The Law Library of Congress, Global Legal Research Directorate 

(202) 707-5080 (phone) • (866) 550-0442 (fax) • law@loc.gov • http://www.law.gov

Regulatory Approaches to 

Cryptoassets in Selected 

Jurisdictions

April 2019 
This report is provided for reference purposes only. 

It does not constitute legal advice and does not represent the official 

opinion of the United States Government. The information provided 

reflects research undertaken as of the date of writing. 

It has not been updated.
Contents 

Comparative Summary ............................................................................................................................. 1 

Anguilla ....................................................................................................................................................... 6 

Argentina ................................................................................................................................................... 12 

Armenia ..................................................................................................................................................... 14 

Australia .................................................................................................................................................... 16 

Bahamas .................................................................................................................................................... 27 

Belarus ....................................................................................................................................................... 29 

Bermuda .................................................................................................................................................... 34 

Brazil .......................................................................................................................................................... 43 

Canada ....................................................................................................................................................... 51 

Cayman Islands ........................................................................................................................................ 63 

China .......................................................................................................................................................... 69 

Denmark .................................................................................................................................................... 72 

Finland ....................................................................................................................................................... 79 

France ......................................................................................................................................................... 85 

Germany .................................................................................................................................................... 90 

Gibraltar .................................................................................................................................................... 98 

Hong Kong .............................................................................................................................................. 106 

Ireland ..................................................................................................................................................... 113 

Indonesia ................................................................................................................................................. 115 

Isle of Man ............................................................................................................................................... 122 

Israel ......................................................................................................................................................... 126 
Italy .......................................................................................................................................................... 134 

Japan ........................................................................................................................................................ 138 

Jersey ........................................................................................................................................................ 143 

Liechtenstein ........................................................................................................................................... 149 

Lithuania ................................................................................................................................................. 157 

Luxembourg ............................................................................................................................................ 162 

Malaysia .................................................................................................................................................. 163 

Malta ........................................................................................................................................................ 174 

Mauritius ................................................................................................................................................. 185 

Mexico ...................................................................................................................................................... 192 

New Zealand .......................................................................................................................................... 196 

Norway .................................................................................................................................................... 205 

Philippines .............................................................................................................................................. 209 

Singapore ................................................................................................................................................. 211 

South Africa ............................................................................................................................................ 218 

Spain ........................................................................................................................................................ 223 

Sweden .................................................................................................................................................... 225 

Switzerland ............................................................................................................................................. 233 

Taiwan ..................................................................................................................................................... 241 

Ukraine .................................................................................................................................................... 243 

United Arab Emirates ............................................................................................................................ 245 

United Kingdom .................................................................................................................................... 253 

Uzbekistan ............................................................................................................................................... 260 
Venezuela ................................................................................................................................................ 263 

European Union ..................................................................................................................................... 265 
The Law Library of Congress 1

Comparative Summary 

Kelly Buchanan 

Foreign Law Specialist

I. Introduction 

The Law Library of Congress has previously produced two major multinational reports related 

to the regulation of cryptocurrencies. The first, published in January 2014, surveyed statements 

issued by government authorities regarding Bitcoin and similar cryptocurrencies in 41 

jurisdictions.1 That report demonstrated that the debate over how to regulate cryptocurrencies 

was still in its infancy, with authorities primarily warning the public about the risks of acquiring 

or transacting with cryptocurrencies. 

The second report, published in June 2018 and covering 130 countries, revealed that many more 

jurisdictions had issued statements and guidance regarding cryptocurrencies, and that some 

countries had enacted or were considering regulations or legislative amendments in certain 

areas.2 This included, for example, clearer indications of the tax treatment of cryptocurrencies, 

the application of anti-money laundering and counter-financing of terrorism (AML/CFT) laws to 

cryptocurrency exchanges and other businesses engaged in cryptocurrency activities, and new 

warnings to consumers regarding the risks of investing in cryptocurrencies. The broad survey of 

the policies of 130 countries was accompanied by detailed reports on fourteen jurisdictions.3

The following report covers 46 jurisdictions, including the European Union (EU), and focuses 

primarily on regulatory approaches to cryptoassets created through blockchain, or distributed 

ledger technology (DLT), in the context of financial market and investor protection laws. It also 

contains updated information regarding the application of tax and AML/CFT laws to 

cryptocurrencies in the countries covered. Additional countries not covered in this report may 

also have taken actions in one or both of these areas, but were not included due to there being no 

existing policies, or new or pending laws, related to financial regulation and oversight of 

cryptocurrency activities. Some countries may also have issued more recent public warnings than 

those included in the 2018 report. 

The report shows that a number of countries are currently applying existing legislation to 

cryptoassets that have the characteristics of securities or other financial products or instruments, 

with regulators providing guidance on this issue. However, around a dozen countries have 

enacted legislation that specifically governs cryptoassets and the entities that deal with them, 

including exchange platforms and businesses providing custodian services. In addition, a 

 

1 LAW LIBRARY OF CONGRESS, REGULATION OF BITCOIN IN SELECTED JURISDICTIONS (Jan. 2014), https://www.loc. 

gov/law/help/bitcoin-survey/. 

2 LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY AROUND THE WORLD (June 2018), https://www. 

loc.gov/law/help/cryptocurrency/world-survey.php . 

3 LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY IN SELECTED JURISDICTIONS (June 2018), https:// 

www.loc.gov/law/help/cryptocurrency/index.php. 
Regulatory Approaches to Cryptoassets: Comparative Summary 

The Law Library of Congress 2

number of other countries are at various stages of developing legislation on cryptoassets, 

including in relation to establishing requirements for initial coin offerings (ICOs). 

Although not covered in the report, we note that the Strategic Hub for Innovation and Financial 

Technology of the US Securities and Exchange Commission has recently issued information on 

the potential application of federal securities law to ICOs, indicating that the digital assets offered 

through an ICO should be assessed based on their particular characteristics.4 Previously, in 2015, 

the Commodity Futures Trading Commission (CFTC) first found that virtual currencies are 

commodities under the Commodity Exchange Act.5 The CFTC’s jurisdiction is therefore 

implicated “when a virtual currency is used in a derivatives contract, or if there is fraud or 

manipulation involving a virtual currency traded in interstate commerce.”6

II. Application of Financial Markets and Services Laws

Legislation governing financial markets, products, and services in various countries include 

requirements related to registration, licensing, and the disclosure of information to investors, 

such as through a prospectus. Relevant financial services in the area of cryptocurrencies may 

include, for example, exchanges, custodial services, advisory services, and brokering. 

A. Application Dependent on Characteristics of Particular Cryptoasset 

The financial regulatory authorities in a number of countries covered in this report have formally 

stated that existing financial market, products, and services laws are applicable to 

cryptocurrencies and/or to ICOs if the relevant tokens have certain characteristics. The 

authorities have published guidance on determining the applicability of the laws on a case-bycase basis. The jurisdictions that have taken this approach include Australia, the Bahamas, 

Canada, Denmark, Finland, Germany, Israel, Jersey, Liechtenstein, Lithuania, New Zealand, 

Singapore, Sweden, Switzerland, Taiwan, and the United Arab Emirates (UAE) (with respect to 

the Abu Dhabi Global Market). The United Kingdom (UK) is currently consulting on guidance in 

this area. In addition, it appears that a similar approach would be taken in the Cayman Islands, 

although no official guidance has been published. 

Several of the relevant authorities have established “innovation hubs” or “sandboxes” to assist 

entities in the financial technology (fintech) sector navigate regulations and to encourage or 

enable innovation. This includes Australia, Canada, Hong Kong, and Switzerland, with such an 

entity also proposed in Israel. 

 

 

4 Framework for “Investment Contract” Analysis of Digital Assets, U.S. SECURITIES AND EXCHANGE COMMISSION,

https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets (last updated Apr. 3, 

2019), archived at https://perma.cc/82FC-CTB7.

55 See LABCFTC, COMMODITY FUTURES TRADING COMMISSION, A CFTC PRIMER ON VIRTUAL CURRENCIES 11 (Oct. 

17, 2017), https://www.cftc.gov/sites/default/files/idc/groups/public/documents/file/labcftc_ primer 

currencies100417.pdf, archived at https://perma.cc/2ASM-W3JN.

6 Id.
Regulatory Approaches to Cryptoassets: Comparative Summary 

The Law Library of Congress 3

B. Specific Extension of Securities Laws to Cryptoassets 

A few jurisdictions have specifically brought cryptocurrencies into the regulatory framework 

applicable to financial products and services through regulations or official statements. This 

includes Hong Kong, Israel (where “virtual currency” is included in the definition of “financial 

asset”), Luxembourg (which has officially recognized tokenized securities as securities), and 

Malaysia (where recent regulations bring all digital assets and tokens created by blockchain 

within the securities regulatory framework, with specific requirements applying for the 

registration of digital asset platforms). 

III. Specific Laws on Cryptoassets 

Several countries have recently enacted specific laws or regulations that govern various activities 

related to cryptoassets, including exchanges and wallets. These cover matters such as technical 

requirements, governance structures, risk management, information disclosure, and other 

investor protection issues. There has been some regulation specific to ICOs, and this is an area in 

which several countries are currently considering possible regulatory approaches. 

The following countries have enacted new laws or regulations specifically on cryptocurrency 

businesses or activities: Anguilla (in relation to tokens that are not considered securities), Belarus 

(where the regulations are applicable to residents of a government-established technology park), 

Bermuda, Gibraltar (in relation to DLT services, with officially regulated blockchain exchanges 

established), Indonesia (in relation to recognizing cryptocurrencies as commodities that can be 

subject to futures trading), Malta, Mauritius (in relation to custodian services), Mexico, Singapore 

(in relation to payment services), UAE, Uzbekistan, and Venezuela (including the establishment 

of a national cryptocurrency). 

The following countries are currently at various stages of considering proposals for specific 

legislation related to cryptoassets: Australia (recently consulted on possible ICO regulation), the 

Bahamas (proposed payment instruments legislation), France (currently considering an ICO bill 

plus additional regulations), Germany (considering proposals to regulate blockchain securities, 

non-security ICOs, and DLT), Gibraltar (regulation of ICOs and tokens), Israel, Italy (considering 

a bill containing restrictions on token anonymization), Japan, Liechtenstein, Malaysia (in relation 

to ICOs), Philippines (ICOs), South Africa, Switzerland, and Ukraine. 

Ireland appears to be at an earlier stage in this process, having established a working group to 

monitor developments and consider whether policy recommendations are required. The UK has 

also established a task force and is working on developing relevant proposals for consultation. 

In addition, the EU is currently reviewing whether existing financial legislation applies to 

cryptoassets and ICOs and whether regulatory action is needed. There are currently divergent 

approaches in the EU Member States, and the European Securities and Markets Authority has 

indicated that it supports the introduction of EU-wide rules to ensure investor protection. 

 
Regulatory Approaches to Cryptoassets: Comparative Summary 

The Law Library of Congress 4

IV. Regulation of Cryptoassets Not Considered Securities 

Where cryptoassets are not considered securities or other financial products, government 

authorities have indicated that other types of laws may be applicable, or have stated more broadly 

that such cryptoassets are unregulated. For example, general consumer protection legislation is 

applicable in relation to cryptocurrency activities in Australia, Canada, Finland, and New 

Zealand. In other jurisdictions, payment services laws may be applicable, which requires entities 

to be licensed in order to perform certain activities. This includes the EU, France, Japan, 

Singapore, and the UK. In Italy, some cryptocurrency businesses may be treated as money 

exchange operators. 

Jurisdictions that have indicated that non-security cryptocurrencies, such as utility tokens, and 

ICOs offering such tokens, are generally unregulated include Brazil, Gibraltar, Isle of Man, Jersey, 

Spain, and the UAE. China and Indonesia appear to have taken a stronger approach, essentially 

banning the use of all cryptocurrencies as a means of payment and prohibiting financial 

institutions from dealing in cryptocurrencies (except in relation to futures trading in Indonesia). 

However, other laws of general application, such as property and contract law, may be applicable 

to cryptoassets in China. 

V. Custodianship 

Some of the new cryptocurrency laws referred to above contain requirements specifically 

applicable to entities that provide cryptoasset custodial or storage services, such as technical 

measures for protecting assets, transactions, and client information. This includes, for example, 

Bermuda, Indonesia, Mauritius, Norway, and the UAE. Specific measures proposed in other 

countries, such as Liechtenstein, also contain provisions setting out the obligations of providers 

of custodial services. 

In Venezuela, the government has established the Crypto Assets Treasury with responsibility for 

the custody, collection, and distribution of cryptoassets in accordance with 

presidential instructions. 

In other jurisdictions, cryptoasset custodial services may be considered a regulated financial 

service, with standard rules applying under the relevant legislation. This includes Australia (if 

the relevant assets are considered a financial product), Canada (where regulators expect certain 

technical measures), and Switzerland (if the tokens are considered financial instruments). 

 

VI. Application of AML/CFT Laws 

Several of the countries covered in the report apply existing AML/CFT laws to entities that deal 

with cryptoassets, including the Cayman Islands (although this may depend on the nature of the 

particular assets), Israel, Lithuania (which is also considering regulatory changes in this area), 

Mauritius (in relation to custodian services), New Zealand, Norway, Philippines, Singapore, 

Sweden (depending on the nature of the assets involved), and Switzerland. 

A number of other jurisdictions have made specific legislative changes to bring cryptoasset 

activities under the relevant laws. This includes Australia, Belarus, Bermuda, Canada, France, 
Regulatory Approaches to Cryptoassets: Comparative Summary 

The Law Library of Congress 5

Gibraltar, Isle of Man, Italy, Malaysia, Malta, Norway, Japan, Jersey, Liechtenstein, Taiwan, the 

UAE, and Uzbekistan. Relevant legislative changes are currently being considered in the UK. The 

EU has also amended its Anti-Money Laundering Directive in order to bring wallet providers 

and exchange platforms within its scope. These changes are in the process of being implemented 

through legislative changes in the EU Member States. 

VII. Taxation 

The tax authorities of several countries covered by this report have published guidance on the 

application of income or capital gains tax rules to cryptocurrency activities, including Australia, 

Brazil, Canada, Denmark, Ireland, Israel, Italy (in relation to corporate tax), Japan, Jersey (in 

relation to corporate tax), Lithuania, Luxembourg, New Zealand, Norway, and Switzerland. 

France has enacted specific provisions regarding the taxation of cryptocurrencies, while there is 

a current bill in South Africa that covers this issue, as well as in Ukraine, where an extended tax 

break is proposed. Other countries that have stated that cryptocurrencies are not subject to tax 

include Belarus (in relation to residents of the government-established technology park), 

Gibraltar (although exchanges must pay corporate income tax), and Uzbekistan. 

The application of value-added tax or goods and services tax has also been considered in several 

countries, with authorities stating that existing exemptions apply to the buying and selling of 

cryptocurrencies. This includes Australia (unless the entity involved in the transaction is a 

business) and EU Member States, following a European Court of Justice ruling on this issue. 
The Law Library of Congress 6 

Anguilla 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY Anguilla has enacted legislation to regulate the issuance of utility tokens that do not fall 

under securities law. The Anguilla Utility Token Offering Act (AUTO Act) provides 

that only qualified companies registered with the Anguilla Financial Services 

Commission may issue utility tokens. In order to register, a significant amount of 

disclosure must be made, and once registered, the companies must follow the antimoney laundering legislation of Anguilla to ensure that utility tokens are not used in 

an unlawful manner. 

I. Introduction 

The Anguillan government has taken a proactive approach towards cryptocurrencies. In 2018, 

the government enacted the Anguilla Utility Token Offering Act (AUTO Act). The AUTO Act is 

one of the first in the world to establish a registration process for first offerings of utility tokens 

that are not securities.1 The objective of the AUTO Act is to provide an easy to use framework 

for the registration of, and disclosure of information by, issuers of utility tokens, with clear rules 

and a small levy charged to issuers. 

II. Approach to Assets Created Through Blockchain 

The AUTO Act provides a a set of rules applicable to issuers of tokens that do not have the 

features of a security and therefore fall outside the existing financial services regulatory 

framework.2 The Act creates 

a simple but effective standardized registration and disclosure protocol for blockchain 

projects wishing to issue utility tokens. The government’s goal is to strike a sound balance 

between meeting the information requirements of the purchasing public, and creating an 

accelerated but prudent process to meet the needs of the fast-moving blockchain industry.3

The AUTO Act was co-authored by an Anguillan finance and tax lawyer and a US finance and 

blockchain lawyer, who stated: 

 

1 Anguilla Utility Token Offering Act 2018, No. 4/2018 (AUTO Act), https://www.fsc.gov.ai/documents/ 

Document Library/Legislation/AUTO Act (enactment).pdf, archived at https://perma.cc/F8YV-EW2W. 

2 Government of Anguilla Announces World’s First Blockchain Token Offering Registration Process for “Utility Token 

Offerings,” THE ANGUILLAN (May 14, 2018), http://theanguillian.com/2018/05/government-of-anguillaannounces-worlds-first-blockchain-token-offering-registration-process-for-utility-token-offerings/, archived at 

https://perma.cc/L69R-3JHX. 

3 Id.
Regulatory Approaches to Cryptoassets: Anguilla 

The Law Library of Congress 7

In drafting this Act, we saw that tokens that were in effect “securities” in Anguilla are 

required to comply with the same Anguillan and international regulatory regime as all 

other securities offerings. However, there remained a large swathe of non-security tokens 

with no clear guidance as to how they should be offered to the public. Therefore, we 

focused our efforts on creating a safe and effective regulatory framework for non-security 

token offerings.4

The aim of the AUTO Act is to provide clear guidance for both issuers of cryptocurrencies and 

the public that wishes to purchase them: 

The objective is a simple but effective standardized registration and disclosure protocol for 

blockchain projects wishing to issue utility tokens. The government’s goal is to strike a 

sound balance between meeting the information requirements of the purchasing public, 

and creating an accelerated but prudent process to meet the needs of the fast-moving 

blockchain industry.5 

A. Financial Regulation and Consumer Protection 

The AUTO Act regulates initial blockchain6 utility token offerings conducted in, or from within, 

Anguilla.7 An initial utility token offering is defined as “an initial offer to the public to subscribe 

for the purchase of utility tokens to be issued by an issuer made by the issuer to any person who 

is not connected to the issuer.”8 

The AUTO Act provides that only qualified companies9 registered under the AUTO Act by the 

Anguilla Financial Services Commission (the Commission) may undertake an initial or secondary 

utility token offering.10 The application for registration must include a US$10,000 application 

fee;11 a statement that contains specified information, including the type and scope of business 

the applicant will carry out; a statement about the scope of the initial token offering; the white 

paper providing detailed information about the tokens; and the financial, technical, and human 

 

4 Id.

5 Id.

6 Blockchain is defined in section 1(1) of the AUTO Act as “a continuously growing list of decentralised digital 

records that are linked and secured using cyptography.” 

7 Section 1(2) of the AUTO Act states “a person is considered to be undertaking an initial or secondary utility 

token offering in or from within Anguilla if the person is resident in Anguilla, organised or incorporated under 

the laws of Anguilla or representing to be undertaking an initial or secondary utility token offering in or from 

within Anguilla.” 

8 AUTO Act § 1(1). 

9 Section 1(1) of the AUTO Act defines “qualified company” as: “a company incorporated under the 

International Business Companies Act, R.S.A. c. 120, the Companies Act, R.S.A. c.C65 or the Limited Liability 

Company Act, R.S.A. c. L65 or such other entity prescribed by regulations[.]” 

10 AUTO Act § 2. 

11 Anguilla Utility Token Offering (Application Process) Regulations 2018, SI 2018/19, sched. 3, 

http://www.fsc.org.ai/documents/Document Library/Legislation/Anguilla Utility Token Offering 

(Application Process) Regulations, 2018.pdf archived at https://perma.cc/YQ28-9RTB. 
Regulatory Approaches to Cryptoassets: Anguilla 

The Law Library of Congress 8

resources available to the applicant.12 The Commission has stated there are exclusions to the 

types of tokens that it will register: 

The Commission will not register an issuer to undertake a utility token offering that is 

intended to enable access to any of the following online businesses: gambling, 

pornography, trading in securities, foreign exchange contracts, binary options, contracts 

for differences and similar instruments, or any business prohibited by the laws 

of Anguilla.13

As noted above, the AUTO Act was created to provide a framework for tokens that are not 

securities and thus do not fall under the financial services framework. The AUTO Act defines a 

token as “any cryptographically secured digital representation of a set of rights, including smart 

contracts, provided on a digital platform and issued or to be issued by an issuer.” “Utility token” 

is defined as 

 any token that – 

(a) does not, directly or indirectly, provide the holder(s) thereof, individual or collectively 

with the other holder(s), any of the following contractual or legal rights – 

(i) ownership or equity interest in the issuer or in any person or pool of assets, 

(ii) entitlement to a share of profits, losses, assets or liabilities of the issuer or any 

other person or pool of assets (other than, in the event of liquidation or dissolution 

of the issuer, to receive a portion of (but not in excess of) the original subscription 

price paid for the utility token in the initial utility token offering ("Limited Return 

Rights”)), 

(iii) legal status as a creditor (other than with respect to Utility Token Features, or 

with respect to Limited Return Rights), or 

(iv) entitlement to receive distributions of profits, revenues, assets or other 

distributions from the issuer or any other person or pool of assets other than with 

respect to Limited Return Rights; and 

(b) has or will have in the future, upon launch of the issuer's Utility Token Platform, one 

or more Utility Token Features;

“Utility Token Features” means the contractual right for a holder thereof to utilise a token 

to – 

(a) have access to, become a member of, or become a user of a Utility Token Platform 

developed and managed, or proposed in the issuer's white paper to be developed and 

managed, by the issuer; 

(b) use as the sole or preferred (by economic discount, preferred access, preferred use or 

otherwise) purchase, lease or rental price for the products and/or services provided or 

proposed to be provided by or in the Utility Token Platform developed and managed, or 

proposed in the issuer's white paper to be developed and managed, by the issuer; or 

 

12 AUTO Act § 5. 

13 Anguilla Financial Services Commission, Procedure for Registering an Issuer under the Anguilla Utility 

Token Offering Act, 2018 (AUTO Act”) (2019), https://www.fsc.gov.ai/documents/Document 

Library/Guidelines/AUTO Act - Process_Application for Registering AUTO Issuer (final 2019).pdf, archived at

https://perma.cc/JJA9-PSAS. 
Regulatory Approaches to Cryptoassets: Anguilla 

The Law Library of Congress 9

(c) use as a means of voting on matters relating to the governance, management or 

operation of the Utility Token Platform developed and managed, or proposed in the 

issuer’s white paper to be developed and managed, by the issuer;14

In order to be approved to undertake an initial utility token offering, the qualified company must 

publish disclosure documents. These are aimed at providing transparency and clarity for the 

consumer. These documents must include the structure of the company; business status; a 

detailed description of the project; the technical and legal description of the tokens offered; 

current ownership of the tokens; how the proceeds will be used; plans to protect the offering 

proceeds; anti-money laundering measures; and the risk factors to purchase tokens. The white 

paper must include, at a minimum, the following information: 

(a) the objectives of the issuer; 

(b) subscription restrictions; 

(c) risk factors of the issue; 

(d) minimum and maximum subscription, if applicable, for subscribers; 

(e) the corporate structure and location, including ownership structure of the issuer and 

any affiliated companies that collectively will develop, manage and operate the blockchain 

project(s) operated or to be developed and operated using the proceeds from the initial or 

secondary utility tokens offering; 

(f) officers and directors of the issuer including relevant backgrounds; 

(g) description of technical functionality of utility tokens proposed to be offered; 

(h) the contractual and legal rights provided by the utility tokens being offered; 

(i) where the initial utility token offering will be offered or restricted from being offered; 

(j) the total amount of utility tokens that may be issued in the initial or secondary offering 

or in the future by the issuer; 

(k) the initial utility token offering timeline, including any discounts provided to 

purchasers on the price of offering based on time, amount, auction or other staged 

investment; 

(l) any actual or projected cap on the total amount offered in the initial offering; 

(m) detailed use of proceeds from the initial or secondary offering, especially any material 

payments that will be made to affiliates of the issuer; 

(n) any rights or obligations of the holders of tokens to have their tokens redeemed by the 

issuer or affiliates; 

(o) all proposed uses of the tokens within the blockchain project or platform owned or to 

be developed by the issuer; 

(p) the mechanism of the initial utility token offering issue; 

(q) a description of the AML/KYC compliance requirements applicable to the offering and 

how they will be addressed; 

(r) any plan for holding offering proceeds in escrow, both prior to the closing of the offering 

and for purposes of staged releases subsequent to closing, including conditions for release; 

(s) security measures to be adopted including measures for protection against hacking or 

diversion of subscriber funds or value; 

(t) any other material information that the issuer reasonably determines to be necessary for 

a potential subscriber to understand 

 

14 AUTO Act § 1(1). 
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The Law Library of Congress 10

(i) the business or proposed business of the issuer and its affiliates, 

(ii) the operation of the proposed blockchain project and 

(iii) the management structure of the issuer.15

Upon registration, the issuer is liable to pay a fee of US$20,000 where maximum subscription 

proceeds are set at US$100 million or less, and US$30,000 for those that are set at more than 

US$100 million.16 

In order to ensure the AUTO Act is kept up to date, the Distributed Ledger Technology Advisory 

Committee was established to advise the Commission on any amendments that it recommends 

should be made to the AUTO Act.17

B. Anti-Money Laundering Law 

The AUTO Act places an obligation on the issuer of utility tokens to conduct due diligence on 

subscribers, and these obligations are set out in the Anguilla Utility Token Offering (Anti-Money 

Laundering and Terrorist Financing) Regulations 2018.18 Every application to be registered as an 

issuer under the AUTO Act must include the procedure the issuer will take to conduct “due 

diligence on the subscribers to the offering for AML/CFT purposes in accordance with the AUTO 

AML/CFT Regulations.”19 This due diligence must be carried out by an AUTO Administrator, 

or a third party that is considered acceptable to the Commission.20 

Section 2 of the 2018 Regulations provides that registered issuers must collect and maintain a list 

of subscribers that contain specific information, including personal details of the subscriber, such 

as their full name; a declaration of the country of residence; and addresses of subscribers that pay 

less than US$5,000. Subscriptions up to US$25,000 must also include a verified address in the 

form of a utility bill and government issued identification. Subscriptions up to US$100,000 

require the address to be verified by a letter from a licensed financial institution. Subscriptions 

up to US$500,000 require all the information above, certified by a notary public, as well as 

additional photographic identification certified by a notary public and a declaration that includes 

any net worth over US$1 million, the source of wealth, that the subscriber is not a politically 

exposed person, and that the subscription is not undertaken on behalf of a third party.21

 

 

15 Anguilla Utility Token Offering (White Paper) Regulations 2018, SI 2018/20, § 2, 

http://www.fsc.org.ai/documents/Document Library/Legislation/Anguilla Utility Token Offering (White 

Paper) Regulations, 2018.pdf, archived at https://perma.cc/4PAP-3TFA. 

16 Anguilla Financial Services Commission, supra note 13, at 4. 

17 AUTO Act § 3. 

18 Anguilla Utility Token Offering (Anti-Money Laundering and Terrorist Financing) Regulations 2018, § 2, 

http://www.fsc.org.ai/documents/Document Library/Legislation/Anguilla Utility Token Offering (AntiMoney Laundering and Terriorist Financing) Regulations, 2018.pdf, archived at https://perma.cc/FE58-PSK6. 

19 Anguilla Financial Services Commission, supra note 13, at 2. 

20 Anguilla Utility Token Offering (Anti-Money Laundering and Terrorist Financing) Regulations 2018, SI 

2018/22, § 2. 

21 Id. 
Regulatory Approaches to Cryptoassets: Anguilla 

The Law Library of Congress 11

C. Taxation 

There do not appear to be any specific taxes that apply to cryptocurrencies in Anguilla. Issuers 

of utility token offerings are subject to a 1.5% levy on the aggregate value of subscriptions, as 

measured at the time of completion of the utility token offering.22

 

22 Anguilla Utility Token Offering (Levy) Regulations 2018, SI 2018/22, § 2, http://www.fsc.org.ai/ 

documents/Document Library/Legislation/Anguilla Utility Token Offering (Levy) Regulations, 2018.pdf, 

archived at https://perma.cc/AG88-G2VB. 
The Law Library of Congress 12 

Argentina 

Graciela Rodriguez-Ferrand 

Senior Foreign Law Specialist

I. Financial Regulation and Consumer Protection 

Under the National Constitution of Argentina1 the only authority capable of issuing legal 

currency is the Central Bank.2 Bitcoins are not legal currency strictly speaking, because they are 

not issued by the government monetary authority and therefore are not legal tender.3 They may 

be considered money but not legal currency, since they are not a mandatory means of cancelling 

debts or obligations.4 

Although bitcoins are not specifically regulated, they are increasingly being used in Argentina, a 

country that has strict control over foreign currencies.5 According to some experts6 a bitcoin may 

be considered a good or a thing under the Civil Code,7 and transactions with bitcoins may be 

governed by the rules of the sale of goods under the Civil Code.8

 

1 CONSTITUCIÓN DE LA NACIÓN ARGENTINA [NATIONAL CONSTITUTION OF ARGENTINA] art. 75, para. 6, BOLETÍN 

OFICIAL [BO], Aug. 22, 1994, http://servicios.infoleg.gob.ar/infolegInternet/anexos/0-4999/804/norma.htm, 

archived at https://perma.cc/XN2T-C5G7.

2 Ley No. 24.144, Carta Orgánica del Banco Central de la República Argentina [Law No. 24,144, Charter of the 

Central Bank of the Republic of Argentina] art. 30, BO, Oct. 13, 1992, http://servicios.infoleg.gob.ar/infoleg 

Internet/anexos/0-4999/542/texact.htm, archived at https://perma.cc/2CVW-8VNX. 

3 El Banco Central Argentino Considera Riesgoso Operar con Bitcoins [Central Bank of Argentina Considers Risky 

Operations with Bitcoins], INFOTECHNOLOGY (May 28, 2014), http://www.infotechnology.com/internet/ ElBanco-Central-argentino-considera-riesgoso-operar-con-bitcoins-20140528-0003.html, archived at

https://perma.cc/746A-JBYG. 

4 Mara Laudonia, El Vacío Legal del Bitcoin, ¿Es o No Es Dinero? [The Legal Vacuum of the Bitcoin, Is It or Is It Not 

Money?], TELAM (Feb. 28, 2018), http://www.telam.com.ar/notas/201702/180185-el-vacio-legal-del-bitcoin-eso-no-es-dinero.html, archived at https://perma.cc/P2WE-L8F9.

5 José Crettaz, Bitcoin: Fiebre Argentina por la Máquina de Dinero Digital [Bitcoin: Argentine Fever for the Digital 

Money Machine], LA NACIÓN (June 30, 2013), http://www.lanacion.com.ar/1596773-bitcoin-pasion-argentinapor-la-nueva-maquina-de-hacer-billetes-digitales, archived at https://perma.cc/PMU9-KWB5; Diego Geddes,

Argentina es uno de los países que más usa el bitcoin [Argentina Is One of the Countries that Uses the Bitcoin], CLARÍN

(Dec. 31, 2013), http://www.clarin.com/sociedad/Argentina-paises-Bitcoin-moneda-virtual_0_10576 

94271.html, archived at https://perma.cc/N8SA-5H9L. 

6 See, e.g., Andres Chomczyk, Situación Legal del Bitcoin en Argentina, ELBITCOIN.ORG (Oct. 10, 2013), 

http://elbitcoin.org/situacion-legal-de-bitcoin-en-argentina, archived at https://perma.cc/43K8-ZYYK.

7 CÓDIGO CIVIL [CIVIL CODE] art. 2311, http://servicios.infoleg.gob.ar/infolegInternet/anexos/105000-109999/ 

109481/texactley340_libroIII_tituloI.htm, archived at https://perma.cc/Y3Q7-JT25. 

8 Id. art. 1323. 
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The Law Library of Congress 13

II. Anti-Money Laundering Law 

A formal recognition of electronic currency was issued by the Unidad de Información Financiera 

(UIF) (Financial Information Unit) of the Ministry of Finance through Resolution 300/2014, which 

warned entities and individuals required by law to report suspicious transactions involving 

money laundering or terrorism financing and to be particularly alert with regard to operations 

carried out with virtual currency.9 The UIF Resolution differentiates “virtual currency” and 

“electronic currency,” stating that the latter involves the electronic transfer of legal tender while 

virtual currency transactions do not involve legal tender.10

III. Taxation 

The latest amendment to the Income Tax law provides that the profit derived from the sale of 

digital currency will be considered income and taxed as such.11 Income derived from the sale of 

digital currency is taxed at 15% when derived from either Argentine or foreign sources.12 The tax 

treatment of cryptocurrency corresponds with the treatment of profits on securities and bonds, 

which represent a liability in favor of the holder—something that does not happen in the case 

of cryptocurrencies.13 

 

9 Unidad de Información Financiera, Resolución 300/14 Prevención del Lavado de Activos y de la Financiación 

del Terrorismo, para. 9, BO, July 10, 2014, http://servicios.infoleg.gob.ar/infolegInternet/anexos/230000-

234999/231930/norma.htm, archived at https://perma.cc/G2L7-9S2Q.

