Is Cryptocurrency Legal In Your City? 6 Things You Should Know About Crypto Law

Cryptocurrency Legal

Cryptocurrency is still a matter of debate in most countries keen on accepting digital currency into their financial systems. So far, there are no clear laws to follow as stakeholders in the financial sector seek control of the digital currency market to protect investors. However, the decentralized finance concept continues evolving and complicates things further for legislators. 

Countries that accept digital currency in their payment systems focus on how to contain the rising market capitalization of crypto by looking at the transactions and holdings. The crypto-friendly countries such as the USA, Canada, and Australia refer to existing laws that govern the securities market to derive control measures. They aim for transparency and accountability in all crypto transactions to enable the recovery of taxes. To understand what crypto laws apply to investors, you must research and learn more about the industry in your region or read through cryptocurrency laws in Wyoming for more insights on digital currency.

Want to learn about crypto laws and how they can affect your investment? Below are six things you should know when investing in the market or adding it to your portfolio.

1. Taxation

The consideration of cryptocurrency in crypto-friendly countries determines the tax implications for investors in the market. In the US, cryptocurrency is a property and not a currency. It falls out of the Internal Revenue Code and cannot be a functional currency in the US financial systems. 

However, investors in the cryptocurrency market must declare crypto transactions that involve their portfolios. In most cases, you’ll have to convert crypto earnings to local currency for the tax regime to take effect. Other countries, such as India, have a 15% tax deduction on capital gains involving cryptocurrency. 

2. Prohibitions And Licensing For Business And Holdings

Businesses that integrate cryptocurrency in their payment systems must obtain licenses from the government. It’s an undertaking that business leaders and management must comply with to make the transactions legal. Such considerations aim to control fraud and tax evasion by businesses as they open more payment options for customers. 

Therefore, you must consult professionals in the financial sector before including cryptocurrency as a payment option in your business. It’ll help you to take advantage of the digital currency systems and avoid penalties or fines for crypto laws violations.

3. Investor Protection

Cryptocurrency has no regulations and may expose investors to risks, such as scams. Recovering lost investments is difficult as the transactions are anonymous through a peer-to-peer network.

The recent surge in the market capitalization of Bitcoin or price action can tempt you to invest in the market blindly.  This is perhaps why financial experts recommend that crypto investments be a maximum of five percent in your portfolio. You must research and consult the cryptocurrency community before entering the trade. 

4. Wallet Privacy And Security Concerns 

Crypto Law

Cryptocurrency leverages digital wallets for the storage of your crypto holdings. The wallets have private keys to unlock and allow you access to your investments. You mustn’t share or lose the keys because you’ll never access your wallet, or hackers can steal your holdings. So, it’s critical to learn how to handle the private keys to your wallet. 

Cybercrime is a big problem that you’ll encounter in the cryptocurrency market. You have the option to keep your holdings offline to avoid losses. In addition, avoid keeping your crypto in exchanges as the speculative market changes and may affect customer services.

5. Fraud And Money Laundering 

Financial commentators have concerns about the anonymity of cryptocurrency transactions. They argue that criminals use digital currency platforms to engage in illegal businesses, such as controlled substances, and remain untraced. But the most challenging job for fraudsters is converting cryptocurrency to cash.

For that reason, the crypto-friendly countries asked the exchanges to identify investors transacting cryptocurrency. It’s one way to streamline the cryptocurrency market through anti-money-laundering rules.

6. Jurisdictional Consideration

Jurisdiction issues in cryptocurrency look at the location of nodes that facilitate transactions and the ledgers they handle in a blockchain. Crypto projects are decentralized, and anyone can access the digital currency market from different backgrounds. Aside from unknown globe placements, financial commentators and legislators point out that there are no legal frameworks to guide investors should a conflict arise in the blockchain. In addition, regulators cannot develop policies or laws to manage cryptocurrency as the ledgers are private to blockchain users.  

Conclusion

It’s been over a decade since cryptocurrency debuted on the financial scene, and no laws exist to control digital currencies. The crypto-friendly countries are considering ways to enforce laws by looking at the traditional investment markets. It follows a surge of companies and businesses incorporating cryptocurrency in their financial systems and operations as a customer retention strategy. So far, taxation of crypto holdings is the main focus for countries allowing investors to transact in digital currencies.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.