Cryptocurrency Recovery | Investment Fraud and Recovery (2024)

The cryptocurrency space has two opinionated and well definedgroups—believers and nonbelievers. To date, there has been littlemiddle ground. However, this is quickly changing. Indeed, financialservices firms are seeing increasing demand from their customers foraccess to Bitcoin and other cryptocurrency-related products, and thecapital markets also are confronting a broad set of crypto-relateddevelopments. As the space continues to develop, other organizationsare exploring whether to get involved, and where to begin.

Given the dynamic nature of the market, the emerging legal andregulatory climate, and the sheer volatility of crypto assets, itcan be a daunting task to define the space or even understand thestrategic rationale of introducing a cryptocurrency into anorganization. This is especially true for directors and executiveswho may not be well versed in cryptocurrencies, their limitations,or even the underlying technology—not to mention the regulatory,risk, accounting, data security, and tax considerations that arisewhen dealing with a new asset class or service offering.

Cryptocurrencies:Not considered legal tender.
Cryptocurrency exchanges:The legal and regulatory framework varies by state. It’s hard tofind a consistent legal approach to cryptocurrencies in the UnitedStates. Laws governing exchanges vary by state, and federalauthorities actually differ in their definition of the term“cryptocurrency.” The Financial Crimes Enforcement Network(FinCEN) doesn’t consider cryptocurrencies to be legal tender butsince 2013 has considered exchanges as money transmitters (subjectto their jurisdiction) on the basis that tokens are “other valuethat substitutes for currency.” The IRS, by contrast, regardscryptocurrencies as property – and has issued tax guidanceaccordingly.

Exchanges
Cryptocurrency exchange regulations in the United States are alsoin an uncertain legal territory, and several of the federalregulators claim jurisdiction.
The Securities and Exchange Commission (SEC) has indicated that itconsiders cryptocurrencies to be securities: in March 2018, itstated that it was looking to apply securities lawscomprehensively for digital wallets and exchanges. By contrast,The Commodities Futures Trading Commission (CFTC) has adopted afriendlier, “do no harm” approach, describing bitcoin as acommodity and allowing cryptocurrency derivatives to tradepublicly.
FinCEN, in response to guidelines published by FATF in June2019 that recommends exchanges gather and share information aboutthe originators and beneficiaries of transactions (known as the“travel rule”), has clarified its stance in recent months. Itconsiders virtual currency exchanges to be in the same category astraditional money transmitters, and as such, all regulations thatapply to traditional money transmitters should apply to virtualexchanges. This includes regulations set forth in the Bank SecrecyAct, which has established its own version of the “travel rule.”

Future Regulation
The Justice Department is coordinating with the SEC and CFTC overfuture cryptocurrency regulations to ensure effective consumerprotection and more streamlined regulatory oversight. The USTreasury has emphasized an urgent need for crypto regulations tocombat global and domestic criminal activities and, in January2018, Treasury Secretary Steve Mnuchin announced a new FSOCworking group to explore the increasingly crowded cryptocurrencymarketplace.
Despite the heightened attention paid to virtual currencies,there’s been little concrete movement from a federal standpoint sofar. Yet, with 21 bills around the use of cryptocurrencies andblockchain currently being considered by Congress, it looks likethis may change as we move further into 2020.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Legal, required to register with FinTRAC after June 1, 2020Cryptocurrencies aren’t legal tender in Canada but the CanadaRevenue Agency has taxed them since 2013. Canada has been fairlyproactive in its treatment of cryptocurrencies: back in 2014, itbrought entities dealing in virtual currencies under the Proceedsof Crime (Money Laundering) and Terrorist Financing Act, while in2017, the British Columbia Securities Commission registered thefirst cryptocurrency-only investment fund.