10 Id. art. 2. 

11 Ley 27430 de Modificación del Impuesto a las Ganancias [Law 27430 Amending the Income Tax Law] art. 2.4, 

BO, Dec. 29, 2017, http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305262/texact.htm, 

archived athttps://perma.cc/GS7J-UR7U, and its regulation, Decreto 1170/2018 de Modificaci’on de la 

Reglamentación de la Ley de Impuesto a las Ganancias [Decree 1170/2018 Modification of the Regulation of 

the Income Tax Law], BO, Dec. 27, 2018), http://servicios.infoleg.gob.ar/infolegInternet/anexos/315000-

319999/318096/norma.htm, archived at https://perma.cc/8W5M-FQAC.

12 Decreto 1170/2018 art. 90, para. 2. 

13 BITCOIN ARGENTINA, SOBRE EL PROYECTO DE GRAVAR LAS MONEDAS DIGITALES COMO RENTA FINANCIERA DE 

ACCIONES Y BONOS [ABOUT THE BILL THAT TAXES DIGITAL CURRENCY AS A FINANCIAL INCOME FROM STOCK AND 

BONDS] 2, last para. (Nov. 17, 2017), https://www.bitcoinargentina.org/wp-content/uploads/sites/6/2017/ 

11/proyecto-impuesto-a-las-ganancias-bitcoin.pdf, archived at https://perma.cc/B8TG-XQYP.
The Law Library of Congress 14 

Armenia 

Astghik Grigoryan 

Legal Research Analyst

I. Approach to Assets Created Through Blockchain 

On October 18, 2018, Armenia opened its first crypto mining farm, with an investment of US$50 

million and the capacity of 3,000 Bitcoin (BTC) and Ethereum (ETH) mining machines. It is 

envisaged that the capacity of the farm would reach 120,000 machines.1 The crypto mining farm 

was created on the basis of the Governmental Decree on the Creation of a Free Economic Zone of 

August 30, 2018, and operates under the legal framework for free economic zones.2

In May 2018, a Bill on Amending the Law on Information Technologies was introduced.3 The bill 

defines cryptocurrency as an asset accessible exclusively through digital means.4 The bill 

establishes a liberal regulatory approach towards mining of cryptocurrencies. According to 

article 4 of the bill, any physical person (at least 18 years old), as well as legal entity, may be 

employed in the crypto mining sector.5 In addition, article 4 states that no prior licensing or 

permits are required in order to engage in crypto mining activities. 

Previously, the Central Bank of Armenia had issued a statement in which it expressed serious 

reservations concerning the circulation of cryptocurrencies, citing insufficient mitigation of the 

following risks: 

• Cryptocurrencies are lacking security and are extremely unstable; 

• In most schemes that use cryptocurrencies, there are no legally responsible entities; 

 

1 Marie Huillet, Armenian PM Attends Launch of Mining Farm Claiming to Be One of ‘World's Largest', 

COINTELEGRAPH (Oct. 19, 2018), https://cointelegraph.com/news/armenian-pm-attends-launch-of-miningfarm-claiming-to-be-one-of-worlds-largest, archived at https://perma.cc/34E2-5AS6.

2 Hajastani Hanrapetujan Voroshum Kotayqi Marzi Hrazdan Qaghaqum Azat Tntesakan Goti Steghtselu, 

“EKOS” Pak Bazhnetirakan Enkerutjann Azat Tntesakan Gotu Kazmakerpich Tsanachelu, Inchpes Naev Azat 

Tntesakan Gotu Gortsuneutjan Veraberjal Kamakerpchi Koghmits Nerakajatsvogh Hashvetvutjan dzevere 

Hastatelu Masin 30 Ogostoi 2018, 974 – Ա . [Resolution of the Government of the Republic of Armenia on 

Recognizing “EKOS” Closed Charitable Entity as an Organizer of Free Economic Zone in the city of Hrazdan of 

Kotayk Marz, As Well as on Approving Reporting Documentation for the Organizer Concerning the Activities 

of Free Economic Zone], August 30, 2018, 974-A, https://www.e-gov.am/gov-decrees/item/30750/ (in 

Armenian), archived at https://perma.cc/WCK4-JMGA. 

3 Hajastani Hanrapetujan Orenqe Tvajin Tekhnologianeri Masin, Nakhagits, P-253-05.02.2018-FV-011 [Law of 

the Republic of Armenia on Information Technologies, Bill P-253-05.02.2018-FV-011], 

http://www.parliament.am/drafts.php?sel=showdraft&DraftID=9504&Reading=0&fbclid=IwAR07Ok_a0yB1

ENjT41jf2tZfXSKCsf5BcrHUq2OwHThtarK3sPvTPA9sbQQ (in Armenian; last visited Mar. 26, 2019), archived at

https://perma.cc/5YD3-4N23. 

4 Id. art. 3. 

5 Id. art. 4. 
Regulatory Approaches to Cryptoassets : Armenia 

The Law Library of Congress 15

• Transactions executed with cryptocurrencies can often be part of the money laundering and 

terrorist financing schemes, as they allow anonymous and cross-border transactions, the 

return of which cannot be secured; and 

• In cases of fraud or criminal distortions in information security, authentic mechanisms to 

protect the legitimate interests of clients or to compensate for their losses are not in place, as 

a result of which the consumers’ interests may be violated.6 

According to the Central Bank, these concerns do not apply to mining activities, as their 

regulation can be delegated to the regulators of the IT sector rather than financial sector.7 In a 

subsequent statement, the chairman of the Central Bank reiterated its support for blockchain 

technologies, but cautioned against using cryptocurrencies.8 Furthermore, the statement 

indicated that when international cryptocurrencies regulation is adopted, Armenia would enact 

a national law to regulate cryptocurrencies.9 

II. Taxation 

The Bill on Information Technologies proposes to lift taxation requirements for crypto-mining 

transactions until December 31, 2023. The Bill also states that other tax, customs or other 

privileges may be introduced provided that equal economic competition is observed.10

 

6 Press Release, Central Bank of Armenia, The Statement of the Central Bank of Armenia on “Crypto-assets” 

(July 5, 2018), https://www.cba.am/EN/pmessagesannouncements/Cryptocurrency warning 07.05.2018 

ENG.pdf, archived at https://perma.cc/54YZ-9KP6.

7 Id. 

8 Press Release, Central Bank of Armenia, Armenian Central Bank Supports Blockchain Technology but 

Cautious about Cryptocurrencies (Nov. 14, 2018), http://www.armbanks.am/en/2018/11/14/117119, archived 

at https://perma.cc/LNU2-EFV5.

9 Id.

10 Law of the Republic of Armenia on Information Technologies, Bill P-253-05.02.2018-FV-011, art. 4.
The Law Library of Congress 16 

Australia 

Kelly Buchanan 

Foreign Law Specialist

SUMMARY The Australian Securities and Investments Commission (ASIC) states that whether 

cryptoassets are a type of financial product under the Corporations Act 2001 (Cth) 

depends on their nature. Where tokens created through blockchain are considered to 

be an interest in a managed investment scheme, shares, derivatives, or a non-cash 

payment facility, an entity that deals with or provides custodial services with respect to 

such tokens could be providing financial services, with disclosure and licensing 

requirements applying. If the tokens are not financial products, the Australian 

Consumer Law would apply. Both this law and the Corporations Act prohibit false and 

misleading conduct. ASIC has been delegated functions under the Australian 

Consumer Law in relation to initial coin offerings that do not involve financial products. 

 Amendments to the anti-money laundering and counter-financing of terrorism 

legislation that came into force in April 2018 impose registration, recording, and 

reporting obligations on digital currency exchanges. Australian taxation law is also 

applicable to investing or dealing in cryptoassets, with capital gains or losses subject to 

the capital gains tax system. 

 The Australian Treasury recently sought public feedback on the regulatory treatment 

of initial coin offerings in Australia, including with respect to financial regulation, 

consumer protection, and taxation. 

I. Approach to Assets Created Through Blockchain 

A recent report analyzing the legal environment with respect to cryptocurrency in Australia 

states that, 

[t]o date, the [Australian] Government has taken a largely non-interventionist approach to 

the regulation of cryptocurrency, allowing the landscape to evolve at a faster rate than its 

regulatory responses. Australian law does not currently equate digital currency with fiat 

currency and does not treat cryptocurrency as “money”.1

Furthermore, 

[w]hile there have been recent amendments to various pieces of legislation to 

accommodate the use of cryptocurrencies, these have predominantly focused on the 

 

1 Peter Reeves & Georgina Willcock, Australia, in BLOCKCHAIN AND CRYPTOCURRENCY REGULATION 2019 (Global 

Legal Insights, Jan. 2019), https://www.globallegalinsights.com/practice-areas/blockchain-laws-andregulations/australia, archived at https://perma.cc/8F46-PYWJ. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 17

transaction relationships, such as the issuing and exchanging process, rather than the 

cryptocurrencies themselves.2

Several Australian laws are relevant to the regulatory treatment of cryptocurrencies and other 

assets created through blockchain, including the Corporations Act 2001 (Cth) (regulation of 

financial products and services);3 Australian Securities and Investments Commission Act 2001 

(Cth) (establishes the role and powers of the Commission with regard to consumer protection in 

relation to financial services);4 Australian Consumer Law, which is contained in the Competition 

and Consumer Act 2010 (Cth) (regulation of non-financial products and services);5 Anti-Money 

Laundering and Counter-Terrorism Financing Act 2006 (Cth) (anti-money laundering obligations 

and registration of digital currency exchanges);6 and Income Tax Assessment Act 1997 (Cth).7 

In January 2019, the Australian Treasury published an issues paper on initial coin offerings (ICOs) 

that sought feedback on, among other matters, the regulatory treatment of ICOs in Australia, 

including with respect to financial regulation, consumer protection, and taxation.8 Consultation 

on the paper ended on February 28, 2019, and the feedback received will inform Treasury’s advice 

to the government.9

A. Financial Regulation and Consumer Protection 

The Australian Securities and Investments Commission (ASIC) updated its guidance on business 

obligations under the Corporations Act 2001 (Cth) and other Australian legislation in relation to 

 

2 Id. 

3 Corporations Act 2001 (Cth), https://www.legislation.gov.au/Details/C2018C00424, archived at

https://perma.cc/UAN8-XRLY. Chapter 7 of the Act relates to financial services and markets. Within this 

chapter, division 3 of part 7.1 defines “financial product,” while division 4 defines “financial service.” 

4 Australian Securities and Investments Commission Act 2001 (Cth), 

https://www.legislation.gov.au/Details/C2018C00438, archived at https://perma.cc/Z6ZF-ZSNP. 

5 Competition and Consumer Act 2010 (Cth) s 131A (division does not apply to financial services) & sch 2 (The 

Australian Consumer Law), https://www.legislation.gov.au/Details/C2018C00437, archived at 

https://perma.cc/VJF6-SVJA. 

6 Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), 

https://www.legislation.gov.au/Details/C2019C00011, archived at https://perma.cc/V484-WF7H. 

7 Income Tax Assessment Act 1997 (Cth), https://www.legislation.gov.au/Details/C2019C00049. 

8 THE TREASURY, INITIAL COIN OFFERINGS: ISSUES PAPER (Jan. 2019), 

https://static.treasury.gov.au/uploads/sites/1/2019/02/c2019-t353604-Issues_Paper.pdf, archived at 

https://perma.cc/6JZ7-4WFV. 

9 Initial Coin Offerings, THE TREASURY, https://treasury.gov.au/consultation/c2019-t353604/ (last visited Mar. 

11, 2019), archived at https://perma.cc/L34G-QPUF. 
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ICOs and cryptocurrency in May 2018.10 The guidance had originally been published in 

September 2017.11 The guidance states that 

[f]or ICOs and crypto-assets that are financial products,12 the Corporations Act includes 

prohibitions against misleading and deceptive conduct. . . . 

For ICOs and crypto-assets that are not financial products (for example, ASIC has stated 

that it does not consider bitcoin to be a financial product), the same prohibitions against 

misleading or deceptive conduct apply under the Australian Consumer Law.13

In April 2018, ASIC “received delegated powers from the ACCC [Australian Competition and 

Consumer Commission] that enabled ASIC to take action under the Australian Consumer Law 

for misleading or deceptive conduct in the marketing or selling of ICOs, even if the ICO does not 

involve a financial product.”14

Whether the Corporations Act applies depends on the nature of the ICO or cryptoasset. The 

guidance explains that 

[f]or ICOs, the mere fact that the token issued is described as a utility token does not mean 

it is not a financial product. The mere existence of a statement that the ICO or the token is 

not a financial product also does not mean it is not a financial product. It is important for 

entities to consider all of the rights and features associated with the token. 

Similarly, the mere fact that a crypto-asset is described as a digital currency does not mean 

it is not a financial product.15

The guidance goes on to examine when tokens issued by an ICO could be a managed investment 

scheme, share, derivative, or non-cash payment facility under the Corporations Act. Where one 

of these categories applies, an entity that provides advice on, deals with, makes a market for, or 

provides a custodial or depositary service for such a financial product could be considered to be 

 

10 Initial Coin Offerings and Crypto-Currency: Information Sheet 225 (INFO 225), AUSTRALIAN SECURITIES AND 

INVESTMENTS COMMISSION (ASIC) (updated May 2018), https://asic.gov.au/regulatory-resources/digitaltransformation/initial-coin-offerings-and-crypto-currency/, archived at https://perma.cc/6H72-AZYF. 

11 See Press Release, ASIC, 17-325MR ASIC Provides Guidance for Initial Coin Offerings (Sept. 28, 2017), 

https://asic.gov.au/about-asic/news-centre/find-a-media-release/2017-releases/17-325mr-asic-providesguidance-for-initial-coin-offerings/, archived at https://perma.cc/GP95-W9EX. 

12 Note that the term “financial product” can be seen as synonymous with the term “securities” in the United 

States. Frederick H.C. Mazando, The Taxonomy of Global Securities: Is the U.S. Definition of a Security Too Broad?, 

33(1) NW. J. INT’L L. & BUS. 121 (2012), 

https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1029&context=njilb, archived at

https://perma.cc/SKG4-QXRN. 

13 INFO 225, supra note 10. 

14 ASIC, ANNUAL REPORT 2017-18, at 78 (Oct. 2018), https://download.asic.gov.au/media/4922570/annualreport-2017-18-published-31-october-2018-full.pdf, archived at https://perma.cc/VE5K-FHZR. 

15 INFO 225, supra note 10. 
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providing a financial service under the Act and various obligations would apply.16 This includes 

disclosure requirements17 and a requirement to hold an Australian financial services license.18 If 

a cryptoasset trading platform enables trading in tokens that are financial products, this may 

involve the operation of a financial market and a market license may be required.19 

The guidance states that 

[a]n assessment of what rights are attached to the tokens issued under an ICO is the key 

consideration in relation to assessing the legal status of an ICO. These rights are generally 

described in the ICO’s ‘white paper’, an offer document issued by the business making the 

offer or sale of an ICO token. What is a right should be interpreted broadly and includes 

rights that may arise in the future or on a contingency, and rights that are not 

legally enforceable.20

In addition to the above guidance, ASIC directs investors to its “Moneysmart” website, which 

contains information and warnings about cryptocurrencies21 and ICOs.22 

ASIC also published information on its approach to evaluating distributed ledger technology or 

blockchain in March 2017.23 The guidance is intended for “both existing licensees and start-ups 

that are considering operating market infrastructure, or providing financial or consumer credit 

services, using distributed ledger technology (DLT) or blockchain.”24 It states that ASIC’s 

historical approach to the obligations contained in the existing regulatory framework is that they 

are “technology neutral.” It notes, however, that “as DLT matures, we anticipate that additional 

regulatory considerations may arise. These are most likely to be resolved with early and 

collaborative dialogue between ASIC and the industry.”25

 

16 Corporations Act 2001 (Cth) s 766A (when does a person provide a financial service?). 

17 See id. pt 7.7 (financial services disclosure). 

18 Id. pt 7.6 (licensing of providers of financial services); AFS Licencees, ASIC, https://asic.gov.au/for-financeprofessionals/afs-licensees/ (last visited Mar. 11, 2019), archived at https://perma.cc/Y7A5-BAZF. 

19 Corporations Act 2001 (Cth) s 795B; INFO 225, supra note 10; Licensed and Exempt Market Operators, ASIC,

https://asic.gov.au/for-finance-professionals/market-infrastructure-licensees/licensed-and-exempt-marketoperators/ (last visited Mar. 11, 2019), archived at https://perma.cc/889Y-M6A9. 

20 INFO 225, supra note 10. 

21 Cryptocurrencies, ASIC’S MONEYSMART, https://www.moneysmart.gov.au/investing/investmentwarnings/virtual-currencies (last updated Oct. 24, 2018), archived at https://perma.cc/J8XB-KHQQ. 

22 Initial Coin Offerings (ICOs), ASIC’S MONEYSMART, https://www.moneysmart.gov.au/investing/investmentwarnings/initial-coin-offerings-icos (last updated Dec. 12, 2018), archived at https://perma.cc/RV6X-ZLJN. 

23 Evaluating Digital Ledger Technology: Information Sheet 219 (INFO 219), ASIC (Mar. 2017),

https://asic.gov.au/regulatory-resources/digital-transformation/evaluating-distributed-ledger-technology/, 

archived at https://perma.cc/K7KT-GSBC. 

24 Id. 

25 Id. 
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The guidance contains an assessment tool for evaluating DLT-based services, which sets out a list 

of questions related to how the DLT will be used, what platform is being used, how the DLT uses 

data, how the DLT is run, how the DLT works under the law, and how the DLT affects others.26

It also provides a summary of license obligations relevant to DLT (including financial services 

licenses and other types of license), depending on the nature of the business.27

In 2015, ASIC launched an “Innovation Hub,” which “assists fintech startups developing 

innovative financial products or services to navigate [ASIC’s] regulatory system.”28 

In its 2018-2022 Corporate Plan, published in August 2018, ASIC stated that a particular focus 

area for 2018-19 is the following: 

Potential harms from technology driven by the growing digital environment and 

structural changes in financial services and markets. We will continue to focus on 

monitoring threats of harm from emerging products (e.g. ICOs and crypto currencies), 

cyber resilience, the adequate management of technological solutions by firms and 

markets, and misconduct that is facilitated by or through digital and/or cyberbased mechanisms.29

In addition, a new project for 2018-19 was identified as follows: 

 Developing our approach for applying the principles for regulating market 

infrastructure providers to crypto exchanges 

 Monitoring emerging products, such as ICOs, and intervening where there is poor 

behaviour and potential harm to consumers and investors30

B. Anti-Money Laundering Law 

The Australian Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing 

Amendment Act 2017 (Cth) in December 2017.31 This legislation brought providers of digital 

currency exchange services within the anti-money laundering and counter-financing of terrorism 

 

26 INFO 219, Appendix 1: Assessment Tool for Evaluating DLT-Based Services, ASIC,

https://asic.gov.au/regulatory-resources/digital-transformation/evaluating-distributed-ledgertechnology/appendix-1-assessment-tool-for-evaluating-dlt-based-services/ (last visited Mar. 11, 2019), archived 

at https://perma.cc/G92G-KZ77. 

27 INFO 219, Appendix 2: Summary of Licence Obligations Relevant to DLT, ASIC, https://asic.gov.au/regulatoryresources/digital-transformation/evaluating-distributed-ledger-technology/appendix-2-summary-of-licenceobligations-relevant-to-dlt/ (last visited Mar. 11, 2019), archived at https://perma.cc/WL7Y-4PR5. 

28 Innovation Hub, ASIC, https://asic.gov.au/for-business/your-business/innovation-hub/ (last visited Mar. 

11, 2019), archived at https://perma.cc/2KEL-8ARN. 

29 ASIC, ASIC’S CORPORATE PLAN 2018-22: FOCUS 2018-19, at 10 (Aug. 2018), 

https://download.asic.gov.au/media/4855947/asic-corporate-plan-2018-22-focus-2018-19-published-31-

august-2018.pdf, archived at https://perma.cc/8QYW-QGQ4. 

30 Id. at 26. 

31 Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Cth), 

https://www.legislation.gov.au/Details/C2017A00130, archived at https://perma.cc/RL7R-YE2X. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 21

(AML/CFT) legal framework, requiring such entities to be registered with the Australian 

Transaction Reports and Analysis Centre (AUSTRAC), maintain an AML/CFT program, and 

meet certain recording and reporting obligations.32 The amendments came into effect on April 

3, 2018. 

AUSTRAC guidance explains that digital currency exchange services include 

 exchanging digital currency for money (whether Australian or not) 

 exchanging money (whether Australian or not) for digital currency 

where the exchange is provided in the course of carrying on a digital currency 

exchange business. 

A transaction between two individuals in a personal capacity is not considered a 

designated service. Reporting entities that provide digital currency exchange services must 

be enrolled and registered on AUSTRAC’s Digital Currency Exchange Register.33

According to a January 2019 media report, AUSTRAC had at that point officially registered 246 

cryptocurrency exchanges. It had also investigated eleven exchanges and subsequently refused 

two registrations.34

C. Taxation 

The Australian Taxation Office’s (ATO’s) guidance on cryptocurrencies states that the tax 

consequences of acquiring or disposing of cryptocurrency vary depending on the 

circumstances.35 It states that 

[i]f you make a capital gain on the disposal of a cryptocurrency, some or all of the gain 

may be taxed. Certain capital gains or losses from disposing of a cryptocurrency that is a 

personal use asset are disregarded. 

If the disposal is part of a business you carry on, the profits you make on disposal will be 

assessable as ordinary income and not as a capital gain. 

 

32 Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ss 5 (definition of digital currency) 

& 6 (designated services) & pt 6A (the Digital Currency Exchange Register); Digital Currency Exchange Providers, 

AUSTRAC, http://www.austrac.gov.au/digital-currency-exchange-providers (last updated Dec. 20, 2018), 

archived at https://perma.cc/9KXL-QTK4. 

33 Definitions and Examples of Common Designated Services, AUSTRAC, http://www.austrac.gov.au/definitionsand-examples-common-designated-services (last updated Jan. 7, 2019), archived at https://perma.cc/9LZ2-

6RFX. 

34 Ariel Bogle, Cryptocurrency Looks for Respectability as More Than 200 Exchanges Registered, ABC NEWS (Jan. 31, 

2019), https://www.abc.net.au/news/science/2019-02-01/digital-currency-exchanges-bitcoin-austracindustry-reputation/10764316, archived at https://perma.cc/MDJ5-P3EA. 

35 Tax Treatment of Cryptocurrencies, AUSTRALIAN TAXATION OFFICE (ATO),

https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia---specifically-bitcoin/

(last updated Nov. 8, 2018), archived at https://perma.cc/NSD3-27YS. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 22

While a digital wallet can contain different types of cryptocurrencies, each cryptocurrency 

is a separate CGT asset.36

A person who holds cryptocurrency as an investment is not entitled to the personal use asset 

exemption and investors “are required to keep records of each cryptocurrency transaction in 

order to work out whether [they] have a made a capital gain or loss from each CGT event.”37 The 

ATO further indicates that “[t]he longer the period of time that a cryptocurrency is held, the less 

likely it is that it will be a personal use asset.”38 Where cryptocurrency is a personal use asset, 

being “kept or used mainly to purchase items for personal use or consumption,” capital gains 

made from such an asset that is acquired for less than AU$10,000 (approx. US$7,100) 

are disregarded.39

In terms of cryptocurrency businesses, the ATO states that 

[i]f you hold cryptocurrency for sale or exchange in the ordinary course of your business 

the trading stock rules apply, and not the CGT rules. Proceeds from the sale of 

cryptocurrency held as trading stock in a business are ordinary income, and the cost of 

acquiring cryptocurrency held as trading stock is deductible.40

The ATO has also provided specific guidance on self-managed super funds (SMSF, i.e., retirement 

savings funds) investing in cryptocurrencies41 and on the application of goods and services tax 

(GST) with respect to transactions involving digital currencies.42 Amendments to the GST 

provisions that came into effect on July 1, 2017, provide that there are no GST consequences in 

relation to buying or selling digital currency, or using it as a means of payment, unless the entity 

concerned is carrying on a business.43

 

36 Transacting with Cryptocurrency, ATO, https://www.ato.gov.au/general/gen/tax-treatment-of-cryptocurrencies-in-australia---specifically-bitcoin/?page=2#Transacting_with_cryptocurrency (last updated Nov. 8, 

2018), archived at https://perma.cc/6CWN-66U5. 

37 Id. 

38 Id. 

39 Id. 

40 Cryptocurrency Used in Business, ATO, https://www.ato.gov.au/general/gen/tax-treatment-of-cryptocurrencies-in-australia---specifically-bitcoin/?page=3#Cryptocurrency_used_in_business (last updated Nov. 8, 

2018), archived at https://perma.cc/DDY5-2W45. 

41 SMSF Investing in Cryptocurrencies, ATO, https://www.ato.gov.au/super/self-managed-super-funds/indetail/smsf-investing/smsf-investing-in-cryptocurrencies/ (last updated Mar. 16, 2018), archived at 

https://perma.cc/3T7Q-WQJP. 

42 GST and Digital Currency, ATO, https://www.ato.gov.au/business/gst/in-detail/your-industry/financialservices-and-insurance/gst-and-digital-currency/ (last updated Mar. 16, 2018), archived at 

https://perma.cc/LTX9-5F9Z. 

43 Id. Detailed information regarding the tax treatment of cryptocurrencies is contained in KELLY BUCHANAN,

REGULATION OF CRYPTOCURRENCY: AUSTRALIA (Law Library of Congress, June 2018), 

https://www.loc.gov/law/help/cryptocurrency/australia.php. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 23

II. Custodianship of Cryptocurrencies by Financial Institutions 

There are no specific legislative provisions governing custodianship of cryptocurrencies or other 

cryptoassets. As indicated above, where a cryptoasset stored in a vault or wallet is considered to 

be a financial product, the custodial services would be regulated under the financial services 

provisions of the Corporations Act 2001 (Cth).44 Thus, “[t]hey are required to hold an Australian 

financial services licence (AFSL) that authorises them to provide custodial or depository services 

to clients with respect of financial products, and need to comply with obligations imposed upon 

them as AFSL holders.”45

In July 2018, it was reported that two Australian companies, Decentralised Capital and Custodian 

Vaults, had announced a partnership to launch “Australia’s first insured crypto-currency 

vault.”46 The vault services were expected to target “institutional and wealthy investors, in 

addition to cryptocurrency exchangers and issuers of initial coin offerings.”47

III. Regulation of Cryptocurrencies as Financial Securities 

The ASIC guidance covers when tokens offered under an ICO could be a share, interest in a 

managed investment scheme, derivative, or non-cash payment facility, all of which are “financial 

products” under the Corporations Act. It also clarifies that ICOs are not the same as “crowdsourced funding” under recent amendments to the Corporations Act governing 

such arrangements.48

A. Shares 

ASIC’s guidance on cryptocurrencies and ICOs covers the question of when an ICO could be an 

offer of shares under the Corporations Act 2001 (Cth).49 It states as follows: 

 

44 See Corporations Act 2001 (Cth) s 766E (meaning of provide a custodial or depositary service). 

45 Simon Lovegrove & Albert Weatherill, Cryptocurrency Exchanges and Custody Providers: International 

Regulatory Developments: Australia, NORTON ROSE FULBRIGHT (Oct. 

2018),https://www.nortonrosefulbright.com/en/knowledge/publications/e383ade6/cryptocurrencyexchanges-and-custody-providers-international-regulatory-developments#section9, archived at

https://perma.cc/JR6L-Q4LB. 

46 Jim Bulling & Edwin Tan, Australia’s First Crypto-Custody Vault is Open for Business, NATIONAL LAW REVIEW

(July 26, 2018), https://www.natlawreview.com/article/australia-s-first-crypto-custody-vault-open-business, 

archived at https://perma.cc/5AZB-JFBY. 

47 Samuel Haig, Australian Firms Partner to Provide Crypto Custody Services, BITCOIN.COM NEWS (July 15, 2018), 

https://news.bitcoin.com/australian-firms-partner-to-provide-crypto-custody-services/, archived at 

https://perma.cc/G8RZ-STM9. 

48 INFO 225, supra note 10. 

49 Chapter 2H of the Corporations Act 2001 (Cth) relates to shares in a company, while section 761A provides a 

definition of “security” for the purposes of chapter 7 of the Act, and division 3 of part 7.1 includes securities 

within the meaning of “financial product.” 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 24

When an ICO is created to fund a company (or to fund an undertaking that looks like a 

company) then the rights attached to the tokens issued by the ICO may fall within the 

definition of a share. 

The bundle of rights referred to above may be used by ASIC to help determine if a token 

is in fact a share. If the rights attached to the token (which are generally found in the ICO’s 

‘white paper’) are similar to rights commonly attached to a share – such as if there appears 

to be ownership of the body, voting rights in decisions of the body or some right to 

participate in profits of the body shown in the white paper – then it is likely that the tokens 

could fall within the definition of a share. 

Where it appears that an issuer of an ICO is actually making an offer of a share, the issuer 

will need to prepare a prospectus. Such offers of shares are often described as initial public 

offerings (IPOs). 

By law, a prospectus must contain all information that consumers reasonably require to 

make an informed investment decision. 

Importantly, though an ICO may look similar to an IPO, the ICO may not offer the same 

protections to consumers and may result in liability for the issuer and those involved in 

the ICO. Issuers of an ICO need to be aware that where an offer document for an ICO is, 

or should have been, a prospectus and that document does not contain all the information 

required by the Corporations Act, or includes misleading or deceptive statements, 

consumers may be able to withdraw their investment before the tokens are issued or 

pursue the issuer and those involved in the ICO for the loss.50

In addition to the prospectus requirements, if an ICO is considered to be an offer of shares, the 

relevant company must maintain a share register, recording all of the shares it has issued and 

information about the company’s shareholders.51

ASIC’s 2017–18 annual report states that, in May 2018, it 

took action to protect investors where we identified fundamental concerns with the 

structure of an ICO, the status of the offeror and the lack of regulated disclosure. As we 

considered the tokens being offered were legally preference shares, the offer required 

prospectus disclosure and was being made by a proprietary limited company (proprietary 

limited companies are not permitted to make offers of securities requiring disclosure). The 

transaction was subsequently withdrawn.52 

 

50 INFO 225, supra note 10. 

51 See Shares: Information Sheet 70 (INFO 70), ASIC (reissued June 2016), https://asic.gov.au/forbusiness/running-a-company/shares/, archived at https://perma.cc/R4QB-3ETB; Philippa Ryan, Australian 

Regulators Have Finally Made a Move on Initial Coin Offerings, THE CONVERSATION (Sept. 29, 2017),

https://theconversation.com/australian-regulators-have-finally-made-a-move-on-initial-coin-offerings-84840, 

archived at https://perma.cc/S8P3-U9QE. 

52 ASIC, ANNUAL REPORT 2017-18, supra note 13, at 78. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 25

B. Managed Investment Schemes 

Under the Corporations Act 2001 (Cth),53 the following are the “basic indicators of whether an 

arrangement is a managed investment scheme”: 

 people contribute money or assets (such as digital currency) to obtain an interest in the 

scheme (‘interests’ in a scheme are generally a type of ‘financial product’ and are 

regulated by the Corporations Act) 

 any of the contributions are pooled or used in a common enterprise to produce 

financial benefits or interests in property, and 

 the contributors do not have day-to-day control over the operation of the scheme but, 

at times, may have voting rights or similar rights.54

If the value of a token is related to the management of such an arrangement, “the issuer of the 

ICO is likely to be offering a managed investment scheme.”55 This categorization carries a range 

of product disclosure, licensing, and registration obligations under the Corporations Act.56

C. Derivatives 

Based on the definition of a derivative in the Corporations Act,57 

[i]f an ICO produced a token that is priced based on factors such as another financial 

product or underlying market index or asset price moving in a certain direction before a 

time or event which resulted in a payment being required as part of the rights or 

obligations attached to the token, this may be a derivative. For example, payment 

arrangements associated with changes in the relevant product, index or asset could be 

structured as a ‘smart contract’ or self-executing contract represented in the token itself.58

The ASIC guidance notes that the “underlying instrument of a derivative may be, among other 

things, a share, a share price index, a pair of currencies or a commodity (including 

a cryptocurrency).”59

 

53 A definition of “managed investment scheme” is provided in section 9 of the Corporations Act 2001 (Cth), 

while chapter 5C contains detailed provisions related to such schemes. Section 764A specifically provides that 

an interest in a managed investment scheme is a financial product. 

54 INFO 225, supra note 10. 

55 Id. 

56 Id. 

57 See Corporations Act 2001 (Cth) s 761D (meaning of derivative). 

58 INFO 225, supra note 10. 

59 Id. 
Regulatory Approaches to Cryptoassets: Australia 

The Law Library of Congress 26

D. Non-Cash Payment Facilities 

Under the Corporations Act, a non-cash payment facility “is an arrangement through which a 

person makes payments, or causes payments to be made, other than by physical delivery of 

currency.”60 The ASIC guidance states that tokens offered through an ICO are unlikely to be noncash payment facilities. However, the categorization could apply where the ICO includes an 

arrangement that allows 

 payments to be made to a number of payees in this form, or 

 payments to be started in this form and converted to fiat currency to enable completion 

of the payment.61

IV. Treatment of Cryptoassets Not Considered Securities 

As noted above, ASIC has stated that it does not consider Bitcoin to be a financial product under 

the Corporations Act 2001 (Cth). Therefore, offers and other activities relating to Bitcoin and 

similar cryptocurrencies are likely to be subject to the Australian Consumer Law, rather than to 

the requirements in the Corporations Act (including licensing and disclosure requirements). They 

are also subject to the capital gains tax system and cryptocurrency exchanges are required to 

comply with the AML/CFT law. 

