as ‘digital currencies.’ Canada, China, and Taiwan call them ‘virtual commodities.’ Germany uses the term ‘crypto-tokens.’ Switzerland refers to them as ‘payment tokens.’ Italy and Lebanon use the name ‘cyber currency.’ Colombia recognizes them as ‘electronic currency,’ while Honduras and Mexico use ‘virtual assets.’ One common approach in these countries is to issue warnings about the risks associated with investing in digital currencies, primarily published by central banks. These warnings are aimed at increasing public awareness about the distinction between real currencies, which are issued and guaranteed by them, and virtual currencies that lack these characteristics. Many of these warnings highlight the volatility of the digital currency market and the lack of legal frameworks for companies facilitating digital currency use, which contribute to the mentioned risks. Some of these warnings also emphasize that there is no legal authority to pursue losses and damages incurred by citizens investing in the digital currency market. In many of these countries, it is stated that individuals will be responsible for their own losses.

Several countries have expressed concerns that digital currencies could be used for criminal activities such as terrorism financing and money laundering. Some countries have extended their focus beyond simple warnings and have expanded anti-money laundering, anti-terrorism, and organized crime laws to cover digital currencies. In these countries, all companies, financial institutions, and banks operating in the digital currency space are required to comply with these laws, and their competence must be approved by judicial authorities. For example, Australia, Canada, and the Isle of Man (among other semi-autonomous countries located in the Irish Sea) are among the countries that have placed all activities in the digital currency sector under anti-money laundering and anti-terrorism laws.

Some countries have gone further and imposed restrictions on investment in this area. The severity of these restrictions varies from one country to another. Some, such as Algeria, Bolivia, Morocco, Nepal, Pakistan, and Vietnam, have outright banned all investment activities related to digital currencies. Qatar and Bahrain, on the other hand, detain their citizens for engaging in activities within their legal jurisdictions but allow them to operate outside their borders. Iran, Bangladesh, Thailand, Lithuania, Lesotho, China, and Colombia, while not banning economic activities related to digital currencies, put any such activities involving financial institutions under indirect restrictions and legal scrutiny.

A few countries have also begun to legislate in the area of Initial Coin Offerings (ICOs). ICOs are a mechanism for raising funds using digital currencies. Some countries, like China, Macau, and Pakistan, have banned ICO activities, while others are focusing on creating legal frameworks in this area. The nature of these regulations can vary depending on the classification of ICOs. For example, in New Zealand, the legal requirements for ICOs differ based on whether they fall into categories like debt securities, equity securities, investments, or derivatives. In the Netherlands, ICOs are categorized as either debt securities or a means of investment, and their cases are handled individually in Dutch courts.

In other parts of the world, more extensive systems for the development of digital currencies have been implemented. Countries like the Marshall Islands, Venezuela, Eastern Caribbean Central Bank member countries, and Lithuania have adopted such systems.

Additionally, there are countries that do not consider the digital currency market to be significant and have not issued warnings or deemed it necessary to create legal frameworks. Belgium, South Africa, and the UK fall into this category and have not taken the digital currency market seriously or pursued legal frameworks for it.

Among all these issues, the most common question arising in the context of investing in digital currencies is the taxation of these assets. The categorization of digital currencies can play a role in determining their activities and, consequently, their tax status. The main debate revolves around whether income from buying and selling digital currencies should be considered ‘income’ or ‘capital gain.’ Different countries, including those mentioned above, have taken unique approaches to taxing this category.