Exchanges
Cryptocurrency exchange regulations in Canada are inconsistent atthe provincial level, but at the federal level, the authoritiestreat cryptocurrencies as securities. In August 2017, the CanadianSecurities Administrators (CSA) issued a notice on theapplicability of existing securities laws to cryptocurrencies, andin January 2018, the head of Canada’s Central Bank characterizedthem “technically” as securities.
Exchanges, however, are essentially regulated in the same way asmoney services businesses and are subject to due diligence andreporting obligations — a recent change set in motion byamendments to the Proceeds of Crime (Money Laundering) andTerrorist Financing Act, which were approved in July 2019. Allexchanges will also need to register with the FinancialTransactions and Reports Analysis Centre of Canada (FinTRAC).These regulations are set to take effect on June 1, 2020.

Future Regulation
While regulations are constantly evolving, there are no signs ofadditional legislation on the horizon. Recent updates to Proceedsof Crime (Money Laundering) and Terrorist Financing Act have yetto fully take effect. We suspect both the government and cryptoexchanges will need some time to evaluate how these changes haveaffected the crypto landscape before considering additionallegislation.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Legal, registration with the Monetary Authority of Singaporerequired In Singapore, cryptocurrency exchanges and trading arelegal, and the city-state has taken a friendlier position on theissue than regional neighbors. Although cryptocurrencies are notconsidered a legal tender, Singapore’s tax authority treatsBitcoins as “goods” and so applies Goods and Services Tax(Singapore’s version of Value Added Tax).

Exchanges
The Monetary Authority of Singapore (MAS) has generally taken arelatively soft approach to cryptocurrency exchange regulations,applying existing legal frameworks where possible. In January2018, however, MAS issued a press release warning the public ofthe risks of crypto speculation, and Deputy Prime Minister TharmanShanmugaratnam stated that cryptocurrencies are subject to thesame AML and CFT measures as traditional, fiat currencies. A yearlater, in 2019, the Payment Services Act 2019 (PSA) was passed,which officially brings exchanges and other cryptocurrencybusinesses under the regulatory authority of the MAS. Thislegislation took effect in January 2020.

Future Regulation
With the Payment Services Act having only recently taken effect,there will inevitably need to be an adjustment period, as cryptobusinesses adapt to the new legislation, which is, in many ways,aligned with FATF’s most recent recommendations. However, MAS willlikely follow this legislation up with additional regulations thatstrive to further align its position with that of FATF.

Cryptocurrencies:Legal, treated as property.
Cryptocurrency exchanges:Legal, must register with AUSTRAC Cryptocurrencies and exchangesare legal in Australia, and the country has been progressive inits implementation of cryptocurrency regulations. In 2017,Australia’s government declared that cryptocurrencies were legaland specifically stated that Bitcoin (and cryptocurrencies thatshared its characteristics) should be treated as property andsubject to Capital Gains Tax (CGT). Cryptocurrencies hadpreviously been subject to a controversial double taxation underAustralia’s goods and services tax (GST) – the change in taxtreatment is indicative of the Australian government’s progressiveapproach to the crypto issue.

Exchanges
In 2018, the Australian Transaction Reports and Analysis Centre(AUSTRAC) announced the implementation of more robustcryptocurrency exchange regulations. Those crypto regulationsrequire exchanges operating in Australia to register with AUSTRAC,identify and verify users, maintain records, and comply withgovernment AML/CFT reporting obligations. Unregistered exchangesare subject to criminal charges and financial penalties.
In addition, in May 2019, the Australian Securities andInvestments Commission (ASIC) issued updated regulatoryrequirements for both initial coin offerings (ICOs) andcryptocurrency trading.

Future Regulation
Australia has established a pattern of proactive cryptocurrencyregulation, and these latest regulations illustrate the country’scontinued effort to provide a clear framework for cryptobusinesses to operate in the coming years. However, recentrevelations that have exposed serious flaws in Australia’sfinancial industry will undoubtedly also affect how AUSTRACapproaches compliance enforcement in the future and will likelylead to increased scrutiny and a tightening of regulatory controlsacross the board.