Both the Australian Consumer Law and the Corporations Act prohibit misleading and deceptive 

conduct.62 As also noted above, ASIC has been delegated functions and powers under the 

Australian Consumer Law in the context of ICOs and other cryptoasset activities. The ASIC 

guidance provides the following examples of conduct that may be prohibited, regardless of the 

applicable law: 

 the use of social media to generate the appearance of a greater level of public interest 

in an ICO 

 undertaking or arranging for a group to engage in trading strategies to generate the 

appearance of a greater level of buying and selling activity for an ICO or a crypto-asset 

 failing to disclose adequate information about the ICO, or 

 suggesting that the ICO is a regulated product or the regulator has approved the ICO 

if that is not the case.63

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As stated above, the treatment of different types of cryptocurrencies depends on their nature. 

There does not appear to be any specific restrictions on the sale of, or investments in, a particular 

type of cryptocurrency. 

 

60 Id. See also Corporations Act 2001 (Cth) s 763D (when a person makes non-cash payments). 

61 INFO 225, supra note 10. 

62 See Competition and Consumer Act 2010 (Cth) sch 2 pt 2-1; Corporations Act 2001 (Cth) pt 7.7 div 7 

(containing offenses related to a disclosure document being “defective,” including where it contains a 

“misleading or deceptive statement.”). 

63 INFO 225, supra note 10. 
The Law Library of Congress 27 

Bahamas 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

I. Introduction 

The Bahamas does not have any legislation that specifically applies to cryptocurrencies. The 

regulation of cryptocurrencies in the Bahamas currently varies according to whether a particular 

cryptocurrency is considered to be a security, currency, or commodity.1 

In September 2018, the Central Bank of the Bahamas issued a caution to the public on initial coin 

offerings (ICOs) of virtual currencies. The caution advised the public that virtual currencies are 

not regulated by the Central Bank of the Bahamas or the Securities Commission of the Bahamas, 

and that the Bank has not issued any licenses to cryptocurrency operators to offer digital currency 

or associated services, including but not limited to cryptocurrency exchanges, crypto loans, and 

crypto and fiat processing either in, or from within, the Bahamas.2 

II. Discussion Paper 

The Central Bank of the Bahamas issued a discussion paper in November 2018 proposing 

different approaches to the regulation of cryptoassets.3 The paper notes the Bank 

will impose constraints on the range of crypto instruments in which [supervised financial 

institutions] may transact--either directly on balance sheet or from an associative point of 

view. The Bank will also prohibit direct convertibility between Bahamian dollar (B$) 

currency or officially sanctioned B$ crypto instruments and foreign currency denominated 

crypto assets or non-resident sponsored instruments.4

The discussion paper states that some cryptoassets may have underlying features or uses that 

meet the criteria of a financial instrument, and these are already regulated by the existing financial 

 

1 Aliya Allen & Graham Thompson, The Bahamas’ Place in a Cryptographic World: A Whitepaper, GRAHAM 

THOMPSON (Mar. 2018), http://www.grahamthompson.com/uploads/1609/doc/Crypto_Article,_AAllen,_ 

March_2018,_IBFS.pdf, archived at https://perma.cc/Y7SS-P7VL.

2 The Central Bank Cautions the Public on Initial Coin Offerings (ICOs) of Virtual Currencies, THE CENTRAL BANK OF 

THE BAHAMAS (Sept. 6, 2018), https://www.centralbankbahamas.com/news.php?cmd=view&id=16453, 

archived at https://perma.cc/W5JV-4NTU. 

3 CENTRAL BANK OF THE BAHAMAS, DISCUSSION PAPER: PROPOSED APPROACHES TO REGULATION OF CRYPTO ASSETS 

IN THE BAHAMAS (Nov. 2018), https://www.centralbankbahamas.com/download/086534800.pdf, archived at

https://perma.cc/26JZ-4FHP. 

4 Id at 1. 
Regulatory Approaches to Cryptoassets: Bahamas 

The Law Library of Congress 28

regulations, such as the Payment Systems Act,5 the Payments Instrument (Oversight) 

Regulations,6 and the Securities Industry Act 2011.7 The discussion paper notes that these acts 

and regulations need to be amended to ensure that cryptoassets clearly fall within their scope. If 

proposals in the report are accepted, the Payments Instrument (Oversight) Regulations will be 

amended to cover the use of the Bahamian dollar and “foreign currency denominated crypto 

payments instruments,”8 although the discussion paper notes that “only Central Bank sponsored 

digital currencies, or payments instruments fully backed by Central Bank issued currencies or 

legal tender deposits, will be eligible for issuance by licensed payment services providers.”9 

The closing date for responses to the discussion paper was set at December 15, 2018. As of March 

26, 2019, it does not appear that any further papers have been issued or amendments made to 

the laws. 

 

5 Payment Systems Act 2012, Act No. 7 of 2012, OFFICIAL GAZETTE, Mar. 20, 2012, 

http://laws.bahamas.gov.bs/cms/images/LEGISLATION/PRINCIPAL/2012/2012-

0007/PaymentSystemsAct2012_1.pdf, archived at https://perma.cc/XM67-VTGW. 

6 Payments Instrument (Oversight) Regulations 2017, SI 2017/53, OFFICIAL GAZETTE, July 26, 2017, 

http://laws.bahamas.gov.bs/cms/images/LEGISLATION/SUBORDINATE/2017/2017-

0053/PaymentInstrumentsOversightRegulations2017_1.pdf, archived at https://perma.cc/LV8C-ZD7V. 

7 Securities Industry Act 2011, Act No. 10 of 2011, OFFICIAL GAZETTE, June 1, 2011, 

http://laws.bahamas.gov.bs/cms/images/LEGISLATION/PRINCIPAL/2011/2011-

0010/SecuritiesIndustryAct2011_1.pdf, archived at https://perma.cc/AA7U-9L35. 

8 DISCUSSION PAPER: PROPOSED APPROACHES TO REGULATION OF CRYPTO ASSETS IN THE BAHAMAS, supra note 3, at 

1. 

9 Id. 
The Law Library of Congress 29 

Belarus 

Astghik Grigoryan 

Legal Research Analyst 

SUMMARY Belarus was the first Eastern European country to adopt comprehensive legislation 

governing cryptocurrencies. The Presidential Decree on the Development of the Digital 

Economy, effective in March 2018, provides the legal framework for cryptocurrencies 

and blockchain technologies. Cryptocurrency operations are limited to the residents of 

High-Tech Park—an entity created by the Presidential Decree to serve as project 

incubator and host. 

In November 2018, High-Tech Park issued five additional regulations pertaining to 

initial coin offerings, cryptocurrency platforms, and exchange operators. The 

regulations also provide for compliance procedures with anti-money laundering and 

counter-financing of terrorism legislation. 

I. Financial Regulation and Consumer Protection 

Belarus was the first Eastern European country to adopt comprehensive legislation governing 

cryptocurrencies. The Presidential Decree on the Development of the Digital Economy, which 

became effective on March 28, 2018, provided the foundation for cryptocurrency and blockchain 

technology regulation. The aim of the Decree was to create a legal framework for the 

comprehensive regulation of businesses based on blockchain technology, including for regulating 

the issuance of and transactions with cryptocurrencies and tokens.1

 The Decree created the High 

Technologies Park (High-Tech Park, HTP)—a project incubator entity authorized to register and 

regulate entities (both residents and non-residents) engaged in the development of blockchain 

technologies and transactions with cryptocurrencies. 

The Decree defined cryptocurrencies as a bitcoin or other digital signs (tokens) that is used in 

international circulation as a universal means of exchange.2

 The Decree also defined 

“cryptoplatform operators,” “cryptocurrency exchange office operators,” and initial coin offering 

(ICO) entities based on their activities in the area of blockchain and cryptocurrencies. 

In November 2018, the HTP issued the following five regulations related to cryptocurrency and 

token activities: 

                                                            

1 Decree of the President of the Republic of Belarus No. 8 of Dec. 21, 2017, 

http://pravo.by/document/?guid=12551&p0=Pd1700008&p1=1&p5=0 (in Russian), archived at 

https://perma.cc/7PJ7-YEKA. 

2 Id. 
Regulatory Approaches to Cryptoassets: Belarus

The Law Library of Congress 30 

 Regulations on the Requirements to be Met by Certain Applicants for Their Registration as 

Residents of the High Technologies Park3 

 Regulations on the Activity of a Cryptoplatform Operator4

 Regulations on the Activity of a Cryptocurrency Exchange Office Operator5

 Regulations on Provision of Services Related to the Creation and Placement of Digital Tokens 

(Tokens) and Carrying Out of Operations on the Creation and Placement of Own Digital 

Tokens (Tokens) (ICO Regulations)6

 Regulations on the Requirements for the Internal Control Rules of Residents of the High 

Technologies Park (Internal Control Regulations.7

In addition to containing more detailed definitions of the roles and authorities of various 

cryptocurrency entities, the regulations also introduced detailed and comprehensive 

requirements related to risk management, data protection, and anti-money laundering and 

countering-financing of terrorism (AML/CFT) procedures. 

A. ICO Organizers 

According to the ICO Regulations, an ICO organizer (which must be an HTP resident) must create 

and place tokens based on a client’s request. The creation and issuance of a particular type of 

token must be based on the analysis of smart contracts. The organizer can also be engaged in 

consulting and promotional activities with regard to tokens.8 

The ICO organizer is required to provide for the proper identification and vetting of clients, 

including identification of the first owner or owners of the tokens. It is the responsibility of the 

ICO organizer to vet potential clients in order to identify and manage risks based on the 

following categories: 

                                                            

3 Regulations on the Requirements to be Met by Certain Applicants for Their Registration as Residents of the 

High Technologies Park (HTP Applicant Regulations), http://www.park.by/content/docs/Regulations-onCrypto/Applicants%20requirements.pdf (unofficial English translation), archived at https://perma.cc/3NZ2-

LPD4.

4 Regulations on the Activity of a Cryptoplatform Operator, http://www.park.by/content/docs/Regulationson-Crypto/CryptoExchange.pdf (unofficial English translation), archived at https://perma.cc/GB8B-RY2D.

5 Regulations on the Activity of a Cryptocurrency Exchange Office Operator, 

http://www.park.by/content/docs/Regulations-on-Crypto/Exchanger.pdf (unofficial English translation), 

archived at https://perma.cc/288K-D74M.

6 Regulations on Provision of Services Related to the Creation and Placement of Digital Tokens (Tokens) and 

Carrying Out of Operations on the Creation and Placement of Own Digital Tokens (Tokens) (ICO Regulations), 

http://www.park.by/content/docs/Regulations-on-Crypto/ICO.pdf (unofficial English translation), archived 

at https://perma.cc/M6YF-JA2K.

7 Regulations on the Requirements for the Internal Control Rules of Residents of the High Technologies Park 

(Internal Control Regulations), http://www.park.by/content/docs/Regulations-on-Crypto/AML.pdf

(unofficial English translation), archived at https://perma.cc/T4J4-3YTJ.

8 ICO Regulations, § 6. 
Regulatory Approaches to Cryptoassets: Belarus

The Law Library of Congress 31 

 Credit risk; 

 Country risk; 

 Market risk; 

 Liquidity risk; 

 Operational risk; and 

 Reputational risk.9 

In addition, ICO organizers must comply with documentation, audit, accounting, and personnel 

requirements of the cryptocurrency regulations listed above.10

The ICO organizer is required to make audio or video recordings of negotiations with clients 

(with mandatory prior notification about this) and keep the data as well as all correspondence 

with clients for at least five years. Belarusian and foreign legal entities are allowed to be ICO 

customers. ICO customers must meet the following requirements: the presence of key personnel 

and good business standing of the customer, his founders, director, and other key professional 

staff members.11 

B. Cryptoplatform Operators 

According to the Regulations on the Activity of a Cryptoplatform Operator, a cryptoplatform 

operator (which must be an HTP resident) is an entity engaged in facilitating trading in tokens, 

including transactions placing the tokens on behalf of clients.12 The Regulations also allow 

cryptoplatform operators to engage in transactions with tokens in the clients’ interests on the 

basis of an agency relationship. In order to execute these functions, cryptoplatform operators 

must adopt “local acts,” which are procedural guidelines for clients with a description of the 

procedures and processes for accepting clients.13 

Cryptoplatform operators must adopt measures to limit suspicious transactions, especially with 

regard to anonymous tokens.14 They must also provide for the complete separation of their own 

money and the money and tokens of clients; report on the balances of electronic money and 

tokens of each client; and report on the execution (or non-execution) of orders.15 Furthermore, 

they must have in place due diligence and proper control measures in preventing trading 

involving minors, citizens of countries that prohibit dealings with cryptocurrency and tokens, 

                                                            

9 Id. § 4.3.1 

10 HTP Applicant Regulations § 15; Internal Control Regulations, ch. 7. See also DEV., BELARUS HAS 

ACCOMPLISHED THE SECOND STAGE OF CRYPTOCURRENCY REGULATION 6-7 (Nov. 

2018),https://uploads.dev.by/files/Cryptocurrency-regulation-in-Belarus%20(1).pdf, archived at 

https://perma.cc/6G55-SKWQ.

11 ICO Regulations, § 2. 

12 Regulations on the Activity of a Cryptoplatform Operator, ch. 4. 

13 Id. § 12. 

14 Id. § 15. 

15 Id. § 5 
Regulatory Approaches to Cryptoassets: Belarus

The Law Library of Congress 32 

and citizens of Belarus who lack proper knowledge of cryptocurrencies.16 The Regulations also 

prescribe general rules for fair and transparent advertising, which must inform clients of the 

potential risks in dealing with cryptocurrencies.17 

II. Anti-Money Laundering Law 

The Internal Control Regulations prescribe requirements and procedures for vetting, verifying, 

and managing risks associated with activities governed by AML/CFT legislation.18 In particular, 

the Regulations state that internal control rules must be in compliance with part 3 of article 5 of 

the AML/CFT Law, as well as other legislative and regulatory acts.19 The main principle of 

AML/CFT legislation--know your client--must be complied with. HTP residents have the right 

to refuse to execute financial transactions on behalf of a client if the latter proposes or intends to 

execute anonymous financial transactions. 

HTP residents also have the right to refuse to executive financial transactions exceeding 2000 base 

values if the client proposes or intends to use mechanism other than bank or electronic money 

transfers. In this case, the HTP resident must, within one business day, inform financial 

intelligence bodies about such a refusal. 

A. Data Collection and Protection 

HTP residents are required keep information about relevant transactions for five years beginning 

from the date of the client’s request for the execution of such transactions. Such information 

includes verification of the addresses (identifiers) of virtual wallets with a high degree risk score 

from a money laundering perspective.20

B. Internal Control 

According to the Internal Control Regulations, an HTP resident’s internal control system 

must include 

identification and verification of all clients executing financial transactions, and in the cases 

specified by these Regulations and (or) the internal control rules, and also of the clients 

executing other transactions (operations) with tokens, which are not financial operations; 

storage of the information which includes clients’ identification data (including the 

information obtained following the results of verification, information updating); 

                                                            

16 Id. §§ 6& 8. 

17 Id. ch. 3. See also BELARUS HAS ACCOMPLISHED THE SECOND STAGE OF CRYPTOCURRENCY REGULATION, supra note 

9, at 8. 

18 Internal Control Regulations, chs. 1-4. 

19 Id. § 5. Zakon o Merakh Po Predotvrasheniju Legalizatsii Dokhodov, Poluchennikh Nezakonnim Put’em i 

Finnansirovaniya Terroristicheskoj Deyateljnosti. 30 Ijun’a 2014 goda, N 165-3 [Law on Preventing Legaisation 

of Income Obtained through illegal activity and on Prevention of Terrorism Financing, June 30, 2014, N165-3], 

https://www.centraldepo.by/doc/1/11/, archived at https://perma.cc/8DJP-NCRB

20 Internal Control Regulations, § 6.3. 
Regulatory Approaches to Cryptoassets: Belarus

The Law Library of Congress 33 

determination of the nature of the client’s ordinary activity; and 

monitoring of all financial transactions of the clients . . . 21

C. Risk Management Measures 

The Regulations prescribe that the following areas of risk exposure should be considered by 

HTP residents: 

 The client’s profile risk; 

 The geographic or regional risk; 

 The transactional risk.22

III. Taxation 

According to the Presidential Decree, the income of HTP residents as well as the income of natural 

persons incurred during the mining, creation, acquisition, or alienation of tokens is exempt from 

income tax.23 The sale of tokens is also exempt from value-added tax.24 These exemptions will be 

in effect until January 1, 2023.25

                                                            

21 Id. § 7. 

22 Id. § 13. 

23 Decree of the President of the Republic of Belarus No. 8 of Dec. 21, 2017, § 3. 

24 Id. 

25 Id.
The Law Library of Congress 34 

Bermuda 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY Bermuda enacted comprehensive legislation in 2018 that regulates cryptocurrencies, 

digital assets, and initial coin offerings. There is an extensive set of licensing 

requirements designed to ensure that digital asset businesses meet standards to ensure 

liquidity and transparency and comply with anti-money laundering laws and various 

consumer protections. 

I. Introduction 

In 2018, Bermuda introduced two new pieces of legislation, the Digital Asset Business Act1 and 

the Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 (ICO 

Act).2 These Acts regulate businesses that handle digital assets and those providing initial coin 

offerings (ICOs). They are designed to ensure transparency, robust anti-money laundering 

procedures, and consumer protection. This report provides a high level overview of the 

requirements and oversight provided by the Acts.

II. Regulation of Cryptocurrencies 

A. Digital Asset Activities 

1. Licensing 

The Digital Asset Business Act entered into force on September 10, 2018.3 It was supplemented 

with the Digital Asset Business (Cybersecurity) Rules 2018,4 the Digital Asset Business (Client 

 

1 Digital Asset Business Act 2018, 2018/28, http://www.bermudalaws.bm/laws/Annual 

Laws/2018/Acts/Digital Asset Business Act 2018.pdf, archived at https://perma.cc/KA74-XMSH. 

2 Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018, 2018/20, 

http://www.bermudalaws.bm/laws/Annual Laws/2018/Acts/Companies and Limited Liability Company 

(Initial Coin Offering) Amendment Act 2018.pdf, archived at https://perma.cc/5REL-UF5K. 

3 Digital Asset Business Act 2018 Commencement Day Notice 2018, BR 97/2018, 

www.bermudalaws.bm/laws/Annual Laws/2018/Statutory Instruments/Digital Asset Business Act 2018 

Commencement Day Notice 2018.pdf, archived at https://perma.cc/SD6P-6QY7

4 Digital Asset Business (Cybersecurity) Rules 2018, BR 99/2018, http://www.bermudalaws.bm/laws/Annual 

Laws/2018/Statutory Instruments/Digital Asset Business (Cybersecurity) Rules 2018.pdf, archived at

https://perma.cc/WNK8-5SLD. 
Regulatory Approaches to Cryptoassets: Bermuda 

The Law Library of Congress 35

Disclosure) Rules 2018,5 and the Digital Asset Business (Prudential Standards) (Annual Return) 

Rules 2018.6 

The 2018 Act regulates “digital asset businesses” in Bermuda, and requires businesses that are 

incorporated or formed either within or outside of Bermuda that conduct digital asset business 

in, or from within, Bermuda to obtain a license from the Bermuda Monetary Authority. Digital 

assets are defined as 

anything that exists in binary format and comes with the right to use it and includes a 

digital representation of value that— 

(a) is used as a medium of exchange, unit of account, or store of value and is not legal 

tender, whether or not denominated in legal tender; 

(b) is intended to represent assets such as debt or equity in the promoter; 

(c) is otherwise intended to represent any assets or rights associated with such assets; or 

(d) is intended to provide access to an application or service or product by means of 

distributed ledger technology; 

but does not include— 

(e) a transaction in which a person grants value as part of an affinity or rewards program, 

which value cannot be taken from or exchanged with the person for legal tender, bank 

credit or any digital asset; or 

(f) a digital representation of value issued by or on behalf of the publisher and used 

within an online game, game platform, or family of games sold by the same publisher 

or offered on the same game platform[.]7 

Businesses that require a license under the Act include those involved in 

(a) issuing, selling or redeeming virtual coins, tokens or any other form of digital assets; 

(b) operating as a payment service business utilising digital assets which includes the 

provision of services for the transfer of funds; 

(c) operating as an electronic exchange; 

(d) providing custodial wallet services; 

(e) operating as a digital assets services vendor.8

The Act specifically excludes the following activities from the definition of digital 

asset businesses: 

 

5 Digital Asset Business (Client Disclosure) Rules 2018, BR 100/2018, www.bermudalaws.bm/laws/Annual 

Laws/2018/Statutory Instruments/Digital Asset Business (Client Disclosure) Rules 2018.pdf, archived at

https://perma.cc/X4ES-6SD5. 

6 Digital Asset Business (Prudential Standards) (Annual Return) Rules 2018, BR 98/2018, 

http://www.bermudalaws.bm/laws/Annual%20Laws/2018/Statutory%20Instruments/Digital%20Asset%20Busine

ss%20(Prudential%20Standards)%20(Annual%20Return)%20Rules%202018.pdf, , archived at

https://perma.cc/93DQ-WMQL.

7 Digital Asset Business Act 2018, § 2(1). 

8 Id. § 10(1). 
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The Law Library of Congress 36

(a) contributing connectivity software or computing power to a decentralized digital 

asset, or to a protocol governing transfer of the digital representation of value; 

(b) providing data storage or security services for a digital asset business, but is not 

otherwise engaged in digital asset business activity on behalf of other persons; 

(c) the provision of any digital asset business activity by an undertaking solely for the 

purposed of its business operations or the business operations of any subsidiary of it.9

In order to obtain a license, the business must pay a fee and apply to the Bermuda Monetary 

Authority. The Act requires businesses to include the following information in the application: 

(a) a business plan setting out the nature and scale of the digital asset business activity which is to 

be carried on by the applicant; 

(b) particulars of the applicant’s arrangements for the management of the business; 

(c) policies and procedures to be adopted by the applicant to meet the obligations under this Act 

and the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 

2008; 

(d) such other information and documents as the Authority may reasonably require for the 

purpose of determining the application; and 

(e) an application fee which shall be an amount determined by the Authority commensurate to 

the nature, scale and complexity of the digital asset business to be carried on by the 

undertaking and as may be prescribed under the Bermuda Monetary Authority Act 1969.10

Bermuda offers two types of digital asset business licenses: 

 Class F licenses enable individuals to provide any digital asset business activities. 

 Class M licenses enables a person to provide all digital asset business activities for a specified 

period of time, which may be extended by the Bermuda Monetary Authority.11

Applicants requesting a license under the Act should specify the type of class of license they are 

seeking. The Bermuda Monetary Authority also has the authority to determine which class of 

license is issued to a business. When making this determination, the Bermuda Monetary 

Authority considers the interests of clients, potential clients, and the public and any obligations 

it believes should be imposed on the applicant “due to the nature of the digital asset business 

activities it intends to carry on.”12 

In order to issue a license, the Bermuda Monetary Authority must be satisfied of the following: 

 

 

9 Id. § 11(5). 

10 Id. § 12(6). 

11 Id. § 12(1). 

12 Id. § 14(2)(b). 
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 Controllers of the business are fit and proper persons;13

 Business is conducted in a prudent manner and in compliance with any codes of practice,14

accounting requirements, and Bermuda’s anti-money laundering legislation; 

 Business is undertaken with skill and integrity; 

 Minimum net assets of US$100,000 will be maintained, unless the Bermuda Monetary 

Authority has determined another amount; 

 Sufficient insurance is carried to cover the risks inherent in the operation of its business, and 

the amount must be “commensurate with the nature and scale of its digital asset business”;15

and 

 The business is directed by two individuals overseen by non-executive members.16 

More detailed guidance on these requirements is contained in a “Statement of Principles” issued 

by the Bermuda Monetary Authority.17 Businesses that conduct digital asset activities without a 

license are subject to a fine of up to US$250,000 and/or up to five years imprisonment.18

 

13 Id. sched. 1 ¶¶ 1-3. These paragraphs provide the Bermuda Monetary Authority with the following 

authorities: 

(2) In determining whether a person is a fit and proper person to hold any particular position, regard shall 

be had to his probity, to his competence and soundness of judgement for fulfilling the responsibilities of that 

position, to the diligence with which he is fulfilling or likely to fulfil those responsibilities and to whether 

the interests of clients or potential clients of the licensed undertaking are, or are likely to be, in any way 

threatened by his holding that position. 

(3) Without prejudice to the generality of the foregoing provisions, regard maybe had to the previous 

conduct and activities in business or financial matters of the person in question and, in particular, to any 

evidence that he has— 

(a) committed an offence involving fraud or other dishonesty, or violence; 

(b) contravened any provision made by or under any enactment appearing to the Authority to be designed 

for protecting members of the public against financial loss due to dishonesty, incompetence or malpractice 

by persons concerned in the provision of banking, insurance, investment or other financial services or the 

management of companies or against financial loss due to the conduct of discharged or undischarged 

bankrupts; 

(c) engaged in any business practices appearing to the Authority to be deceitful or oppressive or otherwise 

improper (whether lawful or not) or which otherwise reflect discredit on his method of conducting business; 

(d) engaged in or has been associated with any other business practices or otherwise conducted himself in 

such a way as to cast doubt on his competence and soundness of judgement. 

14 BERMUDA MONETARY AUTHORITY, DIGITAL ASSET BUSINESS ACT 2018: CODE OF PRACTICE (Sept. 2018), 

www.bma.bm/document-centre/policy-and-guidance/DAB/Digital Asset Business Code of Practice 2018.pdf, 

archived at https://perma.cc/M5LU-3DAN. 

15 Digital Asset Business Act 2018, sched. 1 ¶ 2(6). 

16 Id. sched. 1. 

17 BERMUDA MONETARY AUTHORITY, DIGITAL ASSET BUSINESS ACT 2018: STATEMENT OF PRINCIPLES (Sept. 2018), 

www.bma.bm/document-centre/policy-and-guidance/DAB/DAB Statement of Principles.pdf, archived at 

https://perma.cc/Q66A-8MP7. 

18 Id. 
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2. Oversight 

In order to aid efficient oversight of activities conducted under the Act, licensed digital asset 

businesses must maintain a head office in Bermuda that directs and manages the digital asset 

business. When determining whether such operations occur in Bermuda, the Bermuda Monetary 

Authority considers where the majority of decision making of the business occurs, if senior 

executives responsible for the digital asset business are located in Bermuda, and where meetings 

of the board of directors occur.19 

Businesses licensed under the Act are also required to appoint a senior representative who has 

been approved by the Bermuda Monetary Authority to act in this capacity on behalf of the 

business.20 The Act imposes a duty on the senior representative to notify the Bermuda Monetary 

Authority where he or she believes any of the following circumstances has arisen in the digital 

asset business: 

 There is a likelihood of the business becoming insolvent; 

 The business is failing to comply with any conditions imposed by the Bermuda Monetary 

Authority; 

 The business is involved in any criminal proceedings in Bermuda or overseas; 

 The business stops operating a digital asset business; 

 There are any material changes to the business; or 

 A cyber-reporting event occurs.21

The Act bestows the Bermuda Monetary Authority with a number of supervisory powers, 

including the right to investigate into the activities of businesses; power to obtain information 

and reports; the ability to require licensed businesses to produce documentation; and a right of 

entry onto licensed businesses to obtain information and documents.22

Businesses licensed under the Digital Asset Business Act are required to prepare annual audited 

financial statements or accounts from an approved auditor of all transactions and balances of 

its businesses.23

 

19 Digital Asset Business Act 2018, § 21. 

20 Id. § 19. 

21 Id. § 20. 

22 Id. §§ 58-60. 

23 Id. § 31. 
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B. Initial Coin Offerings 

The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 

(ICO Act) entered into force on July 9, 2018.24 The ICO Act provides a framework for ICOs that 

occur in, or from within, Bermuda. The Act provides that no person is permitted to conduct an 

ICO from in, or within, Bermuda unless they are a company that is registered with the Registrar 

of Companies.25 The ICO Act further provides that ICOs are a “restricted activity” and thus 

requires Bermuda companies to apply to the Minister for consent before launching one from in, 

or within, Bermuda. The ICO Act defines digital asset in the same manner as the Digital Asset 

Business Act, set out above. 

The Fintech Advisory Committee reviews each application and then makes a recommendation to 

the Minister as to whether or not it should be approved. The application must include the details 

of the development and implementation of the product or services, how long it will take to 

complete, along with information about rights, functionality, features, and transferability. To 

ensure that anti-money laundering laws are complied with, the ICO must collect, confirm, and 

store the identity of any purchasers of tokens or coins offered. 

Upon approval from the Minister, the ICO must publish an “offer document” and file it with the 

Registrar of Companies. The document must include details such as the business, or proposed 

business, the project, rights and restrictions on the digital assets as well as warning language 

about the risks associated with investing in ICOs.26 The warning should appear both in the offer 

document and on the ICO platform itself when the offer is open or suspended. The warning 

statement must include the following details: 

(a) information regarding any substantial risks to the project which are known or 

reasonably foreseeable; 

(b) information as to a person’s rights or options if the project which is the subject of the 

Initial Coin Offering in question does not go forward; 

(c) a description of the rights (if any) in relation to the digital assets that are being offered; 

(d) information regarding any disclaimer in respect of guarantees or warranties in 

relation to the project to be developed or any other asset related to the Initial 

Coin Offering.27

 

The ICO Act provides for two different regimes according to the type of assets issued. ICOs that 

are launched solely for crowdfunding purposes are regulated by the Companies Act 1981,28 the 

 

24 The Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 

Commencement Day Notice 2018, BR 63/2018, www.bermudalaws.bm/laws/Annual Laws/2018/Statutory 

Instruments/Companies and Limited Liability Company (Initial Coin Offering) Amendment Act 2018 

Commencement Day Notice 2018.pdf, archived at https://perma.cc/RV4K-C98P. 

25 Id. § 4. 

26 Id. 

27 Id.

28 Companies Act 1981, 1981/59, http://www.bermudalaws.bm/laws/Consolidated Laws/Companies Act 

1981.pdf, archived at https://perma.cc/8KP9-BDEF. 
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The Law Library of Congress 40

Limited Liability Company Act29 and the Register of Companies. ICOs that involve virtual 

currencies or digital assets fall under the Digital Asset Business Act 2018 and are overseen by the 

Bermuda Monetary Authority. 

III. Consumer Protection 

The Digital Asset Business Act 2018 requires licensed businesses to conduct their business in a 

prudent manner, and specifically states that the business 

shall not be regarded as conducting its business in a prudent manner unless it maintains 

or, as the case may be, will maintain minimum net assets of $100,000 or such amount as 

the Authority may direct taking into consideration the nature, size and complexity of the 

licensed undertaking.30

The Digital Asset Business Act requires licensed businesses that hold client assets to keep these 

assets separately from other business accounts.31 It further requires licensed businesses to 

maintain either a surety bond, trust account maintained by a qualified custodian, or indemnity 

insurance in the form and amount, as approved by the Bermuda Monetary Authority in order to 

protect the businesses clients.32 

Licensed businesses that have custody of one or more digital assets are required to maintain a 

sufficient amount of digital assets to meet the obligations it owes to its clients.33 The Digital Asset 

Business Act further mandates businesses should 

ensure that any assets belonging to clients are kept segregated from the DAB’s own assets. 

The DAB may place client assets in a trust with a qualified custodian, or have a surety 

bond or indemnity insurance, or implement other arrangements to ensure the return of 

client assets in the event the DAB is placed into liquidation, becomes insolvent or is a 

victim of theft.34

The Bermuda Monetary Authority has issued a draft code of practice on the custody of digital 

assets to provide further clarity over the standards it expects from businesses when safeguarding 

customer assets.35 The draft code covers the safekeeping of digital assets in the custody of the 

 

29 Limited Liability Company Act 2016, 2016/40, http://www.bermudalaws.bm/laws/Annual 

Laws/2016/Acts/Limited Liability Company Act 2016.pdf, archived at https://perma.cc/X4WN-KXAB. 

