Cryptocurrency as a means of payment

Many states have begun to work on regulating the turnover of cryo, despite the difficulties. But most of them are not following the path of recognizing digital currency as a means of payment, but developing their own digital money. However, laws on virtual assets have already begun to work in the United States, China, Canada, Japan, Germany, Switzerland and other countries. Amir Capital specialists will tell you how to use cryptocurrency correctly.

In 2017, against the backdrop of the popularity of cryptocurrencies, governments first paid close attention to them, although there were attempts to regulate them before that. Virtual money came out of the shadows, and in just 3 years, many countries moved from a ban to creating their own national digital currency CBDC. Despite this, most states do not yet recognize it as legal tender, although some of them are probably already on their way.

Why is it difficult to regulate

The main problem is that the turnover of cryptocurrencies is difficult to track and control, and blockchain technologies pose a real threat to the current banking system. With their appearance, people realized the problems of the existing financial system, and this allowed them to look at the industry in a different way.

Blockchain essentially performs the same functions as banks: users can store their digital assets in wallets, send and receive transfers, and also accept payments for goods. services. You don’t need to go to the office to have a wallet, but sending cryptocurrency to another country is as easy as making a regular transfer in a banking application, but at the same time avoiding a long chain of bureaucratic procedures.


Transaction management is decentralized and autonomous. That is, users can carry out all the same operations as in the personal account of a financial institution, but they do not need banks for this. In addition, cryptocurrencies are stored non-custodially, which means that crypto holders do not need to trust their money to the organization. Crypto wallet users are the only ones who own private keys, which prevents third parties from accessing funds in them.

With this in mind, cryptocurrencies are difficult to regulate. Banks can block transactions and money in accounts to prevent financial crimes. But they cannot get access to the wallets of crypto holders, since they do not own the private keys to them. This makes it difficult to control the movement of digital assets, despite the fact that the blockchain is transparent and allows anyone to easily track any transactions.

At first, governments around the world sought to ban digital currencies. Among them was China, which actively prohibited mining and trading in cryptocurrencies on the territory of the state. But the same China was one of the first to start testing the digital currency of the central bank (CBDC). And in Venezuela, mining was prosecuted and even criminalized.

However, the value of cryptocurrencies and their popularity were difficult to ignore, so many states stopped preventing their mass adoption and decided to support them by establishing rules for regulating the crypto market. More and more countries are recognizing digital money as a commodity and / or means of payment. Let’s list those that not only recognized their legality, but also allowed their use.


The American government has a positive attitude towards cryptocurrencies and the crypto industry in general, and the Financial Crimes Agency (FinCEN) published its first bitcoin guide back in 2013.


The Treasury has identified it as a financial service provider (MSB) and bitcoin is now subject to the Bank Secrecy Act. The United States regulates crypto exchanges, and some well-known trading platforms, such as Coinbase, legally provide exchange services for Bitcoin (BTC) and other virtual assets to American residents. Also in the United States, this currency is recognized as a form of digital property and falls under the same laws as other property of citizens.


Became practically the first country where they began to regulate the cryptocurrency sector. It is even informally considered the center of the cryptoindustry.


Besides, for some time Canada was one of the leaders in the number of cryptomats or Bitcoin ATM’s – analogs of ATMs for virtual money. But now the United States has taken the lead.

Reference! More than 8,500 ATMs are installed in the United States, and only 901 in Canada, according to the Coin ATM Radar service.

Attempts at regulation in the country arose back in 2014, when the Governor General gave his consent to the C-31 bill. Within its framework, cryptocurrencies were considered a financial service provider (MSB). The purpose of this law is to combat financial crime and combat money laundering.

The Canadian Revenue Agency (CRA) has characterized digital currencies as a commodity, and transactions with them are subject to taxation. But so far Canada has not recognized cryptoassets as an official means of payment. However, the government does not prohibit the purchase of goods for them, that is, it allows barter transactions.


This country issued amendments to the law “On payment services” in 2016, and they started working in 2017. The normative act regulates the activities of cryptocurrency exchanges, and according to it, digital currency can be used as valuable property that is used to pay for goods, exchange for other currencies, or transfer through an electronic data processing system.


The operations of crypto exchanges in Japan are regulated by the Financial Services Agency (FSA). By law, foreign digital currency exchange operators can provide services to residents of Japan only if they have representatives in the country.

Since 2017, the FSA has introduced a tax regime for cryptocurrencies. Income from them is considered other income, and not capital gains, as with other types of assets. Summing up, we can say that Japan was one of the first to officially recognize virtual assets as legal tender, but not as a competing or dominant currency within the country.


In 2017, the PRC banned financial companies from making monetary transactions with bitcoin or interacting with virtual finance in any other way. The bans also affected mining: the government actively closed large farms, which forced them to move to another territory.


However, this does not mean that China is against cryptocurrencies. On the contrary, the government is actively working to develop this industry in its country, but seeks to monopolize it. The People’s Bank of China (PBOC), the central financial regulator, has been researching virtual currency for over three years and even created its own Digital Money Institute.

China is developing the digital yuan or electronic payment currency (DCEP) and conducted the first tests of the crypto-yuan in early 2020, along with Switzerland. And in April BSN, the national blockchain platform, was launched.

