Different countries have varying legislation regarding cryptocurrencies and their operations. Some countries have outrightly banned cryptocurrency transactions, mining, and similar activities, while others have restricted their usage. For example, the Chinese authorities have outlawed the use of cryptocurrencies.
Many global crypto transactions occur in Asian countries, accounting for over 31% of worldwide transactions.
Japan was one of the first Asian countries to create a framework for cryptocurrencies through its Payment Services Act (PSA). This happened at a time when most Asian countries were dismissive of cryptocurrencies.
In recent times, more Asian countries, such as India, have drafted laws to regulate crypto transactions and mining in their regions.
In Asia, there are varying regulations governing the use of cryptocurrencies in different regions, and this article will explore them in detail.
Singapore
Singapore has carved a niche for itself as the hub of new technologies, including cryptocurrencies. The Monetary Authority of Singapore (MAS) is the apex financial body in Singapore, in charge of implementing the country’s cryptocurrency regulations.
In 2020, the Payment Services Act (PSA) was enacted to govern the usage and operation of digital and traditional assets. Though cryptocurrency usage may be legal in Singapore, there are some regulations in place to reduce the chances of this digital asset being used in illegal activities such as money laundering and terrorism financing.
To ensure that these regulations are followed by financial institutions in Singapore, the apex financial institution introduced the MAS Notice PSN02 (Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service). This notice outlines the measures put in place to combat money laundering and terrorism using digital currency.
A year later, in January 2021, improvements were made to the PSA to ensure that it met global standards for counter-terrorism financing and anti-money laundering using cryptocurrencies.
Before any crypto company can operate in Singapore, it must obtain a license based on the conditions outlined in the Payment Services Act, as well as meet certain standards.
Binance.com was placed on an Investor Alert List in 2021 because it collected funds from Singapore residents without obtaining the required license as specified in the PSA.
Recently, an alteration was made to the law guiding the operation of crypto platforms in Singapore. Overseas-only crypto operators must apply for a license before they can operate. Aside from the aforementioned, regulators have been given more authority.
According to reports,
“The Monetary Authority of Singapore (MAS) has been given the authority to regulate the operations of businesses that provide digital assets to Singaporeans. The bill classifies digital assets such as cryptocurrencies, digital payment tokens, and virtual representations of capital market products.
As a result of the law, the Monetary Authority of Singapore has the authority to prevent individuals from performing critical tasks in the financial industry if they do not meet the required qualifications. “
Though Singaporeans are allowed to acquire and trade cryptocurrencies, the government and regulators have yet to support this digital asset for retail purposes.
India
The announcement of the Indian government’s policy on cryptocurrencies in February 2022 generated mixed reactions.
The authorities announced that they want to charge a 30% tax on income generated by crypto operations and a 1% tax at the point of sale for each transaction. The 1% TDS tax deducted at the source, is due to be remitted to the Indian government by exchanges. The individual engaged is responsible for paying the 30% tax.
Another declaration claimed that the government intends to create a central bank digital currency (CBDC) in the country, known as the digital rupee.
Indian authorities have not legalized the use of cryptocurrencies, but they have opted to tax the transactions linked to them. This move has generated mixed feelings from different quarters.
With the new crypto regulations in India enacted in 2022, some crypto enthusiasts believed that the government’s decision to legalize cryptocurrencies was because of the proposed taxation.
Binance was one among many that incorrectly tweeted about the legalization of cryptocurrencies in India.
From the scenarios that have played out, the Indian government is working on drafting legislation to either legalize or not legalize cryptocurrency, but before that, it intends to tax cryptocurrency transactions.
China
China has emphasized its anti-crypto stance. It has banned all crypto-related activities, including trade and mining. Different regulatory agencies in China, including the People’s Bank of China (PBOC), issued a joint statement in September 2021 stating that cryptocurrencies will not be regarded as legal tender in the country and residents must not use them for retail purposes.
China is one of the few countries that has officially prohibited the use of cryptocurrencies in the country and imposed harsh penalties on those who break the law. Some governments may enact policies to discourage their citizens from utilizing cryptocurrencies, such as prohibiting banks from processing crypto transactions via their systems.
In the same month, another notice was issued outlining the techniques that local governments would employ to prevent all types of crypto mining activity in the country.
Because of the ban on crypto activities, crypto exchanges have ceased providing services to residents. For example, Huobi Global, a renowned Asian cryptocurrency exchange, has ceased operations in China.
The 2021 activities are not the first attempts by Chinese authorities to target ordinary crypto activity.
Thailand
Thailand has a softer approach to cryptocurrency legislation than China. In 2018, a Royal Decree on Digital Asset Business was enacted to govern the operations of crypto exchanges and crypto activities within the country.
The Royal Decree covered many types of digital assets and stated that operators were under an obligation to apply for the appropriate license from the Thai Securities and Exchange Commission (SEC). The Thai Securities and Exchange Commission (SEC) is responsible for monitoring and regulating the operations of crypto platforms in Thailand.
The Thai SEC allows the trading of just a limited number of cryptocurrencies. As always, it is critical to double-check the list to verify that no laws are broken.
The income earned from crypto activities is taxed in accordance with the Royal Decree. Some operations, such as cryptocurrency profit and capital gains, are subject to a 15% withholding tax.
Japan
In Japan, cryptocurrencies are legal, but they are treated as property.
Japan is a technology-friendly country that is renowned for attracting blockchain technology investors.
The Payment Services Act (PSA), which recognizes cryptocurrencies as properties, governs the Japanese crypto industry.
Before any cryptocurrency platform can operate in Japan and provide services to residents, it must file an application with the Financial Services Agency and obtain a license.
Crypto trading platforms that operate in Japan must seek personal information from their users after registering with the appropriate authorities in order to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines.
The PSA and the Financial Instruments and Exchange Act (FIEA) were amended in 2020 to reflect the major changes in the crypto space.
In 2017, the Japanese tax system was revised to classify cryptocurrency profits as miscellaneous income.
The tax rate levied on cryptocurrency profits in Japan is determined by the crypto enthusiast’s income tax bracket.
According to the tax system, the highest tax rate is set at 55%.
Traders or crypto users who generate a profit of at least 200,000 JPY from crypto activities are required to pay an income tax. Those who do not earn up to 200,000 JPY from crypto activities are not under any obligation to report their profits when filing their income tax return.
The tax rate on cryptocurrency profits ranges from 5% to 45 %. Another tax is levied on it, designated as the municipal tax rate of 10%. If a resident incurs a loss via crypto trading, the loss cannot be deducted from the income of other assets.
South Korea
South Korea does not recognize cryptocurrency as a legal tender for transactions. However, the use of this type of digital asset is not prohibited. Before a crypto exchange can operate in the country, it must first obtain a license from the South Korean Financial Supervisory Service (FSS) after completing the necessary registration.
The South Korean government closely monitors the crypto industry to ensure that all stakeholders adhere to the guidelines.
Because anonymous trading is not allowed in the country, every crypto exchange must collect personal information from its users. Crypto exchanges operating in South Korea are not permitted to offer Bitcoin futures services to their users. Privacy coins are also not authorized in crypto exchanges.
In Conclusion,
- Cryptocurrency regulations vary from country to country.
- China, for example, has explicitly prohibited crypto activities such as trading and mining.
- Crypto taxes are levied in some Asian countries. In India, the tax is set at 30%, with an additional 1% tax payable at the source in specific situations.
- Tax systems are subject to change over time.
- Before using cryptocurrency in your region, ensure that you are up-to-date on the existing regulations on crypto usage.
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