30 Digital Asset Business Act 2018, sched. 1, ¶ 2. 

31 Id. § 17. 

32 Id. § 18. 

33 Id. § 18. 

34 DIGITAL ASSET BUSINESS ACT 2018: CODE OF PRACTICE, supra note 14, para. 34. 

35 BERMUDA MONETARY AUTHORITY, DRAFT DIGITAL ASSET CUSTODY CODE OF PRACTICE 1 (Dec. 2018), 

http://www.bma.bm/document-centre/consultation-papers/Digital Assets Business/Digital Asset Custody 

Code of Practice.pdf, archived at https://perma.cc/L8FF-EVX6. 
Regulatory Approaches to Cryptoassets: Bermuda 

The Law Library of Congress 41

digital asset business, including recovery protocols in cases of compromised or corrupted assets, 

the handling of transactions, and operational policies and procedures.36

 

The Bermuda Monetary Authority may direct licensed businesses to conduct certain actions that 

are “desirable for safeguarding the interests of the licensed undertaking’s clients or proposed 

clients”37 if it believes the businesses are in breach of any provisions of the Act, regulations, or 

rules that apply to it. Failing to comply with a direction is publishable by a fine of up to 

US$2 million.38 The Bermuda Monetary Authority may also conduct an investigation into the 

nature, conduct, or state of a business licensed under the Digital Asset Business Act, suspected 

contraventions of the Digital Asset Business Act, as well as the ownership and control of a 

licensed business.39

IV. Anti-Money Laundering Laws 

The Digital Asset Business Act amended Bermuda’s anti-money laundering laws to include 

businesses licensed to conduct digital asset business within the definition of regulated financial 

institution under the Proceeds of Crime Act 1997 (POCA Act),40 the Anti-Terrorism (Financial and 

Other Measures) Act 2004,41 and the Proceeds of Crime (Anti-Money Laundering and AntiTerrorist Financing) Regulations 2008.42 The obligations contained in these Acts therefore apply 

to businesses licensed under the Digital Asset Business Act. Anti-money laundering procedures 

and policies are required to be included in the license application under the Digital Asset Business 

Act,43 and any branches or subsidiaries located overseas must also comply with Bermuda’s antimoney laundering laws. In addition, the Digital Asset Business Act requires licensed businesses 

to operate in a prudent manner, and states part of that prudent manner involves complying with 

Bermuda’s anti-money laundering legislation.44 

The anti-money laundering laws require that senior management of digital asset businesses 

 

 

36 Id. para. 1.4. 

37 Digital Asset Business Act 2018, § 28(2). 

38 Id. § 28(3). 

39 Id. § 61. 

40 Proceeds of Crime Act 1997, 1997/34, http://www.bermudalaws.bm/laws/Consolidated Laws/Proceeds of 

Crime Act 1997.pdf, archived at https://perma.cc/AM9Q-GX64. 

41 Anti-Terrorism (Financial and Other Measures) Act 2004, 2004/31, http://www.bermudalaws.bm/laws/ 

Consolidated Laws/Anti-Terrorism (Financial and Other Measures) Act 2004.pdf, archived at 

https://perma.cc/Z83Y-J6RK. 

42 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008, BR 77/2008, 

available at http://www.bermudalaws.bm/laws/Consolidated Laws/Proceeds of Crime (Anti-Money 

Laundering and Anti-Terrorist Financing) Regulations 2008.pdf, archived at https://perma.cc/CE8V-72FY. 

43 Digital Asset Business Act 2018, § 12(6)(c). 

44 Id. sched. 1, ¶ 2. See also Proceeds of Crime Act 1997, Anti-Terrorism (Financial and Other Measures) Act 

2004, and Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financial) Regulations 2008. 
Regulatory Approaches to Cryptoassets: Bermuda 

The Law Library of Congress 42

• Ensure compliance with the Acts and Regulations; 

• Identify, assess and effectively mitigate the ML/TF risks the RFI faces amongst its 

customers, products, services, transactions, delivery channels, outsourcing 

arrangements and geographic connections; 

• Conduct an AML and Sanctions risk assessment and ensure that the risk assessment 

findings are maintained up to date; 

• Appoint a Compliance Officer at the senior management level to oversee the 

establishment, maintenance and effectiveness of the RFI’s AML/ATF policies, 

procedures and controls; 

• Appoint a Reporting Officer to process client disclosures; 

• Screen employees against high standards; 

• Ensure that adequate resources are periodically trained and devoted to the RFI’s 

AML/ATF policies, procedures and controls; 

• Audit and periodically test the RFI’s AML/ATF policies, procedures and controls for 

effectiveness and address any issues uncovered adequately and timely; and 

• Recognise potential personal liability if legal obligations are not met.45

Failing to comply with Bermuda’s anti-money laundering laws can result in substantial penalties. 

Failing to comply with the requirements contained in the POCA Regulations is a criminal offence, 

punishable by up to two years imprisonment and/or a fine of up to US$750,000.46 The Bermuda 

Monetary Authority may impose a financial penalty of up to US$10 million for each failure to 

comply with the regulations, along with restrictions on the license issued and other 

disciplinary measures.47

V. Taxation 

Bermuda is a low tax jurisdiction and there are no specific taxes on income, capital gains, or other 

taxes on digital assets in Bermuda. 

 

45 BERMUDA MONETARY AUTHORITY, ANNEX VIII: SECTOR-SPECIFIC GUIDANCE NOTES FOR DIGITAL ASSET BUSINESS

(DAB), para. VIII.25, ¶ http://www.bma.bm/document-centre/policy-and-guidance/DAB/Annex VIIISector-Specific Guidance Notes for Digital Assets.pdf (last visited Apr. 19, 2019), archived at

https://perma.cc/MZD3-R4KK. 

46 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financial) Regulations 2008, reg. 19. 

47 The Proceeds of Crime (Anti-Money Laundering & Anti-Terrorist Financing Supervision and Enforcement) 

Act 2008, § 20. 
The Law Library of Congress 43 

Brazil 

Eduardo Soares 

Senior Foreign Law Specialist

SUMMARY Cryptocurrencies are not yet regulated in Brazil. Financial authorities in Brazil have 

issued statements regarding the risks posed by this type of currency and its lack of 

guarantee by the monetary authorities, and has advised that companies that trade in 

virtual currencies are not regulated, supervised, or licensed to operate by the 

central bank. 

Recently, the Brazilian Securities and Exchange Commission issued statements saying, 

among other things, that cryptocurrencies could not be classified as financial assets 

and could not directly be acquired by investment funds, but indirect investments in 

cryptoassets abroad could be acquired provided that such assets were regulated in 

that foreign market. 

For taxation purposes, gains obtained from the disposal of virtual currencies must be 

declared to the Brazilian Internal Revenue Service and taxes paid accordingly. 

I. Approach to Assets Created Through Blockchain 

A. Policy Statement No. 25,306 of February 19, 2014 

On February 19, 2014, the Brazilian Central Bank (Banco Central do Brasil, BACEN) issued Policy 

Statement No. 25,306 on the risks related to the acquisition of so-called “virtual currencies” or 

“encrypted currencies” and transactions carried out with these currencies.1 The purpose of the 

statement was, inter alia, to clarify that virtual currencies should not be confused with electronic 

money (moeda eletrônica) as defined in Law No. 12,865 of October 9, 2013, and its regulations.2

“Electronic money” is defined in article 6(VI) of Law No. 12,865 as a resource stored in a device 

or electronic system that allows the final user to make payment transactions in the national 

currency (Brazilian Real).3 The statement explained that, in contrast, virtual currencies are 

denominated in a different unit of account from the currencies issued by sovereign governments 

and are not stored in a device or electronic system in national currency.4 

According to the statement, 

 

1 BANCO CENTRAL DO BRASIL, Policy Statement No. 25,306 of February 19, 2014, 

http://www.bcb.gov.br/pom/spb/ing/ IComunicado25306.pdf, archived at https://perma.cc/NC7T-TVSR. 

2 Id. 

3 Lei No. 12.865, de 9 de Outubro de 2013, https://www.planalto.gov.br/ccivil_03/_ato2011-2014/2013/lei/ 

l12865.htm, archived at https://perma.cc/5ZNY-3KVD. 

4 Policy Statement No. 25,306, supra note 1. 
Regulatory Approaches to Cryptoassets: Brazil 

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 the usage of virtual currencies and whether regulations applicable to financial and payments 

systems apply to them have been the theme of international debate and public 

announcements by monetary authorities and other public institutions, with few concrete 

conclusions thus far; 

 virtual currencies are not issued or guaranteed by a monetary authority; 

 these virtual assets are not regulated or supervised by the monetary authorities of 

any country; 

 there is no government mechanism that guarantees the value in official currency of those 

instruments known as virtual currencies; and 

 BACEN is monitoring the evolution of the usage of these instruments, as well as the related 

discussions in international forums—especially regarding their nature, ownership, and 

functioning—in order to possibly adopt measures within its sphere of legal competency, 

if necessary.5

B. Financial Regulation and Consumer Protection 

On September 18, 2018, the Administrative Council for Economic Defense (Conselho 

Administrativo de Defesa Econômica, CADE), Brazil’s antitrust regulator, started an 

investigation into the country’s financial institutions for allegedly abusing market power to 

undermine the performance of cryptocurrency brokers.6 

The probe was initiated at the request of the Brazilian Blockchain and Cryptocurrency Association 

(Associação Brasileira de Criptomoedas e Blockchain, ABCB) to analyze the performance of major 

national banks in relation to the brokerage firms following several complaints that the banks 

undermine the economic order by closing accounts without explanation.7

According to CADE’s superintendent, banks may be “imposing restrictions or even prohibiting . 

. . the access of crypto-currency brokerages to the financial system, which, in fact, can cause losses 

to brokers.”8

In response to CADE’s investigation, banks reported that the accounts were closed because of 

lack of basic customer data required by anti-money laundering legislation.9

 

 

5 Id. 

6 Cade Abre Inquérito Contra Bancos por Supostamente Prejudicarem Corretoras de Criptomoedas, REUTERS (Sept. 18, 

2018), https://br.reuters.com/article/businessNews/idBRKCN1LY36OOBRBS?feedType=RSS&feedName=businessNews, archived at https://perma.cc/FA3V-DNQM. 

7 Id. 

8 Id. 

9 Id. 
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C. Anti-Money Laundering Law 

1. Law No. 9,613 of March 3, 1998 

Article 1 of Law No. 9,613 of March 3, 1998, provides that to hide or conceal the nature, origin, 

location, disposition, movement or ownership of property, rights or values arising, directly or 

indirectly, from a criminal offense is punished with imprisonment from three to ten years and 

a fine.10

Apparently, articles 9, 10, and 11 of Law No. 9,613 were used by the defendants in CADE’s 

investigation. Article 9 determines that natural persons and companies (pessoas jurídicas) are 

subject to the obligations referred to in articles 10 and 11 of the Law if they engage in 

I - the acquisition, intermediation and application of financial resources of third parties, in 

national or foreign currency; 

II - the purchase and sale of foreign currency or gold as a financial asset or foreign 

exchange instrument; 

III - the custody, issuance, distribution, liquidation, negotiation, intermediation or 

administration of securities.11

Article 10 of Law No. 9,613 establishes that the persons and companies referred to in article 

9 must: 

I - identify their clients and maintain updated records, in accordance with instructions 

issued by the competent authorities; 

II - keep a record of all transactions in national or foreign currency, securities (títulos e 

valores mobiliários, títulos de crédito), metals, or any asset that can be converted into cash, 

that exceeds the limit set by the competent authority and in accordance with instructions 

issued by them; 

III - adopt policies, procedures and internal controls, compatible with their size and 

volume of operations, enabling them to comply with the provisions of articles 10 and 11 of 

Law No. 9,613, as disciplined by the competent bodies; 

IV - register and keep their registers up-to-date at the regulatory or supervisory body and, 

failing that, at the Financial Activities Control Council (Conselho de Controle de 

Atividades Financeiras, COAF), in the form and conditions established by them; 

 

V - respond to requests made by COAF at the periodicity, form and conditions established 

by it, and must preserve, under the terms of the law, the confidentiality of the information 

provided.12

 

10 Lei No. 9.613, de 3 de Março de 1998, art. 1, 

http://www.planalto.gov.br/CCIVIL_03/LEIS/L9613compilado.htm, archived at https://perma.cc/7RP8-KWEJ. 

11 Id. art. 9. The sole paragraph of article 9 further details the natural persons and companies that are subject to 

the same obligations specified in articles 10 and 11 of Law No. 9,613. 

12 Id. art. 10. COAF is a body under the Ministry of Justice and Public Security, and was created by article 14 of 

Law 9,613 of 1998, and acts primarily in the prevention and combating of money laundering and the financing 

of terrorism. Conselho de Controle de Atividades Financeiras – COAF, MINISTÉRIO DA ECONOMIA, 
Regulatory Approaches to Cryptoassets: Brazil 

The Law Library of Congress 46

In the event that the client is a legal entity, the identification referred to in article 10(I) must cover 

the individuals authorized to represent it, as well as their owners.13

 

Article 11 determines that the persons and companies referred to in article 9 must 

I - pay special attention to operations which, according to instructions issued by the 

competent authorities, may constitute serious indications of the crimes provided for in 

Law No. 9,613 or related to them; 

II - notify the COAF, avoiding to give notice of such act to any person, including the one 

to whom the information refers to, within twenty four hours, the proposal or realization: 

a) of all transactions referred to in article 10(II) (above), accompanied by the 

identification referred to in article 10(I) (above); and 

b) operations referred to in article 11(I) (above); 

III - notify the regulatory or supervisory body of their activity or, in their absence, to the 

COAF, at the periodicity, form and conditions established by them, the non-occurrence of 

proposals, transactions or operations that may be communicated under the terms of article 

11(II) (above).14

The competent authorities, in the instructions referred to in article 11(I) must prepare a list of 

operations that, due to their characteristics, with respect to the parties involved, values, form of 

performance, instruments used, or lack of economic or legal grounds, can configure the 

hypothesis provided for therein.15

 

2. Bill of Law No. 2,303 of 2015 

A Bill of Law that would have amended Law No. 12,865 of October 9, 2013, which provides for 

payment arrangements and payment institutions that are part of the Brazilian Payment System, 

and Law No. 9,613 of March 3, 1998, which provides for crimes of money laundering or 

concealment of assets and the prevention of the use of the financial system for illicit activities, 

was introduced in the Brazilian Chamber of Deputies in 2015.16 

The Bill would have provided for the inclusion of virtual currencies and air mileage programs in 

the definition of “payment arrangements” under the supervision of the BACEN, and would have 

required individuals and companies engaged in investment businesses to closely monitor deals 

involving virtual currencies and air mileage programs for the crimes of money laundering or 

concealment of assets.17

 

http://www.fazenda.gov.br/acesso-a-informacao/institucional/estrutura-organizacional/conselho-decontrole-de-atividades-financeiras-coaf (last visited Apr. 1, 2019), archived at https://perma.cc/9JQ6-T66K. 

13 Lei No. 9.613, art. 10(§ 1). 

14 Id. art. 11. 

15 Id. art. 11(§ 1). 

16 Projeto de Lei No. 2.303, de 2015, CÂMARA DOS DEPUTADOS, http://www.camara.gov.br/proposicoesWeb/ 

fichadetramitacao?idProposicao=1555470, archived at https://perma.cc/97Y2-NJDV. 

17 Id. 
Regulatory Approaches to Cryptoassets: Brazil 

The Law Library of Congress 47

Law No. 12,865 currently defines “payment arrangement” as a set of rules and procedures that 

regulate the rendering of a particular service to the public that is accepted by more than one 

recipient, through direct access by end users, payers, and recipients.18 

The Bill did not move forward and lapsed on January 31, 2019.19

D. Taxation 

1. Personal Income Tax 

A booklet prepared by the Brazilian Secretariat of Federal Revenue (Secretaria da Receita Federal 

do Brasil, RFB)20 containing questions and answers regarding personal income tax for 2018 

includes information on how to declare virtual currencies on a person’s income tax return and 

the appropriate taxation.21 

The document states that virtual currencies must be declared. It explains that virtual currencies 

(bitcoins, for example), although not considered as currency under the current regulatory framework, 

should be declared in the Assets and Rights Tab as “other assets,” since they can be treated as a 

financial asset. The acquisition value of the assets must be stated. As this type of “currency” does 

not have official quotation, since there is no organ responsible for controlling its issue, there is no 

legal rule for the conversion of amounts for tax purposes. However, the taxpayer must keep 

documentation proving the authenticity of these values.22

Another question asks whether gains obtained from the alienation of virtual currency are taxed. 

The answer provided indicates that where the gains obtained from the sale of virtual currencies 

(bitcoins, for example) in one month is more than R$35,000.00 (approx.US$9,256.00), these are taxed 

as capital gains, with progressive rates applying, and income tax must be paid before the last 

business day of the month following the month of the transaction. The taxpayer must keep 

documentation proving the authenticity of the transactions.23

 

 

18 Lei No. 12.865 de 9 de Outubro de 2013, art. 6(I). https://www.planalto.gov.br/ccivil_03/_ato2011-

2014/2013/ lei/l12865.htm, archived at https://perma.cc/5ZNY-3KVD. 

19 Projeto de Lei No. 2.303, de 2015, supra note 51. 

20 Institucional, RECEITA FEDERAL, http://receita.economia.gov.br/sobre/institucional, archived at

https://perma.cc/FLG2-SQTC. The Brazilian Secretariat of Federal Revenue is a specific body, which is 

subordinated to the Ministry of Finance, performing essential functions so that the State can fulfill its 

objectives. It is responsible for the administration of taxes of competence of the Union, including pensions, and 

those incidents on foreign trade, covering a significant part of the country's social contributions. 

21 MINISTÉRIO DA ECONOMIA, SECRETARIA ESPECIAL DA RECEITA FEDERAL DO BRASIL, PERGUNTAS E RESPOSTAS,

IMPOSTO SOBRE A RENDA DA PESSOA FÍSICA (2019), 

http://receita.economia.gov.br/interface/cidadao/irpf/2019/perguntao/perguntas-e-respostas-irpf-2019.pdf, 

archived at https://perma.cc/ZSN3-V5BT. 

22 Id. at 183 (Question 447). 

23 Id. at 245 (Question 607). 
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2. Public Consultation

On October 30, 2018, the RFB issued a public consultation document seeking comments on the 

draft of a Normative Instruction regarding transactions performed with cryptoassets.24 

The document proposes requiring that cryptoasset exchanges (companies that negotiate and/or 

enable the purchase and sale of cryptoassets) provide information of interest to the RFB regarding 

transactions involving cryptoassets, in addition to providing for the declaration by individuals 

and legal entities when using exchanges abroad or not using exchanges for transactions 

involving cryptoassets.25

The significant increase in recent years in the cryptoassets market in the country and the fact that 

the number of crypto exchange clients has already exceeded the number of users registered at the 

Brazilian stock exchange based in Sao Paulo, are mentioned as reasons for such a measure.

26

II. Custodianship of Cryptocurrencies by Financial Institutions 

In another statement associated with the growing interest of individuals and companies in virtual 

currencies, on November 16, 2017, BACEN warned of the risks derived from storing and 

negotiating virtual currencies and reiterated that these currencies are neither issued nor 

guaranteed by any monetary authority.27 

The statement further explained that companies that negotiate or store virtual currencies on 

behalf of their owners, be they persons or companies, are neither regulated, licensed to operate, 

nor supervised by BACEN; there is no specific provision governing virtual currencies in the legal 

and regulatory frameworks associated with the National Financial System; and BACEN, in 

particular, neither regulates nor supervises transactions involving virtual currencies.28 The 

statement again reminded persons that virtual currencies are not to be confused with e-money, 

which is defined in accordance with Law No. 12,865 of October 9, 2013, and controlled by BACEN 

regulations approved under the guidelines of the National Monetary Council.29

In addition, the statement noted that carrying out international wire transfers referenced in 

foreign currencies through the use of virtual currencies and related instruments does not exempt 

companies from the obligation to comply with foreign exchange rules—especially the rule 

 

24 Consulta Pública RFB No. 06/2018, http://receita.economia.gov.br/sobre/consultas-publicas-eeditoriais/consulta-publica/arquivos-e-imagens/consulta-publica-rfb-no-06-2018.pdf, archived at

https://perma.cc/G423-RACB. 

25 Id. Exposição de Motivos. 

26 Id. at 2. 

27 BANCO CENTRAL DO BRASIL, COMMUNIQUÉ 31,379 OF NOVEMBER 16, 2017, 

http://www.bcb.gov.br/ingles/norms/ Virtual-currencies-Communique-31379-English.pdf, archived at

https://perma.cc/N7KB-P5J9. 

28 Id.

29 Id.
Regulatory Approaches to Cryptoassets: Brazil 

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establishing that this type of transaction may only be performed by institutions authorized by 

BACEN to operate in the foreign exchange market.30

III. Regulation of Cryptocurrencies as Financial Securities 

A. CVM Statement No. 1 of January 12, 2018 

On January 12, 2018, the Brazilian Securities and Exchange Commission (Comissão de Valores 

Mobiliários, CVM) issued Statement No. 1 (Ofício Circular), which was addressed to officers 

responsible for the administration and management of investment funds regulated by CVM 

Instruction No. 555 of December 17, 2014, that are investing in cryptocurrencies.31 

The Statement noted that both in Brazil and in other jurisdictions the legal and economic nature 

of these investment modalities has been discussed, without a conclusion having been reached on 

a particular conceptualization, especially in the domestic market and within its internal 

regulation.32 Based on this uncertainty, the interpretation of the CVM’s technical area is that 

cryptocurrencies cannot be classified as financial assets for the purposes of CVM Instruction 

555/14, and for this reason their direct acquisition by regulated investment funds is not allowed.33

The Statement further explained that the CVM has received inquiries regarding the possibility of 

investment funds being set up in Brazil for the specific purpose of investing in investment funds 

incorporated in other jurisdictions where they are admitted and regulated that invest in 

cryptocurrencies, or investing in derivatives allowed to be traded in regulated environments in 

other jurisdictions.34 In this regard, the CVM emphasized that the existing discussions about 

investment in cryptocurrencies, both directly by funds or in other ways, are still in an 

initial stage.35

The CVM concluded that, based on its understanding of the technical area, there are still many other 

inherent risks associated with such investments (such as cybersecurity and privacy risks), and with 

the future legality of their acquisition or trade, and that considering all these variables it was not 

possible for the CVM to reach a conclusion regarding the possibility of the constitution and 

structuring of indirect investments in cryptocurrencies. Therefore, the CVM advised managers of 

 

30 Id.

31 COMISSÃO DE VALORES MOBILIÁRIOS, OFÍCIO CIRCULAR NO. 1/2018/CVM/SIN (Jan. 2, 2018), 

http://www.cvm.gov.br/export/ sites/cvm/legislacao/oficios-circulares/sin/anexos/oc-sin-0118.pdf, 

archived at https://perma.cc/486G-8TS4. 

32 Id. 

33 Id. Article 2(V) of CVM Instruction 555/2014 lists the financial assets applicable to investment funds 

registered with CVM. Instrução CVM No. 555, de 17 de Dezembro de 2014, 

http://www.cvm.gov.br/legislacao/instrucoes/ inst555.html, archived at https://perma.cc/6LV3-X532. 

34 Id. 

35 Id.
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investment funds to await further and more conclusive guidance from the CVM on the subject in 

order to structure indirect investments in cryptocurrencies.36

B. CVM Statement No. 11 of September 19, 2018 

On September 19, 2018, CVM issued Statement No. 11 (Ofício Circular), to complement CVM 

Statement No. 1 of January 12, 2018.37

Statement No. 11 says that CVM Instruction 555/14, in its articles 98 et seq., when dealing with 

investment abroad, authorizes indirect investment in cryptoassets by, for example, the 

acquisition of shares of funds and derivatives, among other assets traded in third jurisdictions, 

provided they are admitted and regulated in those markets. However, in the performance of the 

duties imposed by regulations, it is the responsibility of the managers (administradores e gestores) 

and independent auditors to be diligent to avoid financing, directly or indirectly, illegal 

transactions such as money laundering, unfair practices, fraudulent operations, or price 

manipulation, among other similar practices.38

Statement No. 11 further said that an adequate way to address these concerns is the realization 

of such investments through trading platforms (“exchanges”) that are subject, in the relevant 

jurisdiction, to the supervision of regulatory bodies with powers to restrain such illegal practices, 

including through the establishment of regulatory requirements.39

It further said that while it is recommended that investments be made through these exchanges, 

there is no explicit prohibition on investments that are made otherwise. However, because of their 

fiduciary duties, administrators and managers should ensure that the chosen structure is able to 

fully meet the above-mentioned legal and regulatory requirements.40

Moreover, Statement No. 11 said it is important for the manager to verify that a cryptoasset is not 

a fraud, as has frequently been seen, for example, in initial coin offers worldwide. Thus, it is 

important that the manager takes steps to minimize the risk of fomenting the offer of a fraudulent 

cryptoasset, including through verification of the relevant variables associated with the issuance, 

management, governance, and other characteristics of the cryptoasset.41

 

36 Id. 

37 COMISSÃO DE VALORES MOBILIÁRIOS, OFÍCIO CIRCULAR NO. 11/2018/CVM/SIN (Sept. 19, 2018), 

http://www.cvm.gov.br/export/sites/cvm/legislacao/oficios-circulares/sin/anexos/oc-sin-1118.pdf,

archived at https://perma.cc/679R-49GT. 

38 Id. 

39 Id. 

40 Id. 

41 Id. 
The Law Library of Congress 51 

Canada 

Tariq Ahmad 

Foreign Law Specialist

SUMMARY Canada primarily regulates cryptocurrencies under securities laws. The Canadian 

Securities Administrators have issued guidance on how the relevant laws may apply to 

different activities involving cryptocurrencies. It includes information on when coins or 

tokens may be considered securities and states that each initial coin or token offering 

must be considered on its own characteristics. Where securities are involved, this may 

trigger prospectus or registration requirements. 

Canada allows the use of digital currencies, including cryptocurrencies. However, 

cryptocurrencies are not considered legal tender in Canada. Canada’s tax laws and 

rules, including the Income Tax Act, also apply to cryptocurrency transactions. The 

Canada Revenue Agency has characterized cryptocurrency as a commodity and stated 

that the use of cryptocurrency to pay for goods or services should be treated as a 

barter transaction. 

On June 19, 2014, the Governor General of Canada gave his royal assent to Bill C-31, 

which includes amendments to Canada’s Proceeds of Crime (Money Laundering) and 

Terrorist Financing Act. The new law treats virtual currencies as “money service 

businesses” for purposes of anti-money laundering provisions. The law is not yet in 

force, pending issuance of subsidiary regulations. 

I. Approach to Assets Created Through Blockchain 

According to a recent report on cryptocurrency regulation in Canada, “[t]he general attitude of 

the Canadian government (including regulatory agencies) to cryptocurrencies has been a mix of 

caution and encouragement: caution in terms of protecting investors and the public, but 

encouragement in its support of new technology.”1 Furthermore, “cryptocurrencies are primarily 

regulated under securities laws as part of the securities’ regulators mandate to protect 

the public.”2 

Canada allows the use of cryptocurrencies as a means of payment.3 According to the Government 

of Canada webpage on digital currencies, “[y]ou can use digital currencies to buy goods and 

services on the Internet and in stores that accept digital currencies. You may also buy and sell 

 

1 Conrad Druzeta et al., Canada, in BLOCKCHAIN & CRYPTOCURRENCY REGULATION 2019 (Josias Dewey ed., Global 

Legal Insights, 2019), https://www.globallegalinsights.com/practice-areas/blockchain-laws-andregulations/canada, archived at https://perma.cc/8MA6-JCS7. 

2 Id. 

3 Digital Currency, FINANCIAL CONSUMER AGENCY OF CANADA (FCAC), https://www.canada.ca/en/financialconsumer-agency/services/payment/digital-currency.html (last updated Jan. 19, 2018), archived at 

https://perma.cc/22BS-5L74. 
Regulatory Approach to Cryptoassets: Canada 

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digital currency on open exchanges, called digital currency or cryptocurrency exchanges.”4

However, cryptocurrencies are not considered legal tender in Canada.5 The Currency Act6 defines 

“legal tender” as “bank notes issued by the Bank of Canada under the Bank of Canada Act” and 

“coins issued under the Royal Canadian Mint Act.”7 According to the report referred to above, 

“[d]espite cryptocurrency not being recognized as legal tender, the Bank of Canada tested Digital 

Depository Receipts (DDR) as a digital representation of Canadian currency in 2016 and 2017. 

DDR is a way to transfer central bank money on to a distributed ledger technology platform (DLT, 

or “blockchain”).”8

A. Financial Regulation and Consumer Protection 

Canada does not have a federal securities regulatory system or authority. Securities regulators 

from each of the ten provinces and three territories in Canada have joined together to form the 

Canadian Securities Administrators (CSA), “whose objective is to improve, coordinate and 

harmonize regulation of the Canadian capital markets.”9 As a result, securities regulations in the 

provinces and territories “have largely been harmonized.”10 

On August 24, 2017, the CSA published CSA Staff Notice 46-307 Cryptocurrency Offerings,11 “which 

outlines how securities law requirements may apply to initial coin offerings (ICOs), initial token 

offerings (ITOs), cryptocurrency investment funds and the cryptocurrency exchanges trading 

these products.”12 On June 11, 2018, the CSA issued CSA Staff Notice 46-308 Securities Law 

Implications for Offerings of Tokens.13 Further information on these notices is provided below. 

 

4 Id. 

5 Id. 

6 Currency Act, R.S.C., 1985, c. C-52, http://laws-lois.justice.gc.ca/eng/acts/c-52/page-1.html, archived at

https://perma.cc/4A4E-3XBH. 

7 Digital Currency, FCAC, supra note 3; Currency Act § 8. 

8 Druzeta et al, supra note 1. 

9 Overview, CANADIAN SECURITIES ADMINISTRATORS (CSA) https://www.securitiesadministrators.ca/aboutcsa.aspx?id=45 (last updated Jan. 19, 2018), archived at https://perma.cc/LRN8-

MNLG. 

10 Druzeta et al., supra note 1. 

11 CSA Staff Notice 46-307 Cryptocurrency Offerings (Aug. 24, 2017), 

https://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20170824_cryptocurrency-offerings.htm, archived at

https://perma.cc/7XF6-3T3E. 

12 Press Release, CSA, Canadian Securities Regulators Outline Securities Law Requirements that May Apply to 

Cryptocurrency Offerings (Aug. 24, 2017), https://www.securities-administrators.ca/aboutcsa.aspx?id=1606, 

archived at https://perma.cc/4KL4-YSEV. 

13 CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens (June 11, 2018), 

https://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20180611_46-308_securities-law-implications-for-offeringsof-tokens.htm, archived at https://perma.cc/GK7Z-RFUH. 
Regulatory Approach to Cryptoassets: Canada 

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The Financial Consumer Agency of Canada (the Agency) “is a federal agency that oversees 

compliance of federally regulated financial entities with consumer protection rules.”14 The 

Agency has a digital currency page which provides information on risks associated with and tips 

on using digital currencies. According to lawyers from Goodmans LLP, the Agency “has not yet 

released an official position on how or if it intends to further regulate the space. However, it is 

possible that as larger Canadian financial institutions begin investing in blockchain and 

cryptocurrency in their retail operations, the Agency will respond with new rules to satisfy its 

mandate and protect financial consumers.”15

B. Anti-Money Laundering Law 

On June 19, 2014, the Governor-General of Canada gave his assent to Bill C-31 (An Act to 

Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014, and 

Other Measures),16 which includes amendments to Canada’s Proceeds of Crime (Money 

Laundering) and Terrorist Financing Act. The law treats virtual currencies as “money service 

businesses” for purposes of anti-money laundering laws.17 As a result of the law, companies 

dealing in virtual currencies will be required to register with the Financial Transactions and 

Reports Analysis Centre of Canada (Fintrac), put into effect compliance programs, “keep and 

retain prescribed records,” report suspicious or terrorist-related property transactions, and 

determine if any of their customers are “politically exposed persons.”18 The law will also apply 

to virtual currency exchanges operating outside of Canada “who direct services at persons or 

entities in Canada.”19 The new amendments also bar banks from opening and maintaining 

accounts or having a “correspondent banking relationship” with companies dealing in virtual 

currencies, “unless that person or entity is registered with the Centre.”20

The law was regarded as the “world’s first national law on digital currencies, and certainly the 

world’s first treatment in law of digital currency financial transactions under national anti-money 

 

14 Allan Goodman & Michael Partridge, Cryptocurrency in Canada, PRACTICAL LAW CANADA (Practice Note w013-8891, 2018), https://www.goodmans.ca/files/file/docs/Cryptocurrency in Canada published 05 22 

18.pdf, archived at https://perma.cc/9FH3-U2R2. 

15 Id. 

16 Bill C-31, An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014, 

and Other Measures, Second Session, Forty-first Parliament, 62-63 Elizabeth II, 2013-2014, Statutes of Canada 

2014 Ch. 20, http://www.parl.ca/DocumentViewer/en/41-2/bill/C-31/royal-assent, archived at

https://perma.cc/2N7Q-E68C. 

17 Id. See also Tariq Ahmad, Canada: Canada Passes Law Regulating Virtual Currencies as “Money Service 

Businesses,” GLOBAL LEGAL MONITOR (July 9, 2014), http://www.loc.gov/law/foreign-news/article/canadacanada-passes-law-regulating-virtual-currencies-as-money-service-businesses/, archived at

https://perma.cc/BQA6-K7MV. 

18 Christine Duhaime, Canada Implements World’s First National National Digital Currency Law; Regulates New 

Financial Technology Transactions, DUHAIME LAW (June 22, 2014), http://www.duhaimelaw.com/2014/06/22/ 

canada-implements-worlds-first-national-bitcoin-law/, archived at https://perma.cc/4TLH-LTN5. 

19 Bill C-31, § 255(2). 

20 Id. § 258. 
Regulatory Approach to Cryptoassets: Canada 

The Law Library of Congress 54

laundering law.”21 Although the law has received royal assent it is not yet in force, pending 

issuance of subsidiary regulations. A March 2018 news report indicated that the government may 

have been about to issue those regulations,22 but as yet none have been released. 