Cryptocurrencies:Legal, treated as property.
Cryptocurrency exchanges:Legal, must register with the Financial Services Agency Japan hasthe world’s most progressive regulatory climate forcryptocurrencies and, as of April 2017, recognizes Bitcoin andother digital currencies as legal property under the PaymentServices Act. Japan is the world’s biggest market for Bitcoin and,in December 2017, the National Tax Agency ruled that gains oncryptocurrencies should be categorized as ‘miscellaneous income’and investors taxed at rates of 15%-55%.
Recent regulations also include amendments to the Payment ServicesAct and the Financial Instruments and Exchange Act, which waspassed in May 2019 and will take effect in April 2020. Theseamendments introduce the term “crypto asset,” which is to be usedinstead of “virtual currency,” places greater restrictions onmanaging users’ virtual money and more tightly regulations cryptoderivatives trading.

Exchanges
Cryptocurrency exchange regulations in Japan are similarlyprogressive. Exchanges are legal in Japan, but after a series ofhigh profile hacks, including the notorious Coincheck heist of$530 million in digital currency, crypto regulations have becomean urgent national concern. Japan’s Financial Services Agency(FSA) has stepped up efforts to regulate trading and exchanges:amendments to the Payment Services Act require cryptocurrencyexchanges to be registered with the FSA in order to operate – aprocess which can take up to six months, and which imposesstricter requirements around both cybersecurity and AML/CFT. Asubsequent amendment in mid-2019 updated this requirement toinclude custodian services providers.

Future Regulation
Japan remains a friendly environment for cryptocurrencies, butgrowing AML concerns are drawing the FSA’s attention to furtherregulatory steps. Following talks between exchanges and the FSA,an agreement to form a self-regulatory body – the Japanese VirtualCurrency Exchange Association (JVCEA) – was put in place. It’s thefirst country to take such a step, and all exchanges are membersof the association. The JVCEA provides advice to as-yet unlicensedexchanges and promotes regulatory compliance, so it’s certain toplay a massive role in establishing industry best practices andensuring compliance with the new regulations taking effect in2020.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Legal, must register with FSS In South Korea, cryptocurrencies arenot considered legal tender and exchanges, while legal, are partof a closely-monitored regulatory system. Cryptocurrency taxationin South Korea is a grey area: since they are considered neithercurrency nor financial assets, cryptocurrency transactions arecurrently tax-free. But the Ministry of Strategy and Finance hasindicated that it’s considering imposing a tax on income fromcrypto transactions and is planning to announce a taxationframework in 2020.

Exchanges
Cryptocurrency exchange regulations in South Korea are strict andinvolve government registration and other measures overseen by theSouth Korean Financial Supervisory Service (FSS). Although arumored ban never materialized, in 2017, the South Koreangovernment prohibited the use of anonymous accounts incryptocurrency trading, and also banned local financial institutesfrom hosting trades of Bitcoin Futures. In 2018, the FinancialServices Commission (FSC) imposed tighter reporting obligations onbanks with accounts held by crypto exchanges.

Future Regulation
In late 2019, South Korea’s National Assembly introduced a billthat re-categorizes virtual currencies as digital assets and willprovide a legal framework for cryptocurrency markets. Under thebill, exchanges will need to register with the government via theFinancial Services Commission’s Financial Intelligence Unit.They’ll also be expected to comply with strict AML/CFTregulations, which will bring South Korea in alignment with FATF’santi-money laundering policies. The bill has been approved by thenational policy committee and is currently under consideration bythe judiciary committee.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Illegal
The People’s Bank of China (PBOC) banned financial institutionsfrom handling Bitcoin transactions in 2013, and went further bybanning ICOs and domestic cryptocurrency exchanges in 2017.Unsurprisingly, China does not consider cryptocurrencies to belegal tender and the country has a global reputation for harshcryptocurrency regulations.