The status of bitcoin was determined by China in 2013. PBOC, MIIT, CBRC, CSRC and CIRC jointly issued a statement and recognized BTC as a virtual commodity that does not have equal legal status with the national currency. He also recognized ICO financing illegal due to the high risks for investors. Accepting Bitcoin and other digital assets as payment in the country is also prohibited by law. This once again points to the Chinese government’s desire to monopolize blockchain and digital money.


Here they are not yet recognized as money or foreign currency, are not regulated by law and are not subject to supervision by financial institutions. The RBA believes that cryptocurrencies do not yet pose significant risks to the Australian financial system.


ASIC does not consider virtual money as legal tender on a par with national currency. However, the Main Committee noted that the Australian Consumer Protection Act 2010 (ACCC) also applies to digital assets, so in fact, cryptocurrency in Australia can be considered a legal tender.

But the committee recommended further research on this issue, as decentralized systems complicate regulation, and the FSI noted that regulations should adapt digital assets to the Australian financial system.


Legislative rules for regulating cryptocurrencies have not yet been established here, but the Bank of England believes that they are necessary, since illegal traffic can harm the country’s economy.


The UK does not prohibit the collection of digital currency for payments to suppliers of goods and services, and the transactions themselves are subject to value added tax, just like trading with traditional funds.

But tax and customs officials point out that digital money cannot be matched to any current payment mechanisms. Therefore, the taxation rules will be determined by the specific activity depending on how the cryptoassets were involved.


General Directorate of Public Finance of France (DGFP) imposes a capital gains tax on cryptocurrency income. But its size will be determined depending on the nature of the income: whether it was episodic or regular.


France in 2020 began testing a pilot project for a central bank digital currency (DCC) based on decentralized blockchain technologies (DLT). The new money will act as a digital euro and operate throughout the entire EU area. Cryptocurrencies are not considered a financial instrument in France.


EU countries stand out for their progressive attitude towards blockchain and digital money. Thus, the German Federal Financial Supervisory Authority (BaFin) defines cryptocurrency as a unit of account. Thus, the country recognized digital assets as a legal financial instrument that can be used for settlements. Bitcoins, along with other virtual currencies, are treated in the same way as traditional means of payment.


Since 2018, cryptocurrencies in Germany are subject to value added tax (VAT), which covers any exchange of digital assets for national or foreign currencies. Although the German Bundesbank stated that bitcoin cannot qualify as a virtual currency, since it is not digital money and does not perform their functions, and the assets themselves were proposed to be defined as crypto tokens.


In 2020, adopted a number of changes to the current legislation, providing a legal basis for cryptocurrency exchanges. The innovations take effect in 2021 and set standards for cryptoassets, rules for combating money laundering. The law will also allow for the digitization (tokenization) of stocks, works of art and other assets.


The crypto business will be regulated by the Financial Market Supervisory Authority (FINMA). One of the cryptocurrency exchanges operating in the country has even received the status of a bank. Cryptocurrencies in Switzerland are classified as tokens that are used as a means of payment or exchange assets.


In 2017, for the first time released a regulatory framework for the virtual marketplace to provide legal certainty to users of digital currencies.


In total, three main laws have been prepared:

  • Maltese Digital Innovation Authority (MDIA);
  • about TAS;
  • about virtual currency.

However, the Government of Malta has stated that it is not going to interfere with the financial policies of individual institutions. For example, Bank of Valletta has banned its clients from performing any operations with cryptocurrencies. The country is also considering a provision that would classify virtual currencies as money or property.


Draft laws on digital assets have been developed since 2017, but the financial regulator rejected them. Nevertheless, at the end of 2019, cryptocurrency was still legalized, and the FATF national commission established the rules for combating financial crimes.


Ukraine used the experience of several countries, such as Japan, Germany, Malta and others, to develop rules for regulating this sector. The new law allows cryptocurrencies to be used in any legal way, including for payments or investments.


The operating rules are regulated by the presidential decree “On the development of the digital economy.” And the activities of ICO operators and crypto-exchanges – by the High Technologies Park (HTP).


Cryptocurrency business is exempt from taxation. However, there are a number of rules that must be observed: conduct business in the HTP residence and pay 1% of the turnover. The law will be in effect until 2049, which is guaranteed by the government.

Any operations are available to users: mining, exchange, transfer and others. Crypto assets are not officially used as a means of payment, but this is not prohibited.


In 2020, the State Duma adopted the law “On digital financial assets”, which came into force on January 1, 2020 and allows you to exchange cryptocurrency for fiat.


The first attempts to regulate in Russia were made in 2018 against the backdrop of the rapidly growing popularity of virtual currencies and ICOs, but after a decline in interest, work on the regulation froze, so it never entered effective.

A new law in 2020 defined cryptocurrency as a digital code. Assets can be used as a means of payment or investment. We are talking about any digital assets, not just those issued in the Russian Federation, including Bitcoin. Despite this, digital currency payments for goods and services are prohibited in Russia.


More and more countries are on the path to adopting virtual money as legal tender for use in their territory. However, many governments are primarily guided by the legal protection of residents of their states and combating financial crimes. In addition, an alternative will be available to users – central bank digital currencies (CBDC), such as the digital yuan or euro. However, it is not necessary that other cryptocurrencies cannot be used for payments on a par with national digital currencies.

Link to source

We use for the best presentation of our site. You will continue to use the site, we will assume that it suits you.