C. Taxation 

Canada’s tax laws and rules also apply to digital currency transactions.23 On March, 6, 2019, it 

was reported that Bitcoin investors were being targeted with audits by the Canada Revenue 

Agency (CRA).24 When asked to comment, a media contact at the CRA said in a statement that 

[t]he Canada Revenue Agency (CRA) understands that a vast majority of middle-class 

Canadians pay their fair share, but it remains committed to ensuring that without 

exception, every taxpayer abides by the same tax laws. As a world-class tax administration, 

the CRA is also committed to adapting its administration to keep pace with evolving global 

services and products, and making key investments to effectively address the new ways 

of doing business in the global economy. 

In order to make good on these commitments, the CRA established a dedicated 

cryptocurrency unit in 2017 to build intelligence, and conduct audits focused on risks 

related to cryptocurrencies. This unit has enhanced the CRA’s ability to monitor and 

enforce compliance in areas of emerging risk, including the cryptocurrency space. There 

are currently over 60 active audits related to cryptocurrency. 

. . . 

The CRA is also committed to helping taxpayers understand their tax obligations when 

using digital currencies, and to remind them that using digital currency does not exempt 

consumers from their tax obligations. The CRA has published educational material on its 

website regarding the tax treatment of dealing in Digital Currency.25

The CRA “has characterized cryptocurrency as a commodity and not a government-issued 

currency. Accordingly, the use of cryptocurrency to pay for goods or services is treated as a 

barter transaction.”26 The tax implications of barter transactions “is available by consulting the 

 

21 Duhaime, supra note 18. 

22 Corin Faife, Canada Is Gearing Up to Regulate Cryptocurrency, MOTHERBOARD (Mar. 20, 2018), 

https://motherboard.vice.com/en_us/article/d358zk/canada-is-gearing-up-to-regulate-cryptocurrencyparliament-hearing, archived at https://perma.cc/K7AH-LDMZ. 

23 Id. 

24 Id. 

25 Id. 

26 Mariam Al-Shikarchy et al., Gowling WLG, Canadian Taxation of Cryptocurrency . . . So Far, LEXOLOGY (Nov. 

14, 2017), https://www.lexology.com/library/detail.aspx?g=6283077e-9d32-4531-81a5-56355fa54f47 (by 

subscription), archived at https://perma.cc/KVX9-L5XA. 
Regulatory Approach to Cryptoassets: Canada 

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Canada Revenue Agency’s Interpretation Bulletin IT-490, Barter Transactions.”27 According to 

the CRA, “[a]ny income from transactions involving cryptocurrency is generally treated as 

business income or as a capital gain, depending on the circumstances. Similarly, if earnings 

qualify as business income or as a capital gain then any losses are treated as business losses or 

capital losses.”28

1. Payments in Cryptocurrencies 

Digital currencies are subject to the Income Tax Act (ITA).29 According to the Financial Consumer 

Agency of Canada, “[g]oods purchased using digital currency must be included in the seller’s 

income for tax purposes.”30 On the issue of taxation, the CRA adds that, 

[w]here digital currency is used to pay for goods or services, the rules for barter 

transactions apply. A barter transaction occurs when any two persons agree to exchange 

goods or services and carry out that exchange without using legal currency. For example, 

paying for movies with digital currency is a barter transaction. The value of the movies 

purchased using digital currency must be included in the seller’s income for tax purposes. 

The amount to be included would be the value of the movies in Canadian dollars.31

According to the CRA, “[w]here an employee receives digital currency as payment for salary or 

wages, the amount (computed in Canadian dollars) will be included in the employee’s income 

pursuant to subsection 5(1) of the Income Tax Act.”32 The CRA has also said that “GST/HST 

[Goods and Services Tax/ harmonized sales tax] also applies on the fair market value of any 

goods or services you buy using digital currency.”33

2. Trade in Cryptocurrencies 

As noted above, digital currency is characterized as a commodity under Canadian law. Thus, 

according to the Financial Consumer Agency, “[w]hen you file your taxes you must report any 

gains or losses from selling or buying digital currencies.”34 Any resulting gains or losses “could 

 

27 Digital Currency, CANADA REVENUE AGENCY (CRA), https://www.canada.ca/en/revenueagency/programs/about-canada-revenue-agency-cra/compliance/digital-currency.html (last updated Mar. 8, 

2019), archived at https://perma.cc/K2T2-YQB9. 

28 Guide for Cryptocurrency Users and Tax Professionals, CRA, https://www.canada.ca/en/revenueagency/programs/about-canada-revenue-agency-cra/compliance/digital-currency/cryptocurrencyguide.html (last updated Mar. 8, 2019), archived at https://perma.cc/PL2Q-VVQF. 

29 Id. 

30 Digital Currency, FCAC, supra note 3. 

31 What You Should Know about Digital Currency, CRA, https://www.canada.ca/en/revenueagency/news/newsroom/fact-sheets/fact-sheets-2015/what-you-should-know-about-digital-currency.html

(last updated Mar. 17, 2015), archived at https://perma.cc/CYV2-236S. 

32 Digital Currency, CRA, supra note 27. 

33 Digital Currency, FCAC, supra note 3. 

34 Id. 
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be taxable income or capital for the taxpayer.”35 The CRA has published a bulletin36 to “provide 

information that can help in determining whether transactions are income or capital in nature.”37

The CRA has also recently published an online guide for cryptocurrency users and tax 

professionals.38 According to lawyers from the law firm Gowling WLG, 

[i]n general terms, where a taxpayer does not engage in the business of trading in 

cryptocurrency (i.e., the taxpayer acquires such property for a long-term growth), any gain 

or loss generated from the disposition of cryptocurrency should be treated as on account 

of capital. However, where a taxpayer engages in the business of trading or investing in 

cryptocurrency, gains or losses therefrom should be treated as being on account of income. 

The cost to the taxpayer of property received in exchange for cryptocurrency (for example, 

another type of cryptocurrency) should be equal to the value of the cryptocurrency given 

up as consideration.39

The law firm also notes that “it is possible that a trader in cryptocurrency would also be required 

to collect GST/HST (and QST [Quebec Sales Tax]) on their supplies, but the CRA has not 

expressed a clear view on this point.”40

3. Mining Cryptocurrencies 

Mining of cryptocurrencies can be undertaken for profit (as a business) or as a personal hobby 

(which is nontaxable).41 According to the CRA, 

[t]he income tax treatment for cryptocurrency miners is different depending on whether 

their mining activities are a personal activity (a hobby) or a business activity. This is 

decided case by case. A hobby is generally undertaken for pleasure, entertainment or 

enjoyment, rather than for business reasons. But if a hobby is pursued in a sufficiently 

commercial and businesslike way, it can be considered a business activity and will be taxed 

as such.42

According to the lawyers from Gowling WLG, 

 

35 What You Should Know about Digital Currency, supra note 31. 

36 CRA, Interpretation Bulletin IT-479R, Transactions in Securities, https://www.canada.ca/en/revenueagency/services/forms-publications/publications/it479r/archived-transactions-securities.html, archived at 

https://perma.cc/NDV9-4BGA. 

37 What you Should Know about Digital Currency, supra note 31. 

38 Guide for Cryptocurrency Users and Tax Professionals, supra note 28. 

39 Al-Shikarchy et al., supra note 26. 

40 Id. 

41 Cryptocurrencies and Tax: Five Things Every Canadian Needs to Know, WILDEBOER DELLELCE (Dec. 12, 2017), 

http://www.wildlaw.ca/resource-centre/legal-updates/2017/cryptocurrencies-and-tax-five-things-everycanadian-needs-to-know/, archived at https://perma.cc/F7RC-R2D3. 

42 Guide for Cryptocurrency Users and Tax Professionals, supra note 28. 
Regulatory Approach to Cryptoassets: Canada 

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[i]f the taxpayer mines in a commercial manner, the income from that business must be 

included in the taxpayer’s income for the year. Such income will be determined with 

reference to the value of the taxpayer’s inventory at the end of the year, established 

pursuant to the rules in section 10 of the ITA and Part XVIII of the Regulations regarding 

valuing inventory.43

II. Custodianship of Cryptocurrencies by Financial Institutions 

According to CSA Staff Notice 46-307, “cryptocurrency offerings can provide new opportunities 

for businesses to raise capital and for investors to access a broader range of investments. 

However, they can also raise investor protection concerns, due to issues around volatility, 

transparency, valuation, custody and liquidity, as well as the use of unregulated cryptocurrency 

exchanges.”44 The notice states that fintech businesses, when establishing a crypto currency 

investment fund, should consider the following: 

• Custody: Securities legislation of the jurisdictions of Canada generally require that all 

portfolio assets of an investment fund be held by one custodian that meets certain 

prescribed requirements. We expect a custodian to have expertise that is relevant to 

holding cryptocurrencies. For example, it should have experience with hot and cold 

storage, security measures to keep cryptocurrencies protected from theft and the ability to 

segregate the cryptocurrencies from other holdings as needed.45

III. Regulation of Cryptocurrencies as Financial Securities 

CSA Staff Notice 46-307 Cryptocurrency Offerings “outlines how securities law requirements may 

apply to initial coin offerings (ICOs), initial token offerings (ITOs), cryptocurrency investment 

funds and the cryptocurrency exchanges trading these products.”46 

A. Cryptocurrency Exchanges 

The first part of the notice looks at the nature of cyptocurrency exchanges and possible 

requirements that apply. It states as follows: 

A cryptocurrency exchange that offers cryptocurrencies that are securities must determine 

whether it is a marketplace. Marketplaces are required to comply with the rules governing 

exchanges or alternative trading systems. If an exchange is doing business in a jurisdiction 

of Canada, it must apply to that jurisdiction's securities regulatory authority for 

recognition or an exemption from recognition. To date, no cryptocurrency exchange has 

been recognized in any jurisdiction of Canada or exempted from recognition. Allowing 

coins/tokens that are securities issued as part of an ICO/ITO to trade on these 

cryptocurrency exchanges may also place the business issuing the coins/tokens offside 

 

43 Al-Shikarchy et al., supra note 26. 

44 CSA Staff Notice 46-307 Cryptocurrency Offerings, supra note 11. 

45 Id.

46 Press Release, CSA, supra note 12. 
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securities laws. For example, the resale of coins/tokens that are securities will be subject 

to restrictions on secondary trading.47

B. Treatment of Coin/Token Offerings 

The second part of the notice looks at coin/token offerings and the circumstances under which 

they would be treated as securities. It states that 

[s]taff is aware of businesses marketing their coins/tokens as software products, taking the 

position that the coins/tokens are not subject to securities laws. However, in many cases, 

when the totality of the offering or arrangement is considered, the coins/tokens should 

properly be considered securities. In assessing whether or not securities laws apply, we 

will consider substance over form. 

. . . 

Every ICO/ITO is unique and must be assessed on its own characteristics. For example, if 

an individual purchases coins/tokens that allow him/her to play video games on a 

platform, it is possible that securities may not be involved. However, if an individual 

purchases coins/tokens whose value is tied to the future profits or success of a business, 

these will likely be considered securities. We have received numerous inquiries from 

fintech businesses and their legal counsel relating to ICOs/ITOs. With the offerings that 

we have reviewed to date, we have in many instances found that the coins/tokens in 

question constitute securities for the purposes of securities laws, including because they 

are investment contracts. In arriving at this conclusion, we have considered the relevant 

case law,{6} which requires an assessment of the economic realities of a transaction and a 

purposive interpretation with the objective of investor protection in mind.48

C. Applicable Securities Legislation Requirements 

The CSA states that cryptocurrency offerings, including ICOs and ITOs, “may involve an offering 

of securities and therefore may trigger prospectus or registration requirements under applicable 

securities laws.”49 The requirements are outlined as follows: 

 Businesses completing ICOs/ITOs may be trading in securities for a business purpose 

(referred to as the “business trigger”), therefore requiring dealer registration or an 

exemption from the dealer registration requirement. Whether or not an activity meets 

the business trigger is facts specific. 

 Businesses completing ICOs/ITOs may be trading in securities for a business purpose 

(referred to as the “business trigger”), therefore requiring dealer registration or an 

exemption from the dealer registration requirement. Whether or not an activity meets 

the business trigger is facts specific.50

 

47 CSA Staff Notice 46-307 Cryptocurrency Offerings, supra 11. 

48 Id. 

49 CSA Reinforces Position that Securities Laws Apply to Cryptocurrency Offerings, Confirms Regulatory Scrutiny for 

Industry Participants, ΜCMILLAN (2018), https://mcmillan.ca/Files/210799_CSA_Reinforces_Position_that_ 

Securities_Laws_Apply_to_Cryptocurrency_Offerings.pdf, archived at https://perma.cc/P8HU-7X8Z. 

50 CSA Staff Notice 46-307 Cryptocurrency Offerings, supra 11. 
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D. Treatment of Cryptocurrency Investment Funds 

The CSA notice also includes the following non-exhaustive list of matters fintech businesses 

should consider when looking to establish cryptocurrency investment funds: 

 Retail investors: In certain jurisdictions of Canada, the OM prospectus exemption 

cannot be used by investment funds to distribute securities to investors.{10} Therefore, 

if investors in the investment fund will include retail investors, businesses will need 

to consider prospectus requirements, applicable investment fund rules and whether 

the investment is suitable. 

 Cryptocurrency exchanges: Due diligence must be completed on any cryptocurrency 

exchange that the investment fund uses to purchase or sell cryptocurrencies for its 

portfolio, including on whether it is regulated in any way and the cryptocurrency 

exchange's policies and procedures for identity verification, anti-money laundering, 

counter-terrorist financing and recordkeeping. Businesses should be prepared to 

discuss with staff how trading volumes on the cryptocurrency exchanges that the 

investment fund intends to use may affect the ability to buy and sell cryptocurrencies 

and to fund redemption requests. 

 Registration: Businesses must consider appropriate registration categories in respect 

of the investment fund, including dealer, adviser and/or investment fund manager. 

 Valuation: How will cryptocurrencies in the investment fund's portfolio be valued? 

How will securities of the investment fund be valued? Will one or multiple 

cryptocurrency exchange(s) be used; and how will such exchange(s) be selected? Will 

there be an independent audit of the investment fund's valuation? 

 Custody: Securities legislation of the jurisdictions of Canada generally require that all 

portfolio assets of an investment fund be held by one custodian that meets certain 

prescribed requirements. We expect a custodian to have expertise that is relevant to 

holding cryptocurrencies. For example, it should have experience with hot and cold 

storage, security measures to keep cryptocurrencies protected from theft and the 

ability to segregate the cryptocurrencies from other holdings as needed.51

E. Further Guidance on Token Offerings

CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens “provides businesses that 

are considering offering digital tokens to the public with additional guidance on when securities 

may be involved and as to how securities regulation may apply to an ICO.”52 It provides 

particular guidance on the offering of tokens, including ones commonly known as “utility 

tokens.” The first part of the notice sets out the purpose and background behind the published 

guidance. It states that, 

 

51 Id. 

52 ONTARIO SECURITIES COMMISSION, TAKING CAUTION: FINANCIAL CONSUMERS AND THE CRYPTOASSET SECTOR 6

(June 28, 2018), https://www.osc.gov.on.ca/documents/en/Investors/inv_research_20180628_taking-cautionreport.pdf, archived at https://perma.cc/5ZBV-JHET. 
Regulatory Approach to Cryptoassets: Canada 

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[s]ince SN 46-307 was published, staff have engaged with numerous businesses wishing to 

complete offerings of tokens and have found that most of these offerings have involved 

securities. As part of this engagement with businesses, we have received various inquiries 

relating to offerings of tokens referred to as “utility tokens”. “Utility token” is an industry 

term often used to refer to a token that has one or more specific functions, such as allowing 

its holder to access or purchase services or assets based on blockchain technology. We have 

seen many businesses offering tokens to raise capital for the development of their software, 

online platform or application. In many of these cases, the offering will involve securities 

despite the fact that the tokens have one or more utility functions.53

The notice then goes on to provide information on when an offering of tokens may or may not 

involve an offering of securities in light of the definition of “security,” stating that, 

[a]s we indicated in SN 46-307, every offering is unique and must be assessed on its own 

characteristics. An offering of tokens may involve the distribution of securities, including 

because: 

• the offering involves the distribution of an investment contract; and/or 

• the offering and/or the tokens issued are securities under one or more of the other 

enumerated branches of the definition of security or may be a security that is not covered 

by the non-exclusive list of enumerated categories of securities. 

In determining whether or not an investment contract exists, the case law endorses a 

purposive interpretation that includes considering the objective of investor protection. 

This is especially important for businesses to consider in the context of offerings of tokens 

where the risk of loss to investors can be high. Businesses and their professional advisors 

should consider and apply the case law interpreting the term “investment contract”{1}, 

including considering whether the offering involves: 

1. An investment of money 

2. In a common enterprise 

3. With the expectation of profit 

4. To come significantly from the efforts of others 

In analyzing whether an offering of tokens involves an investment contract, businesses 

and their professional advisors should assess not only the technical characteristics of the 

token itself, but the economic realities of the offering as a whole, with a focus on substance 

over form.54

The notice then provides “examples of situations and their possible implication on one or more 

of the elements of an investment contract,” but cautions that they are intended to be illustrative 

 

53 CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens, supra note 13. 

54 Id. 
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and not an exhaustive or determinative “on its own of whether or not a security exists.”55 The 

notice states that 

[it is possible that an offering of tokens may be viewed as involving, or not involving, a 

security even with the existence, or absence, of one or more of the characteristics listed 

below. As such, businesses and their professional advisors should complete a meaningful 

analysis based on the unique characteristics of their offering of tokens and should not use 

the following table to complete a mechanical “tick the box” exercise.56

The notice also discusses “token offerings that are structured in multiple steps.”57 On the question 

of enforcement and compliance with securities legislation, the CSA provides the following 

guidance: 

Staff are conducting active surveillance of coin and token offerings activity to identify past, 

ongoing and potential future violations of securities laws or conduct in the capital markets 

that is contrary to the public interest. CSA members have taken and intend to continue 

taking regulatory and/or enforcement action against businesses that do not comply with 

securities laws. 

In order to avoid costly regulatory surprises, we encourage businesses with proposed 

offerings of tokens to consult qualified securities legal counsel in their local jurisdiction 

about the potential application of, and possible approaches required to comply with, 

securities legislation. As trends in the cryptocurrency industry are evolving quickly, we 

encourage businesses seeking flexible approaches to compliance with securities laws to 

contact their local securities regulatory authority to discuss their project at the contact 

information below. When contacting their local securities regulatory authority, businesses 

should be ready to provide a draft whitepaper, a business plan or a detailed description of 

their proposed offering. We may also ask for copies of promotional materials in connection 

with the offering, and a description of the promotional activities and marketing efforts in 

respect of the offering, as well as information on the corporate structure and principals 

involved. We remind businesses to consider securities law requirements that may apply 

to their activities, regardless of where investors are located. A Canadian securities 

regulatory authority may have jurisdiction over trades to investors outside of that 

jurisdiction where there is a real and substantial connection between the transaction and 

that jurisdiction.58

F. CSA Regulatory Sandbox 

The CSA Regulatory Sandbox is an initiative of the CSA “to support fintech businesses seeking 

to offer innovative products, services and applications in Canada.” According to the CSA notice, 

 

55 Id.

56 Id.

57 CSA Staff Publish Follow-up Guidance on Token Offerings, LEXOLOGY (July 2 2018), 

https://www.lexology.com/library/detail.aspx?g=ee5e1b22-dacf-48f8-8772-89b4888c1c48 (by subscription), 

archived at https://perma.cc/9UMM-EM7X. 

58 CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens, supra note 13. 
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[i]t allows firms to register and/or obtain exemptive relief from securities law 

requirements, under a faster and more flexible process than through a standard 

application, in order to test their products, services and applications throughout the 

Canadian market on a time-limited basis. Applications to the CSA Regulatory Sandbox are 

analyzed on a case-by-case basis.59

IV. Treatment of Cryptoassets Not Considered Securities 

Apart from provincial level laws and regulations pertaining to securities, virtual currencies are 

also subject to the provincial-level consumer protection laws that are of general application. These 

laws may include provisions on cooling off periods/right to cancel, unsolicited goods, and 

misrepresentation/unfair business practices.60 According to one law firm, 

[t]okens issued on functional networks with established, redeemable values may be 

analogized to gift cards. Transactions with such tokens may fall under the realm of 

consumer contracts regulated by the various provincial consumer protection agencies 

across Canada. For example, the statutes and regulations enforced by these agencies may 

impose implied legal warranties on the sale or redemption of tokens.61

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

No other guidance with respect to the treatment of different categories of cryptocurrencies or 

assets was located. 

 

59 Id. 

60 Mathew Burgoyne, Canadian Provincial Bitcoin Law: It’s All About Protecting the Consumer, COINDESK.COM (Dec. 

24, 2013), https://www.coindesk.com/canadian-bitcoin-law-consumer-protection, archived at

https://perma.cc/X934-RNZG. 

61 Goodman & Partridge, supra note 14, at 12-13. 
The Law Library of Congress 63 

Cayman Islands 

Tariq Ahmad 

Foreign Law Specialist 

SUMMARY According to the Cayman Islands Monetary Authority (CIMA), virtual currencies are 

not considered legal tender in the Cayman Islands. While there are no laws or 

regulations specifically geared towards governing virtual currencies, there are laws that 

appear to be more generally applicable, including the Securities Investment Business 

Law and anti-money laundering laws and regulations. Apart from a public advisory, 

CIMA has not provided specific guidance on exactly how these laws regulate virtual 

currencies. However, Cayman Island lawyers have provided some guidance on how 

they may be applicable. 

I. Approach to Assets Created Through Blockchain 

The Cayman Islands appear to have a fairly flexible regulatory environment for cryptocurrencies 

and blockchain technologies. The Cayman Islands Monetary Authority (CIMA) “has not issued 

statements or guidance on virtual currencies, blockchain technology, ICOs or STOs, other than a 

warning notice dated 23rd April 2018 which specifically flagged a number of risks specifically 

associated with ICOs and virtual currencies.”1 According to that public advisory, “[v]irtual 

currencies are not legal tender in the Cayman Islands.”2 

While there does not appear to be any specific legislation geared towards regulating 

cryptocurrencies, there are laws that may be applicable in certain circumstances. These include 

the Securities Investment Business Law (2015 Revision), Anti-Money Laundering (AML) Law and 

associated regulations, Money Services Law (2010 Revision), and Electronic Transactions Law 

(2003 Revision). Lawyers Chris Humphries and James Smith predicted in February 2018 that 

more-specific legislation will eventually be created although, for the time being, the 

regulators and lawmakers in the Cayman Islands are keen to avoid rushing through any 

legislation before the potential benefits and pitfalls of blockchain technology, 

cryptocurrencies and ICOs are properly understood.3

 

1 Digital Assets. Five Questions to Ask Your Cayman Counsel, LOEB SMITH (Nov. 22, 2018), 

https://www.loebsmith.com/story/2018/11/22/digital-assets-five-questions-to-ask-your-caymancounsel/143/, archived at https://perma.cc/55Z5-5HZ8. 

2 Cayman Islands Monetary Authority, Public Advisory: Virtual Currencies (Apr. 23, 2018), 

https://www.cima.ky/upimages/noticedoc/1524507769PublicAdvisory-VirtualCurrencies_1524507769.pdf, 

archived at https://perma.cc/V8TF-MY7A. 

3 Chris A. Humphries & James Smith, Cayman Islands: Initial Coin Offerings (ICO) in The Cayman Islands, 

MONDAQ (Feb. 19, 2018), http://www.mondaq.com/caymanislands/x/667952/ 

Commodities+Derivatives+Stock+Exchanges/Initial+Coin+Offerings+ICO+In+The+Cayman+Islands, archived 

at https://perma.cc/5XPY-LXGQ.
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A. Financial Regulation and Consumer Protection 

Securities licensing requirements are set by the Securities Investment Business Law (SIBL) (see 

part III, below).4 This is the “primary legislation relating to the regulation of investments in 

‘securities’ and associated businesses.”5 In addition, certain categories of mutual funds are 

regulated under the Mutual Funds Law (MFL).6 

The MFL grants CIMA “responsibility for regulating certain categories of funds operating in and 

from the Cayman Islands. . . . The law also provides for the regulation of mutual fund 

administrators by CIMA.”7 To be categorized as a mutual fund a fund must be issuing “equity,” 

in other words “shares, limited partnership interests, LLC interests or trust units.”8 This 

“excludes most ICO issuers, as tokens are not considered to be equity interests and therefore ICO 

issuers (as distinct from any Blockchain or cryptocurrency asset class focused fund) should not 

be impacted by the MFL.”9 

B. Anti-Money Laundering Law 

CIMA also plays a “central role in the fight against money laundering and terrorism financing.”10

Section 6(1)(b)(ii) of the Monetary Authority Law grants CIMA the legal mandate, as part of its 

regulatory functions, “to monitor compliance with the money laundering regulations.”11 The 

Cayman Islands anti-money laundering (AML) regime consists of the following laws and 

regulations: the Proceeds of Crime Law (2019 Revision),12 the Anti-Money Laundering 

 

4 Securities Investment Business Law (2015 Revision), Extraordinary Gazette No. 53 (July 17, 

2015), https://www.cima.ky/upimages/commonfiles/1499349906SecuritiesInvestmentBusinessLaw2015Revis

ion.pdf, archived at https://perma.cc/356F-5DBD.

5 Chris Humphries & Simon Orriss, Initial Coin Offerings in the Cayman Islands, STUARTS LAW (undated), 

https://www.stuartslaw.com/cms/document/Initial_Coin_Offerings_in_the_Cayman_Islands.pdf (last 

visited Apr. 1, 2019), archived at https://perma.cc/WA42-LB35. 

6 Mutual Funds Law (MFL) (2019 Revision), Legislation Gazette No. 2 (Feb. 19, 

2019), https://www.cima.ky/upimages/commonfiles/MutualFundslaw2019Revision_1550861599.PDF, 

archived at https://perma.cc/ZHH5-PBAH. 

7 Investment Funds, CAYMAN ISLANDS MONETARY AUTHORITY, https://www.cima.ky/investment-funds (last 

visited Mar. 15, 2019), archived at https://perma.cc/6AZQ-M9DS. 

8 Ian Gobin & Daniella Skotnicki, The Virtual Currency Regulation Review: Cayman Islands, in THE LAW REVIEWS,

THE VIRTUAL CURRENCY REGULATION REVIEW (Michael S. Sackheim & Nathan A. Howell eds., Nov. 2018), 

https://thelawreviews.co.uk/edition/the-virtual-currency-regulation-review-edition-1/1176633/caymanislands, archived at https://perma.cc/FH5J-XTUZ. 

9 Id.

10 Anti-Money Laundering & Countering the Financing of Terrorism, CAYMAN ISLANDS MONETARY AUTHORITY, 

https://www.cima.ky/amlcft (last visited Mar. 15, 2019), archived at https://perma.cc/YGX8-YQZY. 

11 Mutual Funds Law (MFL) (2019 Revision), § 6(1)(b)(ii). 

12 Proceeds of Crime Law (2019 Revision), Legislation Gazette No. 4 (Feb. 21, 2019), 

https://www.cima.ky/upimages/commonfiles/ProceedsofCrimeLaw2019Revision_1552422507.PDF, archived 

at https://perma.cc/D4G8-6559.
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Regulations (2018 Revision),13 and the Guidance Notes on the Prevention and Detection of Money 

Laundering and Terrorist Financing in the Cayman Islands.14 According to CIMA,

[t]hese regulations prescribe measures to be taken to prevent the use of the financial system 

for the purposes of money laundering and terrorist financing. In addition to the AntiMoney Laundering Regulations, the regulatory framework against financial crime in the 

Cayman Islands includes the Proceeds of Crime Law, the Terrorism Law and the 

Proliferation Financing (Prohibition) Law.15

Under the anti-money laundering laws and regulations, any person or business formed, 

registered, or based in the Cayman Islands that is conducting a “relevant financial business” is 

“subject to various obligations aimed at preventing, identifying, and reporting money laundering 

and terrorist financing.”16 The definition of “relevant financial business” is set out in section 2(1) 

and schedule 6 of the Proceeds of Crime Law.17 According to a recent report on cryptocurrency 

regulation in the Cayman Islands, the definition “encompasses a broad variety of activity, 

including the following which may be a particular relevance in the context of Digital Assets”: 

 Money or value-transfer service; 

 Issuing and managing means of payment (specifically including electronic money); 

 Trading in transferable securites; 

 Money broking; 

 Securities investment business; and 

 Investing or administering funds or money on behalf of others.18

The report also notes that, 

[a]s such, the relevant requirements may depend on the type of Digital Asset in question; 

for instance, whether it can best be classed as a currency or money substitute, a security, a 

utility token or something else. We would thus generally expect businesses that engage in 

the operation of cryptocurrency exchanges, cryptocurrency issuances, brokering 

transactions in cryptocurrency, the trading and management of Digital Assets that are 

properly classed as securities, and the investment of funds (whether in the form of fiat 

currency or cryptocurrency) on behalf of other into Digital Assents, to come within the 

 

13 Anti-Money Laundering Regulations (2018 Revision), Extraordinary Gazette No. 22 (Mar. 16, 

2018), https://www.cima.ky/upimages/commonfiles/AntiMoneyLaunderingRegulations2018Revision_1524078242.PDF, archived at https://perma.cc/V3LY-RMJF. 

14 Guidance Notes on the Prevention and Detection of Money Laundering in the Cayman Islands, CAYMAN ISLANDS 

MONETARY AUTHORITY, https://www.cima.ky/guidance-notes (last visited Mar. 19, 2019), archived at

https://perma.cc/XW5G-2ZEB. 

15 Anti-Money Laundering & Countering the Financing of Terrorism, supra note 10.

16 Alistair Russell & Dylan Wiltermuth, Cayman Islands, in BLOCKCHAIN & CRYPTOCURRENCY REGULATION 2019 

(Josias Dewey ed., Global Legal Insights, 2019), https://www.globallegalinsights.com/practiceareas/blockchain-laws-and-regulations/cayman-islands, archived at https://perma.cc/ED7R-7XXB. 

17 Proceeds of Crime Law (2019 Revision), § 2(1). 

18 Russell & Wiltermuth, supra note 16. 
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scope of the AML Laws. Notably Digital Assets that are purely in the nature of utility 

tokens may fall outside of the ambit of the regime.19

The following AML procedures are required under the regulations currently in force: 

i. identification and verification (KYC) procedures for investors/purchasers; 

ii. adoption of a risk-based approach to monitor activities; 

iii. record-keeping procedures; 

iv. procedures to screen employees to ensure high standards when hiring; 

v. adequate systems to identify risk in relation to persons, countries and activities which shall include 

checks against all applicable sanctions lists; 

vi. adoption of risk-management procedures concerning the conditions under which a customer may 

utilize the business relationship prior to verification; 

vii. observance of the list of countries, published by any competent authority, which are noncompliant, or do not sufficiently comply with the recommendations of the Financial Action Task 

Force (FATF); 

viii. internal reporting procedures; and 

ix. other procedures of internal control, including an appropriate effective risk-based independent 

audit function and communication as may be appropriate for the ongoing monitoring of business 

relationships or one-off transactions for the purpose of forestalling and preventing money laundering 

and terrorist financing.20

C. Taxation 

The Cayman Islands does not impose any taxation on Cayman entities.21 There is “no income, 

inheritance, gift, capital gains, corporate withholding or other taxes imposed by the government.” 

II. Custodianship of Cryptocurrencies by Financial Institutions 

No information was found on the issue of custody or custodianship of cryptocurrencies or assets 

in the Cayman Islands. 

 

19 Id. 

20 Digital Assets. Five Questions to Ask Your Cayman Counsel, supra note 1. 

21 Gobin & Skotnicki, supra note 8.
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III. Regulation of Cryptocurrencies as Financial Securities 

A. Regulation of Cryptoassets in General as Securities 

According to the SIBL, persons engaging, “in the course of business,” in securities investment 

business, as defined in the SIBL, must be licensed unless exempted under schedule 3 (Excluded 

Activities) or schedule 4 (Excluded Persons). Excluded persons must, however, be registered 

by CIMA.22

Schedule 1 of the SIBL provides a list of items considered “securities” for the purposes of 

determining “whether a person is engaged in licensable activity.” The definition established in 

Schedule 1 includes 

a list of instruments that are common in today’s financial markets (securities, instruments 

creating or acknowledging indebtedness, instruments giving entitlements to securities, 

certificates representing certain securities, options, futures and contracts for differences), 

and does not in and of itself include virtual currencies.23

According to the report referred to above, the SIBL will only apply 

to the extent that such Digital Assets constitute “securites” for the purposes thereof. The 

statute contains a detailed list of assets that are considered securities thereunder. Although 

such list does not currently make specific reference to any Digital Asset, in our view, 

certain types of Digital Asset are likely to constitute securities. Consequently, 

consideration will need to be given on a case-by-case basis as to whether the Digital Asset 

in question falls within one of the existing categories: for example, instruments creating or 

acknowledging indebtedness, options or futures. Equally, however, it seems clear that 

certain Digital Assets are likely to fall outside the definition, and thus outside the scope of 

the law (for instance, pure utility tokens and some cryptocurrencies).24

A further profile of the Cayman Islands notes the following: 

Digital assets that take the form of warrants, options, futures or derivatives for securities 

or commodities may still be securities. If a Cayman entity was deemed to be issuing 

securities, it would be exempt from any form of licensing under SIBL if the nature of the 

security was an equity interest, debt interest, or a warrant or similar for equity or debt 

interests. 