Exchanges
Although domestic cryptocurrency exchanges are under a blanket banin China, workarounds are possible using foreign platforms andwebsites which China’s internet firewall doesn’t catch. Despitethe near-comprehensive prohibition on crypto trading and relatedservices, the law in China currently still permits crypto miningactivities. In fact, while the government had been considering aban on these activities as well, it reconfirmed that crypto miningwill remain legal in late 2019.

Future Regulation
There’s no indication that China intends to lift or loosen its banon cryptocurrencies anytime soon. However, recent statements bygovernment officials endorsing blockchain technology and thecontinued legal status of crypto mining has led many to speculatethat China intends to be a leader in that space. Indeed, while thetimeline is still undefined, China’s central bank has been workingon introducing an official digital currency for years, withefforts accelerating after Facebook’s announcement of its plans tointroduce its own currency, Libra. The Chinese government, by wayof a report published by the Institute of International Finance,has also expressed support for the implementation of a globalregulatory framework for cryptocurrencies.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Effectively illegal – regulations being considered
Cryptocurrencies are not legal tender in India, and whileexchanges are legal, the government has made it very difficult forthem to operate. Although there is currently a lack of clarityover the tax status of cryptocurrencies, the chairman of theCentral Board of Direct Taxation has said that anyone makingprofits from Bitcoin will have to pay taxes on them. Other IncomeTax Department sources have suggested that cryptocurrency profitsshould be taxed as capital gains.

Exchange Regulations.
Cryptocurrency exchange regulations in India have grownincreasingly harsh. While technically legal, in April 2018 theReserve Bank of India (RBI) banned banks and any regulatedfinancial institutions from “dealing with or settling virtualcurrencies.” The sweeping regulation prohibited the trade ofcryptocurrencies on domestic exchanges – and gave existingexchanges until July 6, 2018, to wind down. On March 4, 2020,however, in a landmark court decision, the country’s Supreme Courtruled the ban unconstitutional.

Future Regulations.
While there were some signs in 2017 and 2018 that India’sgovernments were looking at the possibility of less prohibitivecryptocurrency regulations, recent reports suggest they’vereversed course. In July 2019, an interministerial committeerecommended a blanket ban on cryptocurrencies — except for anofficial, digital currency that is in the works. In addition, aleaked, alleged draft bill has proposed prison time for those who“mine, generate, hold, sell, deal in, issue, transfer, dispose ofor use Cryptocurrency in the territory of India.” Nevertheless,this draft bill has not made it onto the wider parliament flooryet, and there are reports that the government is revisiting thepossibility of regulating cryptocurrencies instead of outrightbanning them.

Cryptocurrencies:Not legal tender.
Cryptocurrency exchanges:Legal, registration requirements with FCA The United Kingdom’sapproach to cryptocurrency regulations has been measured. Althoughthe UK has no specific cryptocurrency laws, cryptocurrencies arenot considered legal tender and exchanges have registrationrequirements. HMRC has issued a brief on the tax treatment ofcryptocurrencies, stating that their “unique identity” means theycan’t be compared to conventional investments or payments, andtheir “taxability” depends on the activities and parties involved.Gains or losses on cryptocurrencies are, however, subject tocapital gains tax.

Exchanges.
Cryptocurrency exchanges in the UK need to register with theFinancial Conduct Authority (FCA). While it doesn’t make specialprovisions for exchanges, FCA guidance stresses that entitiesengaging in activities involving crypto assets must comply withthe Money Laundering, Terrorist Financing and Transfer of Funds(Information on the Payer) Regulations 2017 (MLRs). Amendments tothose regulations, which were approved in 2019 and came into forcein January 2020, incorporate both the latest guidelines set forthvia FATF and the EU’s 5AMLD.

Future Regulations.
While the UK officially left the EU in January 2020, the countryis still subject to the EU’s rules and regulations during the11-month transition period. While Brexit is sure to impact theUK’s stance on cryptocurrency regulation, there’s no specificlegislation on the horizon, and it’s still too early to tellexactly where that impact will be felt.