If a Cayman entity was issuing or trading digital assets that were options, futures or 

derivatives, it would need to consider the implications of SIBL in respect of licensing. A 

business considered to be conducting securities investment business must be licensed 

under SIBL unless it is considered to be conducting excluded activities, which include 

those businesses that are only providing services to sophisticated persons, high-net-worth 

persons or a company, partnership or trust (whether or not regulated as a mutual fund) of 

 

22 Securities Licensing Requirements, CAYMAN ISLANDS MONETARY AUTHORITY, https://www.cima.ky/securitieslicensing-authorisation-requirements (last visited Mar. 19, 2019), archived at https://perma.cc/X4NB-UJM7. 

23 Gobin & Skotnicki, supra note 8. 

24 Russell & Wiltermuth, supra note 16.
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which the shareholders, unitholders or limited partners are one or more persons falling 

within such definitions. Excluded persons must register with the Cayman Islands 

Monetary Authority (CIMA) and pay an annual fee.25

B. Security Token Offerings (STOs) 

Whether or not a token is considered a security also appears to be fact-specific. According to 

lawyers working in this area, 

[a]s with ICOs and the issuance of utility tokens, it is imperative that a full analysis on the 

characteristics of the Security Token be conducted to determine whether or not such token 

is in fact a “security” for the purposes of the Securities Investment Business Law (Revised) 

(SIBL). Notwithstanding the nomenclature, it is possible that some Security Tokens will 

not actually be considered as securities under Cayman law. However, where the token is 

backed by profits or is redeemable for an asset, consideration must be given as to whether 

such token would be regarded as a debt instrument or an option and therefore a 

security. Alternatively, where the Security Token possesses all the rights of a typical share 

and such rights are acknowledged in the issuer's memorandum and articles of association, 

it is arguable that such token actually represents a share in the issuer, much like a share 

certificate albeit in digital form. 

Under Cayman law, a token issuer may not be carrying on “securities investment 

business” despite issuing securities. Where a token issuer is issuing its own securities, 

such activity would typically be regarded as an excluded activity under SIBL in which case 

the issuer would not be required to be registered or licensed with the Cayman Islands 

Monetary Authority (CIMA). As several such exclusions or exemptions apply, the token 

issuer can therefore take steps to structure the STO so that licensing and registration is not 

required in the Cayman Islands.26

IV. Treatment of Cryptoassets Not Considered Securities 

No specific guidance was found regarding the regulation of cryptocurrencies not considered 

securities. However, it appears that purely utility tokens or other types of tokens may fall outside 

the AML or securities regulatory regimes. The Cayman Islands is currently considering the 

Consumer Protection and Guarantees Bill, which is undergoing consultation27 and may 

be delayed.28

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

No further guidance was located regarding the treatment of different types of cryptocurrencies. 

 

25 Gobin & Skotnicki, supra note 8. 

26 Bradley Kruger & Michael Robinson, Security Token Offerings (STOs) in the Cayman Islands, OGIER (Jan. 11, 

2019), https://www.ogier.com/publications/security-token-offerings-stos-in-the-cayman-islands, archived at

https://perma.cc/URA9-U7PC. 

27 Piers Dryden, Fintech in the Cayman Islands, LEXOLOGY (Jan. 24, 2019), https://www.lexology.com/gtdt/ 

tool/workareas/report/fintech/chapter/cayman-islands, archived at https://perma.cc/6HQ7-ZU3N. 

28 Consumer Protection Bill Delayed, CAYMAN COMPASS (Feb. 28, 2018), https://www.caymancompass. 

com/2018/02/28/consumer-protection-bill-delayed/, archived at https://perma.cc/EXJ8-GWRX. 
The Law Library of Congress 69 

China 

Laney Zhang 

Foreign Law Specialist

SUMMARY In China, cryptocurrencies are not legal tender and financial institutions are not allowed 

to accept cryptocurrencies or provide any relevant financial services. Initial coin 

offerings were banned in 2017, and cryptocurrency trading platforms have essentially 

shut down their trading business in China. However, the possession and transfer of 

cryptocurrencies by individuals do not appear to be specifically regulated; in respect of 

these cases, cryptocurrencies could be protected by Chinese law as property with 

economic value.

I. Approach to Assets Created Through Blockchain 

China does not recognize cryptocurrencies1 as legal tender or a tool for retail payments. In a 

circular jointly issued by several government regulators warning the public about the risks of 

bitcoin in December 2013 (2013 Circular), the regulators defined bitcoin as a virtual commodity. 

The Circular also reminded websites that provide bitcoin trading services to perform their antimoney laundering duties.2 

Later, in a circular warning about the risks of initial coin offerings (ICOs) issued on September 4, 

2017 (2017 Circular), the regulators reiterated that cryptocurrencies, such as Bitcoin and 

Ethereum, are not issued by the country’s monetary authority and therefore are not mandatorilyaccepted legal tender. They do not have equal legal status with fiat currencies and “cannot and 

should not be circulated and used in the market as currencies.”3 

The 2017 Circular also imposed restrictions on the primary business activities of cryptocurrency 

trading platforms, including converting legal tender into cryptocurrencies, or vice versa, 

purchasing or selling cryptocurrencies, setting prices, or providing other related agent services. 

According to the Circular, government authorities may shut down the websites and mobile 

applications of platforms that fail to comply, remove their applications from application stores, 

 

1 The term 虚拟货币 (“virtual currencies”) is used in Chinese. 

2 People’s Bank of China (PBOC), Ministry of Industry and Information Technology (MIIT), China Banking 

Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), and China Insurance 

Regulatory Commission (CIRC), Notice on Precautions Against the Risks of Bitcoins (Dec. 3, 2013) (2013 

Circular), http://www.miit.gov.cn/n1146295/n1652858/n1652930/ n3757016/c3762245/content.html (in 

Chinese), archived at https://perma.cc/S4DN-DXHD (all translations by author). 

3 PBOC, Cyberspace Administration of China, MIIT, State Administration for Industry and Commerce, CBRC, 

CSRC, and CIRC, Announcement on Preventing Financial Risks from Initial Coin Offerings (Sept. 4, 2017) (2017 

Circular), http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/3374222/index.html (in Chinese), archived 

at https://perma.cc/N88N-5CV5. 
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or suspend the platform’s business licenses.4 As a result of the 2017 Circular and the subsequent 

regulatory measures, cryptocurrency trading platforms have essentially shut down their trading 

activities in China.5 

II. Custodianship of Cryptocurrencies by Financial Institutions 

Financial institutions in China are not allowed to accept cryptocurrencies or provide any relevant 

financial services. The 2013 Circular provided that financial institutions and payment institutions 

in China must not deal in bitcoins; use bitcoin pricing for products or services; buy or sell bitcoins; 

or provide direct or indirect bitcoin-related services, including registering, trading, settling, 

clearing, or other services. Financial institutions are also prohibited from accepting bitcoins or 

using bitcoins as a clearing tool, or trading bitcoins with Chinese yuan or foreign currencies.6

The 2017 Circular again prohibited financial institutions and non-bank payment institutions from 

directly or indirectly providing services for ICOs and cryptocurrencies, including opening bank 

accounts or providing registration, trading, clearing, or liquidation services.7 

III. Regulation of Cryptocurrencies as Financial Securities 

According to the 2017 Circular, ICOs are “raising virtual currencies through the irregular sale 

and circulation of tokens,” which are “essentially illegal public financing without official 

authorization.”8 The Circular warned that financial crimes may be involved in ICOs, such as the 

illegal issuance of tokens or securities, illegal fundraising, financial fraud, or pyramid selling.9

IV. Treatment of Cryptoassets Not Considered Securities 

Despite of the bans on ICOs and cryptocurrency trading platforms, it appears the possession and 

transfer of cryptocurrencies by individuals are not specifically prohibited by the Chinese 

regulators. In respect of these cases, cryptocurrencies could be treated as property with economic 

value and protected by the General Rules on the Civil Law of the People’s Republic of China 

(PRC) and the PRC Contract Law. 

For example, on October 25, 2018, the Shenzhen Court of International Arbitration reportedly 

published a case analysis concerning a contract dispute involving the possession and transfer of 

cryptocurrencies. In this dispute, concerning the return of bitcoins owed by one private 

individual to another, the arbitral panel found that although bitcoin does not have the legal status 

 

4 Id.

5 Xie Xu, China to Stamp Out Cryptocurrency Trading Completely with Ban on Foreign Platforms, SOUTH CHINA 

MORNING POST (Feb. 7, 2018), http://www.scmp.com/business/banking-finance/article/2132009/chinastamp-out-cryptocurrency-trading-completely-ban, archived at https://perma.cc/42H4-F2AW. 

6 2013 Circular, supra note 2. 

7 2017 Circular, supra note 3. 

8 Id. 

9 Id.
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equal to currency and should not be utilized as a currency in the market, this does not prevent 

bitcoin from being protected by Chinese law as property with economic value.10

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

Despite cracking down on privately-issued cryptocurrencies, the People’s Bank of China (PBOC), 

China’s central bank, is reportedly considering the issuance of its own digital currency. 11

According to a March 2018 interview with Zhou Xiaochuan, the then governor of the PBOC, the 

PBOC had been conducting a study of digital currency for over three years and has set up an 

Institute of Digital Money within the PBOC.12 

In October 2017, the PBOC reportedly completed trial runs on the algorithms needed for a digital 

currency supply, “taking it a step closer to addressing the technological challenges associated 

with digital currencies.”13 The digital currency would be a digital form of the sovereign currency 

that is backed by the central bank. A news report stated that, “[u]nlike Bitcoin or other digital 

money issued by the private sector, the digital fiat currency has the same legal status as the 

Chinese yuan, the only fiat currency issued by the People’s Bank of China.”14

 

10 Chinese Arbitration Court Recognizes Bitcoin as Property Protected by Law, DAVISPOLK (Nov. 1, 2018), 

https://www.davispolk.com/files/2018-11-01-chinese-arbitration-court-recognizes-bitcoin-propertyprotected-by-law.pdf, archived at https://perma.cc/6SAK-QPQC. 

11 The term 数字货币 (“digital money”) is used in Chinese. 

12 Zhou Xiaochuan: Future Regulation on Virtual Currency Will Be Dynamic, Imprudent Products Shall Be Stopped for 

Now, XINHUANET (Mar. 1, 2018), http://www.xinhuanet.com/finance/2018-03/10/c_129826604.htm (in 

Chinese), archived at https://perma.cc/2CW7-8F2T. 

13 Wang Yanfei, PBOC Inches Closer to Digital Currency, CHINA DAILY (Oct. 14, 2017), http://www.chinadaily. 

com.cn/business/2017-10/14/content_33235955.htm, archived at https://perma.cc/T4R8-R4PU. 

14 Id.
The Law Library of Congress 72 

Denmark 

Elin Hofverberg 

Foreign Law Specialist

SUMMARY Denmark has not adopted legislation that specifically deals with cryptoassets. A 

crypoasset transaction may fall under Danish regulatory authority, depending on 

whether the cryptoasset is considered a form of payment (currency), capital asset 

(investment), or financial service. 

 

 The Danish Financial Supervisory Authority has stated that the use of cryptocurrencies 

as payment is generally not regulated by the Authority, but the applicability of Danish 

securities law will depend on the specifics of the initial coin offering (ICO). ICOs that 

are similar to initial public offerings (IPOs) are subject to securities law, and the issuing 

corporation must publish a prospectus in connection with the ICO. 

 Denmark generally treats cryptocurrencies as capital property for tax purposes, taxing 

gains and allowing for deductions on losses. However, losses may not be deducted as 

a business expense when the value of cryptocurrencies that have been received as 

payment for goods or services has decreased. 

I. Approach to Assets Created through Blockchain 

A. General 

Denmark has no laws specifically addressing cryptocurrencies and no regulatory proposals on 

cryptocurrencies are pending in the Danish Parliament. However, the Danish Financial 

Supervisory Authority has issued statements explaining that Danish laws may apply depending 

on the nature of the cryptoasset and how it is used.1 The Authority determined that initial coin 

offerings (ICOs) may be conducted in such a way as to fall under the purview of the Authority, 

and thus would be subject to Danish regulation—for example, “legislation on alternative 

investment funds, prospectuses, and money laundering.”2 Cryptocurrencies that are solely used 

as a means of payment continue to be outside of the purview of Authority.3 

 

1 Press Release, Finanstilsynet, Orientering om ICO’er [Orientation on ICOs] (Nov. 13, 2017), https://finans 

tilsynet.dk/da/Nyheder-og-Presse/Sektornyt/2017/Orientering-om-ICO, archived at https://perma.cc/3A5YW4PS. 

2 Id. 

3 Id. 
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In 2018, the Financial Supervisory Authority made a determination that a specific ICO was not 

subject to its authority. In the specific case, the determining factor was that “the relevant token 

did not grant financial or decision rights over the corporation or the corporation’s earnings.”4

The Authority had previously in 2013 rejected the idea that cryptocurrencies that functioned 

similar to bitcoins were currencies and stated that it would not regulate use of such 

cryptocurrencies.5 In its statement the Financial Supervisory Authority emphasized that it had 

evaluated the use of the cryptocurrency system and found that cryptocurrencies such as bitcoins 

do not fall under any of the financial services categories, including the issuing of electronic 

money, payment for services, currency exchanges, or the issuing of mortgages; thus, it concluded, 

such cryptocurrency activity was not covered under current financial regulations.6 

B. Anti-Money Laundering Law 

1. Regulation 

As a member of the European Union, Denmark is bound by the EU’s Anti-Money Laundering 

Directives. It implemented the Fourth Anti-Money Laundering Directive through its Money 

Laundering Act.7 The Fifth Anti-Money Laundering Directive must be implemented by January 

10, 2020.8 Money laundering is technology neutral, i.e., even though cryptoassets are not 

mentioned in the legislation, all money laundering using that technology is criminalized.9 

 

 

4 Finanstilsynet tager stilling til konkret ICO [The Financial Supervisory Authority Considers a Concrete ICO], 

FINANSTILSYNET (Oct. 3, 2018), https://www.finanstilsynet.dk/Nyheder-og-Presse/Sektornyt/2018/FTtagerstilling-ICO, archived at https://perma.cc/79Z2-94Q5 (translation by author). 

5 Press Release, Finanstilsynet, Advarsel mod virtuelle valutaer (bitcoin m.fl.) [Warnings Regarding Digital 

Currencies (Bitcoins etc.)] (Dec. 17, 2013), https://www.finanstilsynet.dk/da/Nyheder-og-Presse/Presse 

meddelelser/Arkiv/Presse-2013/Advarsel-mod-virtuelle-valutaer-bitcom-mfl-2013, archived at

https://perma.cc/UZ2E-G7S7. 

6 Id. 

7 Officielle noter Lov om forebyggende foranstaltninger mod hvidvask og finansiering af terrorisme 

(hvidvaskloven) [Act on the Prevention of Money Laundering and Financing of Terrorism] (LOV nr 651 af 

08/06/2017) https://www.retsinformation.dk/Forms/R0710.aspx?id=191822, archived at

https://perma.cc/QS6Y-4543. 

8 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD) art. 4, 2018 O.J. (L 

156) 43, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843, archived at

https://perma.cc/JJ8H-NG29. For more on the EU’s Anti-Money Laundering Directives see the EU survey in 

this report. 

9 § 290 a STRAFFELOVEN [CRIMINAL CODE] (LBK nr 1156 af 20/09/2018), https://www.retsinformation.dk/ 

Forms/R0710.aspx?id=202516, archived at https://perma.cc/P9Y2-E7FQ; Press Release, Finanstilsynet, 

Orientering om ICO’er, supra note 1. 
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2. Case Law 

On April 8, 2019, the Danish police published a summary of a Danish District Court case where 

a man was sentenced to four years and three months in prison for money laundering, involving 

the use of bitcoins.10 The total value of the money laundered exceeded DKK 3 million (about 

US$450,000).11

3. Prevalence 

In a 2018 response to a parliamentary question to the Minister of Justice, the Justice Department 

responded that it was not aware of the use of bitcoin ATMs in Denmark to launder illicit funds.12

However, it acknowledged that such cases have happened in other countries and that there is a 

likelihood that it will take place in Denmark as well.13 

C. Taxation 

Similar to other legal interpretations of how to treat cryptoassets, the way a cryptoasset is taxed 

depends on how it is used. SKAT (the Danish Tax Authority) and the Danish Tax Council have 

issued a number of statements on virtual and cryptocurrencies. 

1. Business Losses Not Deductible

In 2014 the Danish Tax Authority published a binding reply (a response to a public question from 

taxpayer that is a binding interpretation of the Tax Authority) in which it declared that an invoice 

amount cannot be issued in cryptocurrencies, but must be issued in Danish Kroner or another 

recognized currency.14 The Authority went on to state that any losses in the value of bitcoins 

cannot be deducted as a cost of doing business when bitcoins are used as a means of payment. 15 

 

10 33-årig mand idømt over fire års fængsel for groft hæleri og hacking, POLITI (Apr. 8, 2019), https://politi.dk/ 

nordjyllands-politi/nyhedsliste/bit-coin/2019/04/08, archived at https://perma.cc/Q9S8-RMAJ. 

11 Id. 

12 Justitsministeriet, Spørgsmål nr. 194 (Alm. del) fra Folketingets Retsudvalg, Case No. 2018-0030-1813 (Dec. 

17, 2018), https://www.ft.dk/samling/20181/almdel/reu/spm/194/svar/1542126/1990093/index.htm,

archived at https://perma.cc/2FT7-3LP5. 

13 Id. 

14 Bitcoins, ikke erhvervsmæssig begrundet, anset for særkilt virksomhed [Bitcoins, Not Commercially 

Justified, Considered Special Activity], SKAT (Apr. 1, 2014), https://www.skat.dk/SKAT.aspx?oId=2156173, 

archived at https://perma.cc/6B89-6WQ2. 

15 Id. 
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2. Value-Added Tax 

In 2016 the Danish Tax Authority discussed cryptocurrencies in relation to value-added tax (VAT) 

and found that cryptocurrencies are exempt from VAT.16 The determination is consistent with 

the preliminary ruling issued by the Court of Justice of the European Union in 2015.17 

The Tax Authority has also commented on how the mining of bitcoins should be treated from a 

VAT tax perspective.18 The case presented to the Authority involved a Danish person who 

wanted to sell hashing capacity (data capacity) on the electrical grid, an activity that was subject 

to VAT, a cost that the seller could later deduct.19 

3. Cryptocurrencies Treated as Capital or Financial Instruments 

In 2018 the Danish Tax Council declared that losses on the sale of certain cryptocurrencies (in this 

case bitcoins) that were purchased as an investment are tax deductible.20 In determining that 

losses are tax deductible the Tax Council also found that profits are subject to income taxation.21 

In 2017 the Tax Council had previously found that other cryptocurrencies (in the relevant case 

bookcoins) are not subject to the same provisions for tax purposes. Instead, cryptocurrencies that 

are tied to another value, here silver, are more similar to structured debt (trade in commodities), 

and therefore subject to financial contracts taxation.22 Thus, any income derived from the increase 

in value of these types of cryptocurrencies is subject to gains tax and loss deductions under the 

same conditions as financial contracts.23

 

16 Momsfritagelse og lønsumsafgift - Køb og salg af Bitcoins [VAT Exemption and Payroll Taxes – Purchase and Sale of 

Bitcoins], SKAT (Jan. 26, 2016), http://skat.dk/skat.aspx?oid=2225268, archived at https://perma.cc/XZG2-

WB6J. 

17 Case C264/14. Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718, http://curia.europa.eu/juris/ 

document/document.jsf?docid=170305&doclang=EN, archived at https://perma.cc/LU2G-U6VD. 

18 Bitcoin mining og tilrådighedsstillelse af datakapacitet - moms og godtgørelse af elafgifter [Bitcoin Mining and Supply 

of Data Capacity – VAT and Payment of Electricity Fees], SKAT (June 27, 2017), https://skat.dk/skat.aspx? 

oid=2249418, archived at https://perma.cc/N772-UTZQ. 

19 Id. 

20 Tab ved afståelse af bitcoins, SKAT (Sept. 5, 2018), https://skat.dk/skat.aspx?oid=2276694&chk=215961, 

archived at https://perma.cc/9VM8-YWNS

21 Id.; see also Gevinst og tab ved handel med bitcoins og ether, SKAT (Apr. 3, 2018), https://skat.dk/skat.aspx?oid= 

2271473, archived at https://perma.cc/B9AZ-GZRL. 

22 Digital valuta anset for struktureret fordring, SKAT (Aug. 31, 2017), https://skat.dk/skat.aspx?oid=2251503, 

archived at https://perma.cc/TU75-Y8ZE; KURSGEVINSTLOVEN [CAPITAL GAINS ACT](LBK nr 1283 af 

25/10/2016), https://www.retsinformation.dk/Forms/r0710.aspx?id=183750, archived at 

https://perma.cc/2SC5-3XHR. 

23 Digital valuta anset for struktureret fordring, SKAT, supra note 22; § 24 stk 3 KURSGEVINSTLOVEN. 
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4. Tax Authority Investigation 

In January of 2019 the Tax Authority announced that it will collect information from 

cryptocurrency traders operating in Denmark to assess whether their customers are paying 

taxes.24 The Tax Authority had previously received information on the sale and purchase of 

cryptocurrencies performed by Danes and persons with ties to Denmark from the Finnish 

Financial Authority.25 According to reports, some 2,700 Danish citizens and residents have 

purchased and sold bitcoins to a value of DKK 100 million (US$15 million) on Finnish 

trading sites.26

II. Custodianship of Cryptocurrencies by Financial Institutions 

No specific legislative provisions governing custodianship of cryptocurrencies or other 

cryptoassets exist under Danish law. Legal commentary suggests that at present operators of 

cryptowallets are not subject to money laundering provisions.27 The argument is based on the 

assumption that crytpocurrencies generally are not subject to money laundering legislation.28 As 

evidenced by a recent court case, however, the use of cryptocurrencies in money laundering is 

indeed illegal.29

III. Regulation of Cryptoassets as Financial Securities 

Certain ICOs may qualify as securities if, because of their nature, they are more similar to initial 

public offerings (IPOs), and they fall under the general definition of “financial instruments” in 

the Act on Capital Markets.30 A cryptoasset is considered a financial security for the purpose of 

the Act on Capital Markets if the purchase of the asset is associated with “financial and deciding 

 

24 Press Release, Skattestyrelsen, Skattestyrelsen indhenter oplysninger fra danske kryptobørser (Jan. 14, 2019), 

https://www.sktst.dk/aktuelt/pressemeddelelser-og-nyheder/skattestyrelsen-indhenter-oplysninger-fradanske-kryptoboerser/, archived at https://perma.cc/FKV9-ZMBE. 

25 Pålæg af oplysningspligt efter skattekontrollovens § 8 D, stk. 1 - handel med virtuel valuta, SKAT (Jan. 14, 2019), 

https://skat.dk/skat.aspx?oid=2284259&lang=da, archived at https://perma.cc/6ZDH-DNR8. See also Oliver 

Batchelor, Efter finsk tip: Skattestyrelsen jagter danske bitcoin-spekulanter, DR (Dec. 10, 2018), https://www.dr.dk/ 

nyheder/penge/efter-finsk-tip-skattestyrelsen-jagter-danske-bitcoin-spekulanter, archived at

https://perma.cc/EAH6-HFV3. 

26 Batchelor, supra note 25. 

27 Hans Fogtdal, Regulering af virtuelle valutaer [Regulation of Virtual Currencies], PLESNER (Jan. 17, 2018), 

https://www.plesner.com/insights/artikler/2018/01/regulering-af-virtuelle-valutaer?sc_lang=da-DK, 

archived at https://perma.cc/9ZRG-6QL4. 

28 Id. 

29 33-årig mand idømt over fire års fængsel for groft hæleri og hacking, POLITI, supra note 10. 

30 LOV OM KAPITALMARKNADER [ACT ON CAPITAL MARKETS] (LBK nr 12 af 08/01/2018), https://www.rets 

information.dk/Forms/r0710.aspx?id=196949, archived at https://perma.cc/74FA-F3PJ; Erhvervsministeriet, 

Bekendtgørelse om hændelsesrapportering for operatører af væsentlige tjenester [Regulation on Trade 

Reporting Requirements for Providers of Substantial Services] (BEK nr 457 af 09/05/2018), https://www. 

finanstilsynet.dk/~/media/Lovgivning/Lovsamling/2018/457-090518-pdf.pdf, archived at

https://perma.cc/F3XE-FUJP. 
Regulatory Approaches to Cryptoassets: Denmark 

The Law Library of Congress 77

rights over the corporation or the corporation’s earnings.”31 Such ICOs are subject to capital 

market requirements in accordance with the Capital Markets Act, specifically those found in 

chapter 3.32 Among other things this includes a duty to publish a prospectus.33

IV. Treatment of Cryptoassets Not Considered Securities 

Cryptoassets that are not considered securities are considered cryptocurrencies or utility tokens 

and may be subject to consumer protection legislation.34 The government has, however, not made 

any public statement to that effect. 

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As Danish law does not specifically mention cryptoassets it also does not prohibit a certain form 

of cryptoassets. As seen above, different laws will apply to different types of cryptoassets based 

on their use. This means that issuers and users of cryptoassets must be mindful of what legislation 

may apply to them and their activities currently and in the future.35 

VI. Creation of an Official Digital Danish Currency 

The Danish Central bank analyzed whether it should adopt an e-currency, and the result was a 

resounding “no.”36 Specifically, its analysis concluded that 

a central bank digital currency would not be an improvement of the existing payment 

solutions in Denmark. Central bank digital currency would fundamentally change 

Danmarks Nationalbank’s role in the financial system and make it a direct competitor to 

the commercial banks. The introduction would also lead to risks of financial instability. 

The potential benefits of introducing central bank digital currency for households and 

businesses in Denmark would not match the considerable challenges which this 

 

31 Compare the outcome in the Danish Financial Supervisory Authority case where the lack of these defining 

characteristics resulted in the ICO not being subject to securities laws. Finanstilsynet tager stilling til konkret ICO, 

FINANSTILSYNET, supra note 4 (translation by author). 

32 Kap. 3 Lov om kapitalmarknader. 

33 For further regulation of prospectus, see Bekendtgørelse om prospekter [Regulation on Prospectuses] (BEK nr 

1170 af 25/09/2018), https://www.retsinformation.dk/Forms/R0710.aspx?id=202841, archived at

https://perma.cc/9QHG-BD4G. 

34 See Lov om forbud til beskyttelse af forbrugernes interesser [Danish Act on Protection of Consumers' 

Interests] (LOV nr 1257 af 20/12/2000), https://www.retsinformation.dk/Forms/R0710.aspx?id=4858, 

archived at https://perma.cc/3LUB-D2VL; Forbrugeraftaleloven [Consumer Contracts Act] (LOV nr 1457 af 

17/12/2013 Gældende), https://www.retsinformation.dk/Forms/R0710.aspx?id=160666, archived at 

https://perma.cc/6SUF-29FD. 

35 See Thomas Prakash, Jurist: Danske bitcoin-ejere er fanget i gråzone [Lawyer: Danish Bitcoin Owners are Trapped in 

a (Legal) Greyzone](Dec. 12, 2018), https://www.dr.dk/nyheder/penge/jurist-danske-bitcoin-ejere-er-fanget-igraazone, archived at http://perma.cc/K469-S5HH. 

36 DANMARKS NATIONALBANK ANALYSIS, CENTRAL BANK DIGITAL CURRENCY IN DENMARK? No. 28 (Dec. 15, 2017), 

http://www.nationalbanken.dk/en/publications/Documents/2017/12/Analysis - Central bank digital 

currency in Denmark.pdf#search=electronic currency, archived at https://perma.cc/DA7R-UQSY. 
Regulatory Approaches to Cryptoassets: Denmark 

The Law Library of Congress 78

introduction would present. Danmark’s Nationalbank therefore has no plans to issue 

central bank digital currency.37

 

37 Id. 
The Law Library of Congress 79 

Finland 

Elin Hofverberg 

Foreign Law Specialist

SUMMARY Cryptocurrencies or cryptoassets are not specifically addressed in Finnish legislation. 

Nevertheless cryptoassets may be to subject to Finnish legislation as its rules on 

securities, money laundering, and tax are technology neutral and do not include 

exemptions for cryptoassets. 

 Initial coin offerings (ICOs) that are similar to IPOs must file a prospectus and send 

annual reports to the Financial Supervisory Authority. ICOs that are not securities are 

subject to the Consumer Protection Act, which among other things prohibits misleading 

advertising. 

 Cryptocurrencies are generally taxed as capital assets. In accordance with EU law, trade 

in cryptocurrencies is not subject to value-added tax. 

 

I. Approach to Assets Created Through Blockchain 

Currently, Finland does not have specific legislation that regulates cryptocurrencies. However, 

legislation that is aimed at increasing the Financial Supervisory Authority’s authority to take 

measures against cryptocurrencies, specifically to prevent money laundering and financing of 

terrorism, is pending before the Finnish Parliament.1 Among other things, the legislation will 

implement the EU’s Fifth Money Laundering Directive.2 

According to the Finnish Financial Supervisory Authority, “[r]egulation of virtual currency 

exchange services currently depends on what kind of virtual currencies are admitted to trading 

and how payment transactions are arranged.”3 For example, 

[i]f a virtual currency is considered to be security, regulations applicable to issuing a security 

must be adhered to. Exchange services offering trading in such currencies must also take 

into consideration provisions relating to securities trading. 

 

1 Press Release, Finansministeriet, Ny lagstiftning om virtuella valutor föreslås – brottsbekämpning underlättas 

[New Legislation on Virtual Currencies Proposed – Will Ease Crime Prevention] (June 14, 2018), 

https://mmm.fi/sv/web/vn/artikeln/-/asset_publisher/10623/virtuaalivaluutoille-ehdotetaan-saantelyarikosten-torjunta-helpottuu, archived at https://perma.cc/YY4Y-WDMD; Regeringens proposition 

[Government Bill] RP 167 2018 rd, https://www.eduskunta.fi/SV/vaski/HallituksenEsitys/Sidor/ 

RP_167+2018.aspx, archived at https://perma.cc/SK2W-LHEQ.

2 Id. 

3 Frequently Asked Questions on Virtual Currencies and their Issuance (Initial Coin Offering), FINANCIAL SUPERVISORY 

AUTHORITY, https://www.finanssivalvonta.fi/en/banks/fintech--financial-sector-innovations/frequentlyasked-questions-on-virtual-currencies-and-their-issuance-initial-coin-offering/ (last updated Jan. 31, 2019), 

archived at https://perma.cc/5WP2-UQR6. 
Regulatory Approaches to Cryptoassets: Finland 

The Law Library of Congress 80

If a virtual currency is not considered to be a security or financial instrument, the general 

provisions of the Consumer Protection Act, such as the provisions relating to distance 

selling, should nevertheless be taken into consideration.4

The Financial Supervisory Authority basically defines virtual currencies associated with initial 

coin offerings (ICOs) in three different ways depending on their use:5 

1. Payment instrument-like virtual currencies, originally planned as alternatives to traditional 

currencies and also intended to be used as payment instruments elsewhere than in their issuer’s 

services. The best known payment instrument-like virtual currency is Bitcoin. 

2. Virtual currencies used as payment for a certain commodity (utility coin), which can be used 

to pay for their issuer’s products or services. Generally, the products or services are only at an early 

stage of their development when the virtual currency usable to pay for them is issued. 

3. Financial instrument-like virtual currencies, which have features in common with securities, 

such as voting and ownership rights and expected returns.6

Thus these three different types of ICOs will all be treated differently by the Financial Supervisory 

Authority. In this report they will be referred to as cryptocurrencies, tokens, and securities. In its 

explanatory statement the Financial Supervisory Authority also makes clear that operators must be aware 

of changes to legislation and regulation concerning their specific ICO, including how they may 

be interpreted.7

A. Financial Regulation and Consumer Protection 

The Finnish legislation on securities is technology neutral, and may apply to cryptoassets and 

ICOs.8 Cryptoassets and ICOs that are not covered by Finland’s financial regulations will be 

subject to its consumer protection laws.9

B. Anti-Money Laundering Law 

Money laundering is a crime in Finland, no matter what technological device is used.10 Finland 

has not yet implemented the Fifth Money Laundering Directive. Once it does, the Law on 

Prevention of Money Laundering and Financing of Terrorism will include language 

targeting cryptocurrencies.11 

 

4 Id. Emphasis by author. 

5 Id. 

6 Id. 

7 Id. 

8 See 1 kap. 1 § VÄRDEPAPPERSMARKNADSLAG [SECURITIES MARKET ACT] (FFS 2012/746), https://www.finlex.fi/ 

sv/laki/ajantasa/2012/20120746, archived at https://perma.cc/936G-ATZA. Further discussed below, Part III. 

9 See Part IV, below. 

10 32 kap. 6 § STRAFFLAG (PENAL CODE) (FFS 1889/39), https://www.finlex.fi/sv/laki/ajantasa/1889/ 

18890039001, archived at https://perma.cc/BF5V-BP8S. 

11 Press Release, Finansministeriet, supra note 1; Regeringens proposition [Government Bill] RP 167 2018 rd, 

https://www.eduskunta.fi/SV/vaski/HallituksenEsitys/Sidor/RP_167+2018.aspx, archived at 

https://perma.cc/SK2W-LHEQ; LAG OM FÖRHINDRANDE AV PENNINGTVÄTT OCH AV FINANSIERING AV TERRORISM
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C. Taxation 

1. Income Tax 

The Finnish Tax Authority (Vero/SKAT) has issued guidance on how virtual currencies are taxed 

for income tax purposes.12 Taxation of cryptocurrencies and cryptoassets depend on the nature 

of the asset.13 Typically, the money derived from the sale or barter of virtual currencies has been 

treated as income from capital.14 However, losses are typically not deductible.15 Thus, Finland 

treats, for purposes of income tax, cryptocurrencies similar to CFD (Contract for Difference) 

products.16 In a March 2019 judgement the Finnish Supreme Administrative Court held that a 

sale of the cryptocurrency Ether that had been purchased with the goal of making a profit was 

not taxable as capital profits, but as income (gain) on transfer of property.17 The tax authority is 

adjusting its guidelines accordingly.18

Mining of cryptocurrencies is taxed differently from the sale of cryptocurrencies. For tax 

purposes, mining of cryptocurrencies is considered Earned Income (Förvärvsinkomst) as Income 

from Other Activity, i.e. work-related.19 The income is considered income for tax purposes when 

the value of the mined product is accessible to the user.20 Thus, the market value of the virtual 

currency at the time it is mined and available to the miner will determine his or her tax liability.21

Moreover, costs associated with the mining will be deductible in relation to the income derived 

from mining.22 For example, mining generally requires a lot of electricity, and thus the electricity 

 

[LAW ON THE PREVENTION OF MONEY LAUNDERING AND THE FINANCING OF TERRORISM] (FFS 2017/444), 

https://www.finlex.fi/sv/laki/ajantasa/2017/20170444, archived at https://perma.cc/V5CB-M9LR. 

12 Taxation of Virtual Currencies, VERO (May 29, 2018), https://www.vero.fi/en/detailedguidance/guidance/48411/taxation-of-virtual-currencies/, archived at https://perma.cc/W8JK-9BCC; Har du 

använt virtuella valutor?, VERO (Apr. 10, 2017), https://www.vero.fi/sv/skatteforvaltningen/ 

skatteforvaltningen/nyheter/uutiset/2017/har_du_anvant_virtuella_valuto/, archived at

https://perma.cc/8KGJ-NPBK. 

13 Taxation of Virtual Currencies, supra note 13. 

14 32 § INKOMSTSKATTELAGEN [INCOME TAX ACT] (ISKL), https://www.finlex.fi/sv/laki/ajantasa/1992/ 

19921535, archived at https://perma.cc/EW3Z-B99S. 

15 Taxation of Virtual Currencies, supra note 13; Högsta förvaltningsdomstolen [Supreme Administrative Court 

Decision] HFD 54/2017, HFD 2010:74, https://www.finlex.fi/sv/oikeus/kho/vuosikirjat/2010/201003093, 

archived at https://perma.cc/ZM7E-2NJN. 

16 Taxation of Virtual Currencies, supra note 13; HFD 2010:74. 

17 Högsta förvaltningsdomstolen [Supreme Administrative Court Decision] 29.3.2019/1263 HFD 2019:42 

(ECLI:FI:KHO:2019:42) (summary in Swedish), https://www.finlex.fi/sv/oikeus/kho/vuosikirjat/2019/ 

201901263, archived at https://perma.cc/XX2U-646C; 45 § 1 mom. ISKL. 

18 Taxation of Virtual Currencies, supra note 13. 

19 61 § ISKL; Taxation of Virtual Currencies, supra note 13. 

20 Taxation of Virtual Currencies, supra note 13. 

21 Id. 

22 Id. 
Regulatory Approaches to Cryptoassets: Finland 

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cost for mining is deductible,23 as are costs for computers and other equipment needed in the 

mining.24 Blocking others’ mining activities for the protection of a value in the cryptocurrencies, 

known as proof-of-stake protocol, is considered as income from capital for tax purposes.25

In relation to ICOs, the nature of the investment conditions of the ICO determines how the 

acquisition and sale of the financial product is taxed.26

Virtual currencies used in internet games (tokens) that may be used as payments or that may be 

converted to cash are considered earned income as they relate to the gamer’s personal activity.27

2. Value-Added Tax (VAT) 

In accordance with EU law, trade in cryptocurrencies is exempt from VAT, as it is considered a 

financial service.28 

II. Custodianship of Cryptocurrencies by Financial Institutions 

There is no regulation of custodianship of cryptocurrencies by financial institutions in Finland. 

However, the Financial Supervisory Authority noted in 2019 that new money laundering rules 

are expected to enter into force in 2019 and therefore “providers of exchange services and wallet 

services should familiarise themselves with the regulations in advance.”29 Specifically, this means 

reviewing the draft Finnish legislation and the EU’s Fifth Money Laundering Directive.30 

 

23 Id. 

24 Id. 

25 Id. 

26 Id. 

27 Id.

28 Council Directive 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax, 2006 O.J. 

(L 347) 1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32006L0112&from=EN, 

archived at https://perma.cc/SSQ7-KEHL; 42 § mom. 5 p. MERVÄRDESSKATTELAG [VALUE ADDED TAX ACT]

(MOMSL), https://www.finlex.fi/sv/laki/ajantasa/1993/19931501, archived at https://perma.cc/UQL8-PNC9; 

CENTRALSKATTENÄMNDEN CSN 2014/34, https://www.vero.fi/sv/Detaljerade_skatteanvisningar/ 

centralskattenamndens-forhandsavgoranden/54360/csn034201/, archived at https://perma.cc/24GS-A8NQ; 

Case C264/14. Skatteverket v. David Hedqvist, 2015 CURIA EUROPA, ECLI:EU:C:2015:718 (Oct. 22, 2015), 

http://curia.europa.eu/juris/document/document.jsf?docid=170305&doclang=EN, archived at

https://perma.cc/LU2G-U6VD. 

29 Frequently Asked Questions on Virtual Currencies and their Issuance (Initial Coin Offering), supra note 3. 

30 Press Release, Finansministeriet, supra note 1. 
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III. Regulation of Cryptocurrencies as Financial Securities 

Cryptoassets may be considered securities. The Finnish legislation on securities is technology 

neutral.31 Thus, as the Financial Supervisory Authority has noted, 

[a] virtual currency to be issued via an ICO may also fall within the scope of the definition 

of a security or financial instrument. A security is defined in Chapter 2 Section 1 of the 

Securities Market Act. A security is negotiable and issued or meant to be issued to the 

public together with several other securities with similar rights. A financial instrument is 

defined in Chapter 1 Section 14 of the Investment Services Act (747/2012).32

Moreover the Financial Supervisory Authority has clarified that 

[t]here are no special regulations or exceptions for the issuance of virtual currencies. If a 

virtual currency classified as a transferable security is issued via an ICO, securities 

legislation should be adhered to. In this case, the issuer of the virtual currency may have, 

for example, an obligation to prepare and publish a prospectus.33

Finnish securities regulation requires that “[a]nyone that offers securities to the public or applies 

for securities to be traded on a regulated market, must make public a prospectus of the 

securities.34 New EU rules on security market prospectus will enter into force on July 21, 2019.35

Other general requirements on issuers of securities include a prohibition on providing false or 

misleading information.36

 

31 See 1 kap. 1 § VÄRDEPAPPERSMARKNADSLAG [SECURITIES MARKET ACT] (FFS 2012/746), https://www.finlex.fi/ 

sv/laki/ajantasa/2012/20120746, archived at https://perma.cc/936G-ATZA. 

32 Frequently Asked Questions on Virtual Currencies and their Issuance (Initial Coin Offering), supra note 3. 

33 Id. For further information on prospectus regulations see Offering of Securities and Prospectuses, FINANCIAL 

SUPERVISORY AUTHORITY, https://www.finanssivalvonta.fi/en/capital-markets/issuers-andinvestors/offering-of-securities-and-prospectuses/ (last updated Dec. 5, 2018), archived at

https://perma.cc/WK73-6KN8. 

34 3 kap. 1 § VÄRDEPAPPERSMARKNADSLAG [SECURITIES MARKET ACT](FFS 2012/746), https://www.finlex.fi/ 

sv/laki/ajantasa/2012/20120746, archived at https://perma.cc/936G-ATZA. 

See also Regleringen av värdepappersprospekt ska förnyas [Regulation of Securities Prospectus to be Updated], 

FINANSMINISTERIET (July 25, 2017) https://vm.fi/sv/artikel/-/asset_publisher/lainsaadantoa-uudistetaanarvopapereita-koskevien-esitteiden-saantelyn-osalta, archived at https://perma.cc/L9PF-SVT9. 

35 See Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the 

prospectus to be published when securities are offered to the public or admitted to trading on a regulated 

market, and repealing Directive 2003/71/EC ( 1 ), 2017 O.J. (L168) 12, https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=OJ:L:2017:168:FULL&from=EN , archived at https://perma.cc/SN5D-SJ89; Press 

Release, Finansministeriet, Regleringen av värdepappersprospekt ska förnyas (July 25, 2017), 

https://vm.fi/sv/artikel/-/asset_publisher/lainsaadantoa-uudistetaan-arvopapereita-koskevien-esitteidensaantelyn-osalta, archived at https://perma.cc/G4GE-FC8L. 

36 1 kap. 4 § VÄRDEPAPPERSMARKNADSLAG. 
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IV. Treatment of Cryptoassets Not Considered Securities 

No specific legislative provisions governing cryptocurrencies or other cryptoassets exist under 

Finnish law. 

The Financial Supervisory Authority has explained that “[i]f a virtual currency is not considered 

to be a security or financial instrument, the general provisions of the Consumer Protection Act, 

such as the provisions relating to distance selling, should nevertheless be taken into 

consideration.”37 The Consumer Protection Act includes rules on misleading advertising, untrue 

information, transfer of the goods, and a duty to inform.38 

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As noted above, the type of cryptocurrency as well as the user’s relationship to the cryptocurrency 

determine the legal treatment of the cryptoasset. The Finnish Supervisory Authority notes that 

“[t]he most important issue in organising an ICO is the nature of the virtual currency to be issued 

and to what it entitles.”39 There are no specific restrictions or rules regarding particular types 

of cryptocurrencies. 

 

37 Frequently Asked Questions on Virtual Currencies and their Issuance (Initial Coin Offering), supra note 3. 

38 2 kap. 2 and 6§§, 5 kap. 4 § and 6 a kap. 5§ KONSUMENTSKYDDSLAG [CONSUMER PROTECTION ACT] (FFS 

1978/38), https://www.finlex.fi/sv/laki/ajantasa/1978/19780038, archived at https://perma.cc/SJT4-X8EN. 

39 Frequently Asked Questions on Virtual Currencies and their Issuance (Initial Coin Offering), supra note 3. 
The Law Library of Congress 85 

France 

Nicolas Boring 

Foreign Law Specialist

SUMMARY The French government has started to build a legal framework for cryptoassets with the 

goal of becoming a pioneering and key player in the field at the international level. Two 

recent studies, one by the National Assembly and one commissioned by the Minister of 

the Economy and Finance, offer in-depth analyses of cryptocurrencies in France and 

make several policy proposals. Both reports appear to agree on the importance of 

establishing rules that provide clarity and security while also allowing as much 

flexibility as possible, so that the cryptoasset sector may develop 

through experimentation. 

 The Prudential Supervisory Authority has adopted the position that cryptocurrency 

exchange platforms needed to be licensed as payment service providers to operate 

legally. A current bill includes several provisions on cryptoassets. If this bill becomes 

law, it will create a legal framework for initial coin offerings, based on an optional 

certification scheme that would include compliant token issuers on a public “white list,” 

signaling to investors that they are trustworthy. 

 Anti-money-laundering regulations and reporting requirements apply to professionals 

involved in the sale or purchase of cryptoassets. France’s principal anti-moneylaundering agency has created a new specialized unit to address an increase in the use 

of cryptoassets in money laundering and the financing of terrorism. 

 The Appropriations Law for 2019 clarified how cryptoassets are taxed by specifying 

that gains from the sale of cryptoassets are subject to an income tax of 12.8% and social 

contributions of 17.2%. Starting in 2020, French taxpayers will have to declare all of 

their cryptoasset accounts to French tax authorities, including those located abroad. 

I. Approach to Assets Created Through Blockchain 

France appears to be in the process of building a fairly comprehensive legal framework for 

cryptoassets. The French Minister of Finance has expressed the country’s ambition to “adopt an 

open approach while playing a pioneering and key role at the international level” in relation to 

cryptoassets.1 The government has been actively studying the best ways to achieve those goals, 

and has started to adopt some legislation aimed at meeting them. 

 

1 ERIC WOERTH & PIERRE PERSON, RAPPORT D’INFORMATION RELATIE AUX MONNAIES VIRTUELLES [INFORMATIONAL 

REPORT ON VIRTUAL CURRENCIES] 52 (Commission des finances, de l’économie générale et du contrôle 

budgétaire [Commission on Finance, the General Economy, and Budgetary Control], Assemblée nationale 

[National Assembly], No. 1624, Jan. 30, 2019), http://www.assemblee-nationale.fr/15/pdf/rap-info/i1624.pdf, 

archived at https://perma.cc/FZP8-3P9Q. 
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A 2018 report commissioned by the Minister of the Economy and Finance, referred to as the 

Landau Report (after its main author), argued against “directly regulating cryptocurrencies,” as 

this would make it necessary to “define and classify, and therefore rigidify objects that are 

essentially in motion and still unidentified.”2 For the near future, at least, regulators should 

accept a certain amount of ambiguity until cryptocurrencies become more established and less 

experimental, the report said.3 Any regulation should be “technologically neutral” to the extent 

possible, and be geared towards regulating the actors rather than the products. Notable 

exceptions to this general principle, however, would be regulations to fight against money 

laundering and the financing of terrorism.4 

Furthermore, this report called on the government to clarify the accounting and tax framework 

applicable to cryptocurrencies, to provide market actors with more legal certainty.5 Additionally, 

the authors called on the government to promote the development of blockchain technology and 

the digitization of assets, while also taking measures to limit the financial sector’s exposure 

to cryptoassets.6

A further report on cryptocurrencies was published in January 2019 by the Commission on 

Finance, the General Economy, and Budgetary Control of the National Assembly, France’s lower 

house of Parliament.7 This report, which included a series of 27 policy recommendations for 

cryptoassets, argued for a legislative approach that would “structure the conversion point 

between fiat currency and cryptoassets, while giving a maximum amount of flexibility within the 

blockchain space, giving free reign to experimentation.”8 Similar to the Landau Report, the 

National Assembly report called for a regulation that would be flexible and would not constrain 

cryptoassets to existing legal definitions.9 

II. Early Blockchain-Related Legislation 

The first piece of legislation directly related to cryptoassets appears to have been adopted in April 

2016, when an ordinance included two provisions which allowed the use of blockchain 

technology for a specific type of zero-coupon bond called a “mini-bond” (minibon).10 The main 

 

2 JEAN-PIERRE LANDAU & ALBAN GENAIS, LES CRYPTO-MONNAIES [CRYPTOCURRENCIES]: RAPPORT AU MINISTRE DE 

L’ECONOMIE ET DES FINANCES [REPORT TO THE MINISTER OF ECONOMY AND FINANCE] 44 (July 4, 2018), 

https://www.ladocumentationfrancaise.fr/var/storage/rapports-publics/184000433.pdf, archived at

https://perma.cc/83RK-WRNT. 

3 Id.

4 Id. 

5 Id. at 45. 

6 Id.

7 WOERTH & PERSON, supra note 1.

8 Id. at 119. 

9 Id. at 70. 

10 Ordonnance n° 2016-520 du 28 avril 2016 relative aux bons de caisse [Ordinance No. 2016-520 of 28 April 

2016 Regarding Zero Coupon Bonds], art. 2, 
Regulatory Approaches to Cryptoassets: France 

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impact of this ordinance was to provide the first definition of blockchain in French law, but 

otherwise these provisions only had a very narrow application. Another ordinance, from 

December 2017, went further and made it possible to use blockchain technology for a broader 

range of financial instruments.11 This allows the tokenization of assets, which makes the trading 

of financial assets in large volumes possible.12

III. Financial Regulation and Consumer Protection 

The French Financial Market Authority (Autorité des marchés financiers, AMF) and Prudential 

Supervisory Authority (Autorité de contrôle prudentiel et de résolution, ACPR) issued a joint 

notice in December 2017, warning investors about the current unregulated nature 

of cryptocurrencies.13

The ACPR took the position that intermediation in the exchange of cryptocurrencies against legal 

tender currency should be considered a payment service. Consequently, cryptocurrency 

exchange platforms in France need to be licensed as payment service providers by the ACPR.14 

As a condition for obtaining and keeping a payment service provider license, cryptocurrency 

exchanges must follow regulations designed to prevent money laundering and the financing of 

terrorism, particularly by establishing internal monitoring and compliance systems.15

A current bill, referred to as the PACTE Bill (“Projet de loi Pacte”), includes amendments to the 

French Monetary and Financial Code that would add several provisions regarding cryptoassets.16 

If it becomes law, this bill will create a new legal framework for initial coin offerings (ICOs). One 

of the features of this legal framework is the creation of a certification scheme by the AMF, by 

which token issuers that fulfill certain criteria will be included on a “white list” available to the 

 

https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000032465520&categorieLien=id, archived 

at https://perma.cc/K3UP-AJ9D. 

11 Ordonnance n° 2017-1674 du 8 décembre 2017 relative à l'utilisation d'un dispositif d'enregistrement 

électronique partagé pour la représentation et la transmission de titres financiers [Ordinance No. 2017-1674 of 8 

December 2017 Regarding the Use of a Shared Electronic Registration Method for the Representation and 

Conveyance of Financial Instruments], 

https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000036171908&categorieLien=id, archived 

at https://perma.cc/ESA7-89E6. 

12 WOERTH & PERSON, supra note 1, at 51. 

13 France, in LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY AROUND THE WORLD 31 (June 2018), , 

http://www.loc.gov/law/help/cryptocurrency/cryptocurrency-world-survey.pdf; Achats de Bitcoin: l’AMF et 

l’ACPR mettent en garde les épargnants [Bitcoin Purchases: The AMF and ACPR Warn Savers], AMF, ACPR (Dec. 4, 

2017), https://acpr.banque-france.fr/sites/default/files/medias/documents/20171204-cp-bitcoin.pdf, archived 

at https://perma.cc/CM6Q-EGUH. 

14 ACPR, Position de l’ACPR relative aux opérations sur Bitcoins en France [Position of the ACPR Regarding 

Bitcoin Operations in France] (Position 2014-P-01, Jan. 29, 2014), https://acpr.banquefrance.fr/sites/default/files/20140101_acpr_position_bitcoin.pdf, archived at https://perma.cc/NYZ6-YR6N. 

15 Id. 

16 Projet de loi relatif à la croissance et la transformation des entreprises [Bill Regarding Growth and the 

Transformation of Companies], No. 382 (Sénat [Senate]) (Mar. 18, 2019), arts. 26, 26bis(A), 26bis(B), 

https://www.senat.fr/leg/pjl18-382.pdf, archived at https://perma.cc/A8DE-66LB. 
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public. The government hopes that this “white list” will provide investors useful evidence of an 

issuer’s trustworthiness.17 In debating the PACTE Bill, several legislators have expressed 

concerns that it does not provide enough protection to investors. Their concerns stem from the 

optional nature of the AMF’s certification, and the fact that the Bill does notaddress online frauds 

related to cryptocurrencies.18 The PACTE Bill was adopted by the National Assembly on March 

16, 2019, and is scheduled to be discussed and voted on by the Senate in April.19

IV. Anti-Money Laundering Law 

Legislation adopted in December 2016 amended the Financial and Monetary Code to apply antimoney laundering and counter-financing of terrorism regulations to professionals involved in 

the sale or purchase of cryptoassets.20 The Code now requires “any person who, as a habitual 

part of their profession, is either a party or an intermediary in the purchase or sale of any 

instrument containing non-monetary value units in digital form, that can be saved or transferred 

for the purpose of buying a good or a service, but that does not represent a debt to the originator,” 

to monitor and report activity which could linked to money laundering or the financing 

of terrorism.21 

In its 2018 activity report, France’s principal anti-money laundering agency, the Ministry of 

Finance’s Traitement du renseignement et action contre les circuits financiers clandestins 

(Treatment of Intelligence and Action Against Clandestine Financial Circuits) (TRACFIN), stated 

that it had seen a sharp increase in the use of cryptoassets for money laundering and the financing 

 

17 Loi PACTE : les 6 mesures qui vont dynamiser l'innovation en France [PACTE Law : 6 Measures That Will Invigorate 

Innovation in France], ECONOMIE.GOUV.FR [website of the French Ministry of the Economy and Finance] (Oct. 10, 

2018), https://www.economie.gouv.fr/loi-pacte-encourager-innovation-france, archived at 

https://perma.cc/6TEB-838V. 

18 Gaëlle Marraud des Grottes, PACTE et ICO : modification à la marge en séance publique [PACTE and ICOs : 

Amendments on the Margin During the Public Session], ACTUALITES DU DROIT (Mar. 19, 2019), 

https://www.actualitesdudroit.fr/browse/tech-droit/blockchain/20492/pacte-et-ico-modification-a-lamarge-en-seance-publique, archived at https://perma.cc/4DUJ-P9US. 

19 AFP, Projet de loi Pacte: nouveau feu vert de l'Assemblée [PACTE Bill : New Green Light From the Assembly], PUBLIC 

SENAT (Mar. 16, 2019), https://www.publicsenat.fr/article/politique/projet-de-loi-pacte-nouveau-feu-vert-del-assemblee-139264, archived at https://perma.cc/QBX3-FCRF. 

20 Ordonnance n° 2016-1635 du 1er décembre 2016 renforçant le dispositif français de lutte contre le 

blanchiment et le financement du terrorisme [Ordinance No. 2016-1635 of 1 December 2016 Reinforcing the 

French Measures in the Fight Against Money Laundering and the Financing of Terrorism], art. 2, 

https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000033511344&categorieLien=id, archived 

at https://perma.cc/554B-N6Q5; CODE MONETAIRE ET FINANCIER [MONETARY AND FINANCIAL CODE], art. L561-2 

(7° bis), 

https://www.legifrance.gouv.fr/affichCodeArticle.do?idArticle=LEGIARTI000020871540&cidTexte=LEGITEX

T000006072026, archived at https://perma.cc/B2KT-KBW4. 

21 CODE MONETAIRE ET FINANCIER [FINANCIAL AND MONETARY CODE], art. L561-2, 

https://www.legifrance.gouv.fr/affichCodeArticle.do?idArticle=LEGIARTI000020871540&cidTexte=LEGITEX

T000006072026, archived at https://perma.cc/S92N-X66K. 
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of terrorism.22 To address this development, TRACFIN created a new investigative unit 

specialized in the analysis of cryptoasset transactions.23 

V. Taxation 

The Appropriations Law for 2019 amended the French Tax Code to clarify how cryptoassets are 

taxed.24 Under these new provisions, the gains from the sale of cryptoassets are subject to an 

income tax of 12.8% and social contributions of 17.2%.25 This aligns cryptoassets with the taxation 

of income from stocks and other non-real estate assets.26 Under the new tax provisions, persons 

who sell less than 305 Euros’ (US$343) worth of cryptoassets in a year are exempt from these 

taxes.27 However, the new provisions will also make it mandatory for French taxpayers to declare 

all of their cryptoasset accounts to the French tax authorities, including accounts located abroad.28 

This latter tax provision will only enter into force on January 1, 2020, while the former ones have 

been in force since January 1, 2019.29

 

22 TRACFIN, TENDANCES ET ANALYSE DES RISQUES DE BLANCHIMENT DE CAPITAUX ET DE FINANCEMENT DU 

TERRORISME EN 2017-2018 [TRENDS AND ANALYSIS OF RISKS OF MONEY LAUNDERING AND FINANCING OF TERRORISM 

IN 2017-2018] 61 (Nov. 28, 2018), https://www.economie.gouv.fr/files/2017_Rapport_analyse_FR.pdf, archived 

at https://perma.cc/64A7-JRRX. 

23 Id. at 62. 

24 Loi No. 2018-1317 du 28 décembre 2018 de finance pour 2019 [Law No. 2018-1317 of 28 December 2019 of 

Finance for 2019], art. 41, 

https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000037882341&dateTexte=&categorieLie

n=id, archived at https://perma.cc/LL56-TTCH. 

25 CODE GENERAL DES IMPOTS [GENERAL TAX CODE], art. 150 VH bis, 

https://www.legifrance.gouv.fr/affichCodeArticle.do?cidTexte=LEGITEXT000006069577&idArticle=LEGIAR

TI000037943236&dateTexte=&categorieLien=cid, archived at https://perma.cc/64F8-RUP8. 

26 Delphine Cuny, Bitcoin: Bercy taxe à 30% et oblige à déclarer les comptes de crypto-actifs [Bitcoin : Ministry of 

Finance to Tax Crypto-Assets at 30%, and Makes Declaring Crypto-Asset Accounts Mandatory], LA TRIBUNE (Nov. 15, 

2018), https://www.latribune.fr/entreprises-finance/banques-finance/bitcoin-bercy-taxe-a-30-et-oblige-adeclarer-les-comptes-de-crypto-actifs-797653.html, archived at https://perma.cc/92TJ-YAPP. 

27 CODE GENERAL DES IMPOTS, art. 150 VH bis (II)(B). 

28 Loi No. 2018-1317 du 28 décembre 2018, art. 41(I)(4°). 

29 Id. art. 41 (II).
The Law Library of Congress 90 

Germany 

Jenny Gesley 

Foreign Law Specialist

SUMMARY The German federal government is currently preparing a comprehensive national 

“Blockchain Strategy,” which is slated to be presented in the summer of 2019. In 

addition, it supports the development of European and international regulation for 

cryptocurrencies and tokens (cryptoassets). In addition, in March 2019, the German 

Federal Ministry of Finance together with the German Federal Ministry for Justice and 

Consumer Protection published key points for the regulatory treatment of electronic 

securities and crypto tokens as the first implementing measure within the framework 

of the Blockchain Strategy. 

 Germany is currently in the process of transposing into its domestic law the amendment 

of the European Union’s Anti-Money Laundering Directive (5th AMLD), which 

extended the customer due diligence requirements to custodian wallet providers and 

virtual currency exchange platforms, and defined virtual currencies. In line with the 

jurisprudence of the European Court of Justice, transactions to exchange a traditional 

currency for bitcoin or other virtual currencies and vice versa constitute the taxable 

supply of other services for consideration, but fall under the exemption from valueadded tax (VAT). 

 The German Federal Financial Supervisory Authority (BaFin) qualifies virtual 

currencies/cryptocurrencies as units of account and therefore financial instruments. 

However, on September 29, 2018, the Higher Regional Court of Berlin held that trading 

in bitcoin does not require a banking license, because it is not a unit of account within 

the meaning of the German Banking Act, a decision that is directly at odds with the 

regulatory practice of BaFin. With regard to ICOs, BaFin assesses on a case-by-case basis 

whether the ICOs qualify as financial instruments or as securities and therefore trigger 

the need to comply with the relevant financial legislation. 

I. Approach to Assets Created through Blockchain 

The German Federal government is currently preparing a comprehensive national “Blockchain 

Strategy,” one of its priorities set out in the coalition agreement between the governing parties 

CDU, CSU, and SPD. In addition, it supports the development of European and international 

regulation for cryptocurrencies and tokens (cryptoassets).1 A public consultation on the 

                                                            

1 EIN NEUER AUFBRUCH FÜR EUROPA. EINE NEUE DYNAMIK FÜR DEUTSCHLAND. EIN NEUER ZUSAMMENHALT FÜR 

UNSER LAND [A NEW DEPARTURE FOR EUROPE. A NEW DYNAMIC FOR GERMANY. A NEW SOLIDARITY FOR OUR 

COUNTRY], KOALITIONSVERTRAG ZWISCHEN CDU, CSU UND SPD [COALITION AGREEMENT BETWEEN CDU, CSU,

AND SPD], 19. LEGISLATURPERIODE [19TH LEGISLATIVE PERIOD], at 70, 71, https://www.cdu.de/system/ 

tdf/media/dokumente/koalitionsvertrag_2018.pdf?file=1, archived at http://perma.cc/J63C-3ZCW; BlockchainStrategie [Blockchain Strategy], BUNDESREGIERUNG [FEDERAL GOVERNMENT], 

https://www.bundesregierung.de/breg-de/themen/digital-made-in-de/blockchain-strategie-1546662 (last 

visited Mar. 13, 2019), archived at http://perma.cc/L929-T2P3. 
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Blockchain Strategy took place from February 20 to March 29, 2019.2 The Blockchain Strategy is 

slated to be presented in the summer of 2019.3 With regard to the legal framework, the Blockchain 

Strategy will cover the necessity of a different legal approach for public and private blockchain, 

the applicable law, liability and enforcement, smart contracts, the use of intermediaries, data 

protection, formal requirements such as recognizing digital formats as equivalent to written 

formats, and taxation.4

In addition, in March 2019, the German Federal Ministry of Finance together with the German 

Federal Ministry for Justice and Consumer Protection published key points for the regulatory 

treatment of electronic securities und cryptotokens.5 The key points are the first implementing 

measure within the framework of the Blockchain Strategy.6 Its goal is to “make electronic 

securities possible while ensuring investor protection and creating legal certainty and application 

security for the areas of civil and supervisory law.”7 The key points go beyond the Blockchain 

Strategy by making electronic securities available outside of blockchain technology and similar 

technologies.8 Developments on a European and international level are taken into account to 

avoid a “German solution” that would conflict with EU-wide harmonization measures; however, 

Germany did not want to wait to publish its own rules as such EU-wide measures can take several 

years.9 Anti-money laundering regulation is not the focus of this consultation paper, but will be 

addressed in the act implementing the amendment of the EU anti-money laundering legislation.10

 

                                                            

2 BUNDESMINISTERIUM FÜR WIRTSCHAFT UND ENERGIE [BMWI] [FEDERAL MINISTRY FOR ECONOMIC AFFAIRS AND 

ENERGY] & BUNDESMINISTERIUM DER FINANZEN [BMF] [FEDERAL MINISTRY OF FINANCE], ONLINE-KONSULTATION 

ZUR ERARBEITUNG DER BLOCKCHAIN-STRATEGIE DER BUNDESREGIERUNG [ONLINE CONSULTATION TO DEVELOP THE 

BLOCKCHAIN STRATEGY OF THE FEDERAL GOVERNMENT] (2019), https://www.blockchain-strategie.de/BC/ 

Redaktion/DE/Downloads/online-konsultation-zur-erarbeitung-der-blockchain-strategie.pdf?__ 

blob=publicationFile&v=3, archived at http://perma.cc/NKE7-ABYX. 

3 Blockchain-Strategie, supra note 1. 

4 ONLINE-KONSULTATION, supra note 2, at 23-27. 

5 BUNDESMINISTERIUM DER FINANZEN & BUNDESMINISTERIUM DER JUSTIZ UND FÜR VERBRAUCHERSCHUTZ [FEDERAL 

MINISTRY OF FINANCE & FEDERAL MINISTRY FOR JUSTICE AND CONSUMER PROTECTION], ECKPUNKTE FÜR DIE 

REGULATORISCHE BEHANDLUNG VON ELEKTRONISCHEN WERTPAPIEREN UND KRYPTO-TOKEN. DIGITALE 

INNOVATIONEN ERMÖGLICHEN – ANLEGERSCHUTZ GEWÄHRLEISTEN [KEY POINTS FOR THE REGULATORY TREATMENT 

OF ELECTRONIC SECURITIES AND CRYPTO TOKENS. MAKING DIGITAL INNOVATIONS POSSIBLE. ENSURING INVESTOR 

PROTECTION] (Mar. 7, 2019), https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/ 

Themen/Internationales_Finanzmarkt/2019-03-08-eckpunktelelektronische-wertpapiere.pdf;jsessionid= 

E6F58727AB7EC88D34631AEA3204B3E0?__blob=publicationFile&v=3, archived at http://perma.cc/2ZWU75J7. 