Cryptocurrencies:Legal, accepted as payment in some contexts
Cryptocurrency exchanges:Legal, regulated by SFTA In Switzerland cryptocurrencies andexchanges are legal, and the country has adopted a remarkablyprogressive stance towards cryptocurrency regulations. The SwissFederal Tax Administration (SFTA) considers cryptocurrencies to beassets: they are subject to the Swiss wealth tax, and must bedeclared on annual tax returns.

Exchanges.
Switzerland imposes a registration process on cryptocurrencyexchanges – which must obtain a license from the Swiss FinancialMarket Supervisory Authority (FINMA) in order to operate.Cryptocurrency regulations in Switzerland are also in place forICOs: in February 2018, FINMA published a set of guidelines whichapplied existing financial legislation to offerings across a rangeof areas – from banking to securities trading and collectiveinvestment schemes (depending on structure). Switzerland’sgovernment also approved a motion in March 2019 that directed theFederal Council to adapt existing provisions to includecryptocurrencies.

Future Regulations.
Moving forward, Switzerland’s government has indicated that itwill continue to work towards a regulatory environment which isfriendly to cryptocurrencies. In 2016, the town of Zug, aprominent global cryptocurrency hub, introduced Bitcoin as a wayof paying city fees. In January 2018, Swiss Economics MinisterJohann Schneider-Ammann stated that he was aiming to makeSwitzerland “the crypto-nation.” Meanwhile, the Swiss Secretaryfor International Finance, Jörg Gasser, has emphasized the need topromote cryptocurrencies without compromising existing financialstandards. Finally, in late 2019, it was announced that the Swissgovernment is considering legislation that would encourageinnovation in blockchain technology.

Cryptocurrencies:Legal, member-states may not introduce their own cryptocurrencies
Cryptocurrency exchanges:Regulations vary by member-state Cryptocurrencies are broadlyconsidered legal across the bloc, but cryptocurrency exchangeregulations depend on individual member states. Cryptocurrencytaxation also varies, but many member-states do charge capitalgains tax on cryptocurrency-derived profits – at rates of 0-50%.In 2015, the Court of Justice of the European Union ruled thatexchanges of traditional currency for cryptocurrency should beexempt from VAT. In January 2020, the EU’s Fifth Anti-MoneyLaundering Directive (5AMLD) came into effect, and that bringscryptocurrency-fiat currency exchanges under EU’s anti-moneylaundering legislation. 5AMLD will require exchanges to performKYC/CDD on customers and fulfill standard reporting requirements.

Exchanges.
Cryptocurrency exchanges are not currently regulated at a regionallevel. In certain member states, exchanges will have to registerwith their respective regulators such as Germany’s FinancialSupervisory Authority (BaFin), France’s Autorité des MarchésFinanciers (AMF), or Italy’s Ministry of Finance. Authorizationsand licenses granted by these regulators can then “passport”exchanges, allowing them to operate under a single regime acrossthe entire bloc.

Future Regulations.
The EU is actively exploring further cryptocurrency regulations.An EU draft document expressed concerns about the risks associatedwith private digital currencies. At the same time, it confirmedthat the European Central Bank was considering the possibility ofissuing its own digital currency. In addition, the EU’s SixthAnti-Money Laundering Directive (6AMLD) is set to take effect inDecember 2020, and as a result, member-states will need toimplement even more stringent controls to reduce the risk cryptoassets pose. Lastly, in January 2020, the European Commissionannounced a public consultation initiative, seeking guidance onwhere and how crypto assets fit into the existing regulatoryframework.

Cryptocurrencies:Not legal tender
Cryptocurrency exchanges:Legal, regulated under the VFA Act
Malta has taken a very progressive approach to cryptocurrencies,positioning itself as a global leader in crypto regulation. Whilecryptocurrencies are not legal tender, they are recognized by thegovernment as “a medium of exchange, a unit of account, or a storeof value.” Malta has no specific cryptocurrency tax legislation,nor is VAT currently applicable to transactions exchanging fiatcurrency for crypto.

Exchanges.
Cryptocurrency exchanges are legal in Malta, and in 2018, theMaltese government introduced landmark legislation to define a newregulatory framework for cryptocurrencies and address AML/CFTconcerns. The legislation comprises three separate bills,including the Virtual Financial Assets Act (VFA), which set aglobal precedent by establishing a regulatory regime applicable tocrypto exchanges, ICOs, brokers, wallet providers, advisers, andasset managers.
The VFA regulations (effective from November 2018) also introducedthe Innovative Technology Arrangements and Services Act whichestablished the regime for the future registration andaccountability of crypto service providers. The Malta DigitalInnovation Authority was also established: going forward, the MDIAwill be the government authority responsible for creating cryptopolicy, collaborating with other nations and organizations, andenforcing ethical standards for the use of crypto and blockchaintechnology.

Future Regulations.
No new legislation is currently on the horizon. But the MaltaFinancial Services Authority (MFSA) indicated in its strategicplan for 2019-2021 that the country’s financial services regulator“will actively monitor and manage business-related riskspertaining to licensed virtual assets and cryptocurrencybusinesses” in order to better address money laundering and otherfinancial crime risks. So additional regulations are likelyforthcoming.

Cryptocurrencies:Not legal tender
Cryptocurrency exchanges:Legal, must register with the Financial Intelligence Unit
Cryptocurrency regulations in Estonia are open and innovative,especially in comparison to other EU member-states. Although notlegal tender, Estonia’s government regards cryptocurrencies as“value represented in digital form.” The government classescryptocurrencies as digital assets for tax purposes but does notsubject them to VAT. In 2017, the Anti Money Laundering andTerrorism Finance Act introduced robust new regulations for cryptobusinesses operating in Estonia.

Exchanges.
Exchanges are legal in Estonia but, after the 2017 AML/CFTlegislation, operate under a well-defined regulatory frameworkwhich includes strict reporting and KYC rules. Under currentlegislation, cryptocurrency exchanges must obtain two licensesfrom the Financial Intelligence Unit of Estonia: the VirtualCurrency Exchange Service License and the Virtual Currency WalletService License. In May 2019, the Estonian government passedlegislation tightening licensing requirements, and in January2020, it went further, asserting that virtual currency serviceproviders will be treated the same as financial institutions underthe Estonian Money Laundering and Terrorist Financing PreventionAct.

Future Regulations.
A number of crypto initiatives with potentially significantregulatory consequences have been mooted in Estonia, including aspeculative government plan to introduce a national cryptocurrencyknown as “estcoin.” After EU criticism, Estonia’s governmentstepped back from the plan but continues to examine ways to usethe estcoin within a government “e-residency” program.

Cryptocurrencies:Not considered legal tender
Cryptocurrency exchanges:Legal, must register with the GFSC
Gibraltar is a global leader in cryptocurrency regulation:cryptocurrency is not considered legal tender in the country butcryptocurrency exchanges are legal and operate within awell-defined regulatory framework. Gibraltar has a reputation as alow taxation environment: it does not impose capital gains ordividend tax on cryptocurrencies, and crypto exchanges are subjectto a business-friendly 10% corporate income tax rate.

Exchanges.
In January 2018, Gibraltar introduced its Digital LedgerTechnology Regulatory Framework after extensive engagement withthe crypto industry. Under the framework, exchanges must registerwith the Gibraltar Financial Services Commission (GFSC) anddemonstrate that they are meeting the “principles” of the DLTframework, which include a strong focus on the detection anddisclosure of money laundering and terrorist financing.

Future Regulations.
Gibraltar’s government is seeking to strengthen its position as aglobal leader by exploring further cryptocurrency regulation. In2017, the GFSC issued a statement on the unregulated use of ICOsand suggested it will monitor their use within the DLT Framework.Similarly, the commission’s Innovate and Create Team has beenestablished to help businesses innovate new products for thecrypto-economy.

Cryptocurrencies:Not legal tender
Cryptocurrency exchanges:Legal, must register with the CSSF
There are no specific cryptocurrency regulations in Luxembourg,but the government’s legislative attitude towards them isgenerally progressive. Although cryptocurrencies are not legaltender, Finance Minister Pierre Gramegna has commented that, giventheir widespread use, cryptocurrencies should be “accepted as ameans of payment for goods and services.” In August 2018,authorities issued advice on the tax treatment of cryptocurrencieswhich, in a business context, depends on the type of transactioninvolved.
While the Commission de Surveillance du Secteur Financier (CSSF)issued a warning in March 2018 about the volatility ofcryptocurrencies, their vulnerability to crime and the associatedrisks of investing in ICOs, Luxembourg’s progressive approach tocrypto has continued. The CSSF acknowledged in 2017 the financialbenefits of blockchain technology, and Pierre Gramegna has spokenof the “added value and efficient services” that cryptocurrenciesbring. In early 2019, lawmakers passed legislation that gavetransactions performed using blockchain technology the same legalstatus as those done using traditional methods.

Exchanges.
Cryptocurrency exchanges in Luxembourg are regulated by the CSSF,and new crypto businesses must obtain a payments institutionslicense if they wish to begin trading. Licenses involve AML/CFTreporting obligations under Luxembourg’s “electronic money”statutes. The first license was granted in 2016 to Bitstamp, whichtrades in a range of currencies, including USD, EUR, bitcoin, andethereum – and passports into EU member-states.

Future Regulations.
Although there are no specific legislative steps on the radar, weexpect more legislation to be forthcoming, especially given thatthe EU’s 5AMLD directive came into force in January 2020, and6AMLD is set to come into force later this year.

Cryptocurrencies:Laws vary by country
Cryptocurrency exchanges:Sparse regulation, laws vary by country
In Latin America, cryptocurrency regulations run the legislativespectrum. Those countries with harsher regulations includeBolivia, which has comprehensively banned cryptocurrencies andexchanges, and Ecuador, which has issued a ban on the circulationof all cryptocurrencies apart from the government-issued “SDE”token. By contrast, in Mexico, Argentina, Brazil, Venezuela andChile, cryptocurrencies are commonly accepted as payment by retailoutlets and merchants. For tax purposes, cryptocurrencies areoften treated as assets: they are broadly subject to capital gainstax across the region, while transactions in Brazil, Argentina andChile are also subject to income tax in some contexts.

Exchanges.
Cryptocurrency exchange regulations in Latin America are sparse:many countries have no specific laws governing the trade ofcryptocurrencies and so, beyond the scope of existing legislation,do not regulate exchanges. The lack of regulation, combined withhigh adoption rates, has made Latin America an attractive optionfor businesses looking to capitalize on the interest in virtualcurrencies.
Nevertheless, this has also led to friction with traditional banksin the region, and some banks in Chile took steps to closeaccounts of exchanges in late 2018. Subsequent court rulings haveoffered protection to these exchanges for the time being, but it’sclear more definitive guidelines are needed. Further, Mexicoregulates exchanges to an extent: the Law to Regulate FinancialTechnology Companies extends anti-money laundering (AML) laws tocryptocurrencies through registration and reporting requirements.

Future Regulations.
Many Latin American countries have expressed concern about theeffect of cryptocurrencies on financial stability and their moneylaundering risks. Beyond issuing official warnings, however,financial authorities across the region have yet to reveal plansfor any significant future cryptocurrency regulations. Chile, forexample, introduced legislation in April 2019 aimed at doing justthat, but there has been little said about the legislation sinceor what it will do if passed.