6 Id. at 1. 

7 Id. (translation by author). 

8 Id. 

9 Id. 

10 Id. at 2 et seq.; see also Part I(B), below, and the European Union survey in this report. 
Regulatory Approaches to Cryptoassets: Germany 

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A. Financial Regulation and Consumer Protection 

1. Consultation Paper of the Federal Ministry of Finance 

The consultation paper of the Federal Ministry of Finance suggests that German law should 

generally be opened up for electronic securities, meaning the current requirement that securities 

need to be embodied in a physical certificate would be eliminated.11 However, issuing securities 

in electronic form would not be mandatory; issuers would have the option to still use a paper 

form.12 In addition, the Ministry of Finance proposes that the regulation be technology-neutral, 

in particular with regard to the fact that blockchain technologies consume a lot of energy and 

affect the environment, and should therefore not be privileged.13 The regulation of electronic 

shares will be taken up at a later point.14 

The paper also suggests establishing a register for electronic securities run by a central state 

registry or a registry supervised by the state.15 The issuer itself or an authorized third party might 

be able to register an electronic security if it is proven that blockchain technology will not permit 

subsequent unauthorized amendments.16 The blockchain securities register might be included in 

another public register to provide legal certainty to issuers and investors that the securities listed 

therein are securities within the meaning of German civil law.17 However, keeping a register on 

a blockchain might qualify as the operation of a securities settlement system, so that registration 

as a central security depository (CSD) within the meaning of EU Regulation No. 909/2014 might 

be necessary.18 The paper states that further review is needed in this regard.19 To ensure investor 

protection for securities registered on a blockchain (“blockchain securities”), the following is 

proposed (individually or cumulative): 

 Blockchain securities may only be purchased by institutional investors. 

 The issuer or the authorized third party who keeps the register must be subject to some type 

of state supervision. 

                                                            

11 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 2. 

12 Id. 

13 Id. 

14 Id. 

15 Id. at 3 & 4. 

16 Id. at 4. 

17 Id.

18 Id.; Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on 

Improving Securities Settlement in the European Union and on Central Securities Depositories and Amending 

Directives 98/26/EC and 2014/65/EU and Regulation (EU) No. 236/2012, 2014 O.J. (L 257) 1, https://eurlex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0909&from=EN, archived at

http://perma.cc/PD5P-N8LE. 

19 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 4. 
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 Blockchain securities may only be purchased by private investors if the relevant blockchain 

register is run by a credit or financial institution subject to supervision in the EU. 

 Private investors may not purchase blockchain securities directly from the issuer or another 

investor, but the purchase must be effected by a licensed and supervised intermediary, who 

explains rules and advises investors. 

 Private investors may purchase blockchain securities directly from issuers; however, issuers 

are subject to special information and documentation obligations. A resale of blockchain 

securities by a private investor to another private investor can only be effected via the issuer 

as a counterparty interposed between the seller and buyer in order to ensure that information 

and documentation obligations are complied with.20

The paper also proposes that electronic securities could be declared “objects” by means of a legal 

fiction so that the rules on property law apply. Alternatively, they could be subject to a law sui 

generis similar to the Swiss Federal Act on Intermediated Securities.21 In any case, there will be 

independent rules on the acquisition and transfer of electronic securities as well as on good faith.22

The paper also points out that electronic securities will be subject to the Securities Trading Act,23

the Securities Prospectus Act,24 and the provisions of the EU Market Abuse Regulation25 as these 

laws do not require the embodiment of securities in physical form.26

As a last point, the paper also deals with the issuance of utility tokens/cryptocurrencies. It states 

that utility tokens are generally not classified as securities, investment assets, or other types of 

financial instruments within the meaning of the Securities Trading Act, and will most likely also 

                                                            

20 Id. at 6. 

21 Id.; Bucheffektengesetz [BEG] [Federal Intermediated Securities Act] [FISA], Oct. 3, 2008, SYSTEMATISCHE 

RECHTSSAMMLUNG [SR] [SYSTEMATIC COLLECTION OF LAWS] 957.1, as amended, https://www.admin.ch/opc/ 

de/classified-compilation/20061735/201601010000/957.1.pdf, archived at http://perma.cc/8ZXM-ATLS, 

unofficial English translation available at https://www.admin.ch/opc/en/classified-compilation/20061 

735/201601010000/957.1.pdf, archived at http://perma.cc/58J9-QZDJ. 

22 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 3. 

23 Wertpapierhandelsgesetz [WpHG] [Securities Trading Act], Sept. 9, 1998, BUNDESGESETZBLATT [BGBL.]

[FEDERAL LAW GAZETTE] I at 2708, as amended, https://www.gesetze-im-internet.de/wphg/WpHG.pdf, 

archived at http://perma.cc/EX64-UCYG, unofficial English translation available at https://www.bafin.de/ 

SharedDocs/Veroeffentlichungen/EN/Aufsichtsrecht/Gesetz/WpHG_en.html?nn=8356586, archived at

http://perma.cc/U3J5-M55M. 

24 Wertpapierprospektgesetz [WpPG] [Securities Prospectus Act], June 22, 2005, BGBL. I at 1698, 

http://www.gesetze-im-internet.de/wppg/WpPG.pdf, archived at http://perma.cc/5B9L-FL8X, unofficial 

English translation available at https://www.bafin.de/SharedDocs/Downloads/EN/Aufsichtsrecht/ 

dl_wppg_en.html?nn=8356586 (English version updated through June 22, 2011), archived at

http://perma.cc/75RV-X5HQ. 

25 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market 

Abuse (Market Abuse Regulation) and Repealing Directive 2003/6/EC of the European Parliament and of the 

Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, 2014 O.J. (L 173) 1, 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0596&from=EN, archived at

http://perma.cc/RSV8-9K97. 

26 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 6. 
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not be classified as electronic securities in most cases.27 They therefore will not be subject to the 

provisions of the Securities Trading Act, the Securities Prospectus Act, or the Investment Assets 

Act.28 Thus, there is no obligation to publish a prospectus or information sheet for the public 

offering of utility tokens. The paper states that the “whitepapers” that are generally published 

are not comparable and do not enable an investor to make an informed decision. It also points 

out the risks associated with investing in utility tokens.29 It notes that the European Securities and 

Markets Authority (ESMA) has also pointed out the necessity to create adequate risk disclosure 

requirements in its advice on ICOs and cryptoassets.30 The paper proposes two different options 

to handle this situation: 

 Germany will wait until the EU passes a regulation on the issuance of utility tokens based on 

ESMA’s recommendations and will actively participate in the legislative process; or 

 Germany could pass national legislation as a bridge solution that would be in force until an 

EU regulation has been passed. It would require the publication of an information sheet 

approved by the German Federal Financial Supervisory Authority (Bundesanstalt für 

Finanzdienstleistungsaufsicht, BaFin) for every public offer of utility tokens.31

2. Proposal to Regulate Distributed Ledger Technologies 

In addition, on September 11, 2018, the parliamentary group of the Free Democratic Party (FDP) 

submitted a request that the federal government regulate distributed ledger technologies (DLT) 

to the German parliament.32 The proposal aims to provide legal certainty for the application of 

DLT, among others blockchain technology and ICOs, and to create a workable legal framework 

so that private persons as well as companies can make use of the new technology.33 It also states 

that the treatment of utility tokens, debt tokens, and security tokens remains unclear and there is 

no enforceable legal protection against “ICO scams.” The application of tax law must also be 

clarified.34 The proposal requests the following: 

                                                            

27 Id. at 7. 

28 Id.; Vermögensanlagengesetz [VermAnlG] [Investment Assets Act], Dec. 6, 2011, BGBL. I at 2481, 

http://www.gesetze-im-internet.de/vermanlg/VermAnlG.pdf, archived at http://perma.cc/W5QH-U24Y. 

29 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 7. 

30 Id. at 7; ESMA, ADVICE. INITIAL COIN OFFERINGS AND CRYPTO-ASSETS (Jan. 9, 2019) (ESMA REPORT), 

https://www.esma.europa.eu/file/49978/download?token=56LqdNMN, archived at http://perma.cc/2GRYJ8BG. For more information on the ESMA report, see the EU survey in this report. 

31 BUNDESMINISTERIUM DER FINANZEN, supra note 5, at 8. 

32 DEUTSCHER BUNDESTAG: DRUCKSACHEN UND PROTOKOLLE [BT-DRS.] 19/4217, http://dip21.bundestag. 

de/dip21/btd/19/042/1904217.pdf, archived at http://perma.cc/CEC9-UW3L. 

33 Id. at 2. 

34 Id.
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 Creation of more expertise and resources at BaFin to deal with regulatory hurdles with regard 

to the use of blockchain technology in the financial market. 

 BaFin must be more transparent with regard to its classification of tokens; clear criteria must 

be published and be publicly available; the framework conditions for blockchain 

technologies, ICOs, and token sales must be available in several languages. 

 Companies must have the possibility to submit a voluntary prospectus for tokens to BaFin for 

its approval; furthermore, Germany should advocate for EU-wide rules on prospectuses for 

securities token offers. 

 Tax authorities must be technically capable of capturing situations involving cryptocurrencies 

and token issuances and be able to tax them appropriately. Data on blockchain technology 

must be compiled. 

 A review must be undertaken as to whether the current legal framework is compatible with 

DLT and whether there are regulatory gaps, including in financial laws and civil law. 

 The requirement that securities must be embodied in physical form must be abolished and a 

qualified digital register must be established. 

 The use of smart contracts must be reviewed. 

 Data protection rules must be updated. 

 The role of banks as digital wallet providers must be reviewed and classified; a new provision 

in the Banking Act might be necessary. 

 Taxation in general must be clarified—in particular whether the sale of tokens is subject to 

the “First-In-First-Out-Rule,“ the ”Last-In-Last-Out-Rule,“ or if there is a choice; the tax 

treatment of forks; and whether the sale of tokens is subject to value-added tax (VAT).35 

B. Anti-Money Laundering Law 

On July 9, 2018, the amendment of the European Union’s Anti-Money Laundering Directive (5th 

AMLD) entered into force, extending the customer due diligence requirements to custodian 

wallet providers and virtual-currency exchange platforms, and defined virtual currencies.36

                                                            

35 Id. at 3 & 4. 

36 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), 2018 O.J. (L 156) 

43, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN, archived at

http://perma.cc/JV7W-64Y5; Consolidated Version of the Directive (EU) 2015/849 of the European Parliament 

and of the Council of 20 May 2015 on the Prevention of the Use of the Financial System for the Purposes of 

Money Laundering or Terrorist Financing, Amending Regulation (EU) No. 648/2012 of the European 

Parliament and of the Council, and Repealing Directive 2005/60/EC of the European Parliament and of the 

Council and Commission Directive 2006/70/EC (Anti-Money Laundering Directive, AMLD), 2015 O.J. (L 141) 

73, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02015L0849-20180709&qid= 

1552510550346&from=EN, archived at http://perma.cc/W7KN-PCPM. For more detailed information on the 

amendment, see the EU survey in this report. 
Regulatory Approaches to Cryptoassets: Germany 

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Member States must transpose the new rules into national law by January 10, 2020.37 Germany so 

far has not implemented the changes into its domestic law.38

C. Taxation 

In February 2018, the German Federal Ministry of Finance published guidance on VAT treatment 

of bitcoin and other virtual currencies. It determined that transactions to exchange a traditional 

currency for bitcoin or other virtual currencies and vice versa constitute the taxable supply of 

other services for consideration, but fall under the exemption from VAT. It stated that bitcoin or 

other virtual currencies that are used simply as a means of payment are treated the same as 

traditional means of payment. Using bitcoin or other virtual currencies for no other purpose than 

as a means of payment is therefore not taxable.39 This guidance is in line with the European Court 

of Justice (ECJ) decision Hedqvist dated October 22, 2015.40

II. Custodianship of Cryptocurrencies by Financial Institutions 

It appears that Germany does not have any specific rules on custodianship of cryptocurrencies 

by financial institutions. 

III. Regulation of Cryptocurrencies as Financial Securities 

BaFin qualifies virtual currencies/cryptocurrencies as units of account and therefore financial 

instruments.41 Undertakings and persons that arrange the acquisition of tokens, sell or purchase 

tokens on a commercial basis, or carry out principal broking services in tokens via online trading 

platforms, among others, are generally required to obtain authorization from BaFin in advance.42

                                                            

37 5th AMLD, supra note 36, art. 4, para. 1. 

38 Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten [Geldwäschegesetz] [GwG] [Anti-Money 

Laundering Act], June 23, 2017, BUNDESGESETZBLATT [BGBL.] [FEDERAL LAW GAZETTE] I at 1822, as amended, 

http://www.gesetze-im-internet.de/gwg_2017/GwG.pdf, archived at http://perma.cc/E7DA-VM42. 

39 Bundesministerium der Finanzen [BMF] [Federal Ministry of Finance], BMF-Schreiben. Umsatzsteuerliche 

Behandlung von Bitcoin und anderen sog. virtuellen Währungen; EuGH-Urteil vom 22. Oktober 2015, C264/14, Hedqvist [BMF-Letter. VAT Treatment of Bitcoin and Other So-Called Virtual Currencies; ECJ Decision 

of October, 2015, C-264/14, Hedqvist] (BMF Letter), Feb. 27, 2018, at 1 & 2, http://www.bundesfinanz 

ministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Umsatzsteuer/UmsatzsteuerAnwendungserlass/2018-02-27-umsatzsteuerliche-behandlung-von-bitcoin-und-anderen-sog-virtuellenwaehrungen.pdf?__blob=publicationFile&v=1, archived at http://perma.cc/56TQ-9RJJ. 

40 Case C-264/14, Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718, http://curia.europa.eu/juris/celex. 

jsf?celex=62014CJ0264&lang1=en&type=TXT&ancre, archived at http://perma.cc/7Q6Q-MM9V. 

41 Gesetz über das Kreditwesen [KWG] [Banking Act], Sept. 9, 1998, BGBL. I at 2776, § 1, para. 11, sentence 1, no. 

7, http://www.gesetze-im-internet.de/kredwg/KWG.pdf, archived at http://perma.cc/7WF4-79PG, unofficial 

English translation available at http://perma.cc/GV76-TSDZ (English version updated through July 15, 2014), 

archived at http://perma.cc/GV76-TSDZ; Virtual Currency (VC), BAFIN, https://www.bafin.de/EN/ 

Aufsicht/FinTech/VirtualCurrency/virtual_currency_node_en.html (last visited Mar. 21, 2019), archived at 

http://perma.cc/HF5Q-E7AF.

42 Banking Act, § 32; Virtual Currency (VC), supra note 41. 
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However, on September 29, 2018, the Higher Regional Court of Berlin (Kammergericht Berlin, 

KG Berlin) held that trading in bitcoin does not require a banking license because it is not a 

financial instrument—in particular, not a unit of account within the meaning of the German 

Banking Act. The decision is directly at odds with the regulatory practice of BaFin. The Court 

ruled that BaFin overstepped its competency when it classified bitcoin as “units of account” and 

therefore made them subject to authorization.43

In February 2018, the BaFin published information on the regulatory assessment of ICOs and the 

tokens, coins, and cryptocurrencies on which they are based.44 It stated that firms involved in 

ICOs need to assess on a case-by-case basis whether the ICOs qualify as financial instruments 

(transferable securities, units in collective investment undertakings, or investments) or as 

securities and therefore trigger the need to comply with the relevant financial legislation. 

                                                            

43 KG Berlin, Sept. 25, 2018, Docket No. (4) 161 Ss 28/18 (35/18), http://www.gerichtsentscheidungen.berlinbrandenburg.de/jportal/portal/t/279b/bs/10/page/sammlung.psml?pid=Dokumentanzeige&showdoccase=

1&js_peid=Trefferliste&documentnumber=1&numberofresults=1&fromdoctodoc=yes&doc.id=KORE22387201

8&doc.part=L&doc.price=0.0#focuspoint, archived at http://perma.cc/AS2C-6RVN. For more details on the 

case, see Jenny Gesley, Germany: Court Holds That Bitcoin Trading Does Not Require a Banking License, GLOBAL 

LEGAL MONITOR (Oct. 19, 2018), http://www.loc.gov/law/foreign-news/article/germany-court-holds-thatbitcoin-trading-does-not-require-a-banking-license/, archived at http://perma.cc/JK24-ZFA9. 

44 BaFin, Advisory Letter (WA). Supervisory Classification of Tokens or Cryptocurrencies Underlying “Initial 

Coin Offerings” (ICOs) as Financial Instruments in the Field of Securities Supervision, reference no. WA 11-QB 

4100-2017/0010, https://www.bafin.de/SharedDocs/Downloads/EN/Merkblatt/WA/dl_hinweisschreiben_ 

einordnung_ICOs_en.pdf?__blob=publicationFile&v=2, archived at http://perma.cc/69Z2-JT8L. 
The Law Library of Congress 98 

Gibraltar 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY Gibraltar has actively sought to provide legal certainty regarding the operation of 

cryptocurrencies within its jurisdiction. It currently requires the registration of firms 

that use distributed ledger technology to store or transmit value belonging to others. 

The registration process involves the Gibraltar Financial Services Commission 

reviewing the application and, if satisfied that certain criteria are met, a license may be 

granted, enabling the holder to operate a business using distributed ledger technology. 

Gibraltar is also in the process of introducing regulations that will regulate digital 

tokens that are not securities. 

I. Introduction 

The Gibraltar Financial Services Commission (GFSC) is the regulator of the financial services 

market in Gibraltar and is responsible for regulating providers of such services that conduct 

business in Gibraltar and overseas. The GFSC must undertake this responsibility “in an effective 

and efficient manner in order to promote good business, protect the public from financial loss 

and enhance Gibraltar’s reputation as a quality financial centre.”1

The government of Gibraltar recently introduced regulations governing the use of distributed 

ledger technology (DLT) in order to provide legal certainty to those operating within this 

framework, help with consumer confidence, and ensure that Gibraltar’s reputation and its 

financial sector is protected.2 Gibraltar has established a regulatory framework for 

cryptocurrency exchanges, and is currently working on legislation to regulate initial coin 

offerings (ICOs). The Gibraltar Funds and Investment Association has stated that the DLT 

legislation and upcoming ICO regulations has resulted in a surge of interest in Gibraltar that 

has had 

a positive effect on Gibraltar's funds industry. Gibraltar is now considered the ‘go-to’ place 

for anything involving crypto currency or blockchain technology . . . [and] it is one of the 

few jurisdictions in the world where it is possible to open a bank account for 

such activities.3

 

1 Press Release, Gibraltar Financial Services Commission (GFSC), Distributed Ledger Technology (DLT) 

Regulatory Framework (Jan. 2, 2018), http://www.gfsc.gi/news/distributed-ledger-technology-dlt-regulatoryframework-270, archived at https://perma.cc/7DPW-ANKK. 

2 Presentation, Siân Jones & Nicky Gomez, GFSC, Gibraltar’s DLT Regulatory Framework: Turning the Vision 

into Reality 7 (Oct. 2017), http://www.gfsc.gi/publications/2018/10/DLT Turning Vision into Reality 20 

October 2017.pdf, archived at https://perma.cc/4LSC-EAZ3. 

3 Gibraltar: A Safe Haven for Crypto Funds, GIBRALTAR FUNDS & INVESTMENTS ASSOCIATION, 

https://www.gfia.gi/crypto (last visited Mar. 26, 2019), archived at https://perma.cc/G7NC-2EKL. 
Regulatory Approaches to Cryptoassets: Gibraltar 

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II. Regulation of Cryptoassets 

In May 2017, the Gibraltar government published a consultation paper discussing proposals for 

a regulatory framework covering DLT.4 In September 2017, the GFSC issued a statement that a 

new regulatory framework for DLT would be introduced and, on October 12, 2017, the 

government introduced the Financial Services (Distributed Ledger Technology Providers) 

Regulations 20175 under the Financial Services (Investment and Fiduciary Services) Act.6 These 

regulations entered into force on January 1, 2018.7 The government of Gibraltar claims that the 

GFSC was the first regulator to introduce a framework regulating DLT.8 The aim of the legislation 

is to protect consumers, protect the reputation of Gibraltar as a well-regulated and safe 

environment for firms that use DLT, and enable Gibraltar to prosper from the use and growth of 

new financial technology.9 

The term “Distributed Ledger Technology” is defined in the Financial Services (Investment and 

Fiduciary Services) Act 1989 as 

a database system in which– 

(a) information is recorded and consensually shared and synchronised across a network 

of multiple nodes; and 

(b) all copies of the database are regarded as equally authentic[.]10

The DLT framework in Gibraltar does not regulate cryptocurrencies themselves, rather it serves 

to fill the gap by providing a regulatory regime for activities that use DLT for storing or 

transmitting value that belongs to another for businesses operating in or from Gibraltar that are 

not subject to another regulatory framework.11 Providing DLT services is defined in the Financial 

Services (Investment and Fiduciary Services) Act 1989 as “[c]arrying on by way of business, in or 

from Gibraltar, the use of distributed ledger technology for storing or transmitting value 

 

4 GIBRALTAR FINANCE, PROPOSALS FOR A DLT REGULATORY FRAMEWORK 18 (May 2017), 

http://www.gibraltarfinance.gi/downloads/20170508-dlt-consultation-publishedversion.pdf?dc_%3D1494312876, archived at https://perma.cc/K36X-47YD. 

5 Financial Services (Distributed Ledger Technology Providers) Regulations 2017, LN 2017/204, regs. 4-5, 

https://www.gibraltarlaws.gov.gi/articles/2017s204.pdf, archived at https://perma.cc/KN48-CJQF. 

6 Financial Services (Investment and Fiduciary Services) Act 1989, §§ 5, 7, 53, 56, 

http://www.gibraltarlaws.gov.gi/articles/1989-47o.pdf, archived at https://perma.cc/MUK3-5Q3T. 

7 Financial Services (Distributed Ledger Technology Providers) Regulations 2017, reg. 1(2). See also Press 

Release, GFSC, supra note 1. 

8 Press Release, GFSC, supra note 1. 

9 Id. 

10 Financial Services (Investment and Fiduciary Services) Act 1989, Act No. 49-1989, sched. 3 ¶ 10(2) (as 

amended). 

11 Id. sched. 3 ¶ 10(1). 
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belonging to others.”12 “Value” is defined as including “assets, holdings and other forms of 

ownership, rights or interests, with or without related information, such as agreements or 

transactions for the transfer of value or its payment, clearing or settlement.”13

The DLT framework requires that firms operating in or from Gibraltar that engage in this type of 

activity for business purposes must be authorized by the GFSC.14 The GFSC has stated that 

“[f]irms and activities that are subject to another regulatory framework continue to be regulated 

under that framework.”15 

In order to obtain a DLT provider license, a person must submit an initial application assessment 

request with a £2,000 fee16 (approx. US$2,750) to the GFSC, 17 which must 

(a) assess the nature and complexity of the requester’s proposed business model and of 

the products and services which the requester proposes to offer; and 

(b) provide the requester with an initial assessment notice informing the requester of 

(i) any steps which the requester must take before applying for a DLT Provider’s 

licence; 

(ii) the documents and other information which must accompany any application; 

and 

(iii) the prescribed application fee which is payable. 

Licenses are then granted if the applicant follows these steps and the GFSC is satisfied the 

applicant will comply with the nine regulatory principles.18 Upon receiving an application 

assessment notice from the GFSC, the person may then apply for a DLT provider’s license 

conforming with the requirements of the notice and including an additional fee that ranges from 

£8,000 (approx. US$11,000) to £28,000 (approx. US$39,000), depending upon the complexity of the 

application, which is determined during the initial application assessment.19 

 

12 Id. 

13 Id. sched. 3 ¶ 10(2).

14 Distributed Ledger Technology Regulatory Framework (DLT Framework), GFSC, www.gfsc.gi/dlt (last visited 

Mar. 26, 2019), archived at https://perma.cc/2VEY-TNUM. 

15 Id.; Financial Services (Investment and Fiduciary Services) Act 1989, Act No. 49-1989, sched. 3 ¶ 10(3) (as 

amended). 

16 GFSC, DLT APPLICATION PROCESS AND FEE STRUCTURE (Oct. 4, 2017), https://www.fsc.gi/uploads/DLT 

Application Process and Fee Structure Public.pdf, archived at https://perma.cc/96VL-T4TJ. 

17 Financial Services (Distributed Ledger Technology Providers) Regulations 2017, LN 2017/204, regs. 4-5; 

Financial Services (Investment and Fiduciary Services) Act 1989, Act No. 49-1989, § 2(1). 

18 Financial Services (Distributed Ledger Technology Providers) Regulations 2017, LN 2017/204, reg. 5. 

19 Financial Services Commission (Fees) Regulations 2016, sched. 2, https://www.gibraltarlaws.gov.gi/ 

articles/2016s071.pdf, archived at https://perma.cc/TJF7-FK8W. 
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Nine regulatory principles are set out in schedule 2 of the Financial Services (Distributed Ledger 

Technology Providers) Regulations 2017:20 

1. A DLT Provider must conduct its business with honesty and integrity.21 

2. A DLT Provider must pay due regard to the interests and needs of each and all its 

customers and must communicate with them in a way that is fair, clear and not 

misleading.22 

3. A DLT Provider must maintain adequate financial and non-financial resources.23 

4. A DLT Provider must manage and control its business effectively, and conduct its 

business with due skill, care and diligence; including having proper regard to risks to its 

business and customers.24 

5. A DLT Provider must have effective arrangements in place for the protection of customer 

assets and money when it is responsible for them.25 

6. A DLT Provider must have effective corporate governance arrangements.26 

7. A DLT Provider must ensure that all of its systems and security access protocols are 

maintained to appropriate high standards.27 

8. A DLT Provider must have systems in place to prevent, detect and disclose financial 

crime risks such as money laundering and terrorist financing.28 

9. A DLT Provider must be resilient and have contingency arrangements for the orderly 

and solvent wind down of its business.29

 

20 Id. 

21 See GFSC, DLT PROVIDER GUIDANCE NOTES: HONESTY AND INTEGRITY (2017), www.gfsc.gi/uploads/Guidance 

Note 1 - Honesty and Integrity GFSC.pdf, archived at https://perma.cc/VD8U-VQLZ. 

22 See GFSC, DLT PROVIDER GUIDANCE NOTES: CUSTOMER CARE (2017), http://www.gfsc.gi/uploads/Guidance 

Note 2 - Customer Care GFSC.pdf, archived at https://perma.cc/5R44-58K5. 

23 Further guidance on this principle is available at: GFSC, DLT PROVIDER GUIDANCE NOTES: FINANCIAL AND 

NON-FINANCIAL RESOURCES (2017), http://www.gfsc.gi/uploads/Guidance Note 3 - Resources GFSC.pdf, 

archived at https://perma.cc/Z2RL-S9TU. 

24 Further guidance on this principle is available at: GFSC, DLT PROVIDER GUIDANCE NOTES: RISK MANAGEMENT

(2017), http://www.gfsc.gi/uploads/Guidance Note 4 - Risk Management GFSC.pdf, archived at

https://perma.cc/2A9V-QZCX. 

25 See GFSC, DLT PROVIDER GUIDANCE NOTES: PROTECTION OF CLIENT ASSETS (2017), http://www.gfsc.gi/ 

uploads/Guidance Note 5 - Protection of Client Assets GFSC.pdf, archived at https://perma.cc/QWT6-GXYG. 

26 See GFSC, DLT PROVIDER GUIDANCE NOTES: CORPORATE GOVERNANCE (2017), http://www.gfsc.gi/uploads/ 

Guidance Note 6 - Corporate Governance GFSC.pdf, archived at https://perma.cc/TW75-ZD48. 

27 See GFSC, DLT PROVIDER GUIDANCE NOTES: SYSTEMS AND SECURITY ACCESS (2017), http://www.gfsc.gi/ 

uploads/Guidance Note 7 - Cyber Security GFSC.pdf, archived at https://perma.cc/3VCD-YSC4. 

28 See GFSC, DLT PROVIDER GUIDANCE NOTES: FINANCIAL CRIME (2017), http://www.gfsc.gi/uploads/Guidance 

Note 8 - Financial Crime GFSC.pdf, archived at https://perma.cc/S5QZ-7SP6. 

29 See GFSC, DLT PROVIDER GUIDANCE NOTES: RESILIENCE (2017), http://www.gfsc.gi/publications/2018/11/ 

Guidance Note 9 - Resilience GFSC.pdf, archived at https://perma.cc/59G6-XUXR. 
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In a paper discussing the introduction of these regulations, the government noted that, 

[i]n determining whether a principle is met, the GFSC will have regard to similarities in 

such matters as risk profile, use case, business model and product. The principles will be 

applied proportionately and on a risk-based approach.30

DLT provider license holders are further required to pay an annual fee, charged at a flat rate of 

£10,000 (approx. US$14,000), although an additional fee of up to £20,000 (approx. US$28,000) may 

be charged “depending upon the complexity of regulating the DLT Provider.”31 Companies that 

are currently licensed under the existing financial legislation in Gibraltar and use DLT to improve 

their procedures and processes do not need a separate license unless the activities that DLT is 

used for are not within the scope of the current license. Banks that wish to provide virtual 

currency services and warrants need to obtain a new DLT provider license for these activities. 

Providing DLT services without a license under the regulations is an offense, punishable with a 

fine of up to £10,000 (approx. US$14,000).32

The nine regulatory principles that govern the DLT framework were established as it was 

determined that 

[a] flexible, adaptive approach is required in the case of novel business activities, products, 

and business models. We consider that regulatory outcomes remain central but are better 

achieved through the application of principles rather than rigid rules. This is because for 

businesses based on rapidly-evolving technology such hard and fast rules can quickly 

become outdated and unfit for purpose.33

III. Gibraltar Blockchain Exchange 

The Gibraltar Blockchain Exchange (GBX)34 was established in November 2018 as an official 

licensed exchange by the GFSC and is a subsidiary of the Gibraltar Stock Exchange.35 It is 

recognized by ESMA (the European regulator) and HMRC (UK) and 

aims to be a world-leading institutional-grade token sale platform and digital asset 

exchange. Built upon principles of decentralisation and community consensus, we seek to 

create a new era of trust, openness and global acceptance for the crypto industry, one 

quality token listing at a time.36

 

30 PROPOSALS FOR A DLT REGULATORY FRAMEWORK, supra note 4, at 18. 

31 Financial Services Commission (Fees) Regulations 2016, LN 2016/071, sched. 1. 

32 Financial Services (Penalty Fees) Regulations 1993, LN 1993/147, sched., http://www.gibraltarlaws.gov.gi/ 

articles/1993s147.pdf, archived at https://perma.cc/A58V-PQ2C. 

33 Distributed Ledger Technology Regulatory Framework (DLT Framework), supra note 14. 

34 A Trusted, Regulated, Insured Digital Asset Exchange (DAX), GIBRALTAR BLOCKCHAIN EXCHANGE, https://gbx.gi

(last visited Mar. 26, 2019), archived at https://perma.cc/K8GX-2JBL. 

35 Id. 

36 Id. 
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The DLT framework requires exchanges to register with the GFSC and meet the criteria discussed 

above.37 The objective of the GBX is to enable consumers to access vetted token sales, while 

enabling token issuers to provide tokens to a “large pool of AML/KYC-cleared [anti-money 

laundering/know your customer-cleared] buyers.”38

The Digital Asset Exchange (DAX) was also recently formed as a licensed, regulated digital asset 

exchange that forms part of the Gibraltar Stock Exchange Group.39

IV. Digital Tokens 

Unless a digital token has the underlying structure of a security, these assets are currently 

unregulated in Gibraltar.40 In 2017 the GFSC issued a statement that it would monitor the use of 

ICOs within the DLT framework.41 A further statement was issued in 2018 stating that the GFSC 

would work to introduce legislation to regulate digital tokens, which it considered are 

“essentially those created and traded using [DLT].”42 The token regulation proposals 

recommended that these services should be covered to in the same manner as financial services 

that are currently regulated and cover 

 the promotion, sale and distribution of tokens; 

 operating secondary market platforms trading in tokens; and 

 providing investment and ancillary services relating to tokens.43 

The proposed framework in the token regulation proposals will not directly regulate tokens, but 

how the sale is conducted, the distribution and promotion of tokens and require disclosure of 

information aimed to ensure consumers have an accurate idea of the risks posed by purchasing 

the token.44 

A statement from the GFSC stated the regulations would include rules governing disclosure of 

information about the token, anti-money laundering provisions and cover 

 

37 GIBRALTAR BLOCKCHAIN EXCHANGE, EXCHANGE RULES (v. 2.0, Aug. 2018), https://gbx.gi/docs/GBXExchange-Rules.pdf, archived at https://perma.cc/42ST-KJE4. 

38 A Trusted, Regulated, Insured Digital Asset Exchange (DAX), supra note 33. 

39 Id. 

40 GIBRALTAR FINANCE, TOKEN REGULATION 2 (2018), http://gibraltarfinance.gi/20180309-token-regulation---

policy-document-v2.1-final.pdf, archived at https://perma.cc/Y9TF-FFYY. 

41 Press Release, GFSC, Statement on Initial Coin Offerings (Sept. 22, 2017), 

http://www.fsc.gi/news/statement-on-initial-coin-offerings-250, archived at https://perma.cc/HD3M-N6UB. 

42 Press Release, Minister for Commerce & GFSC, HM Government of Gibraltar and the Gibraltar Financial 

Services Commission Announce Plans for Token Legislation (Feb. 12, 2018), www.gfsc.gi/news/hmgovernment-of-gibraltar-and-the-gibraltar-financial-services-commission-announce-plans-for-tokenlegislation-272, archived at https://perma.cc/5LGC-ALNZ. 

43 TOKEN REGULATION, supra note 40, at 2. 

44 Id. at 4. 
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 the promotion, sale and distribution of tokens by persons connected with Gibraltar; 

 secondary market activities relating to tokens, carried out in or from Gibraltar; and 

 the provision, by way of business, in or from Gibraltar of investment advice relating 

to tokens.45

The GFSC has stated that the proposed regulations are a natural extension of the DLT framework: 

Token regulation is the natural progression following the regulation of DLT Providers, 

being vital to the protection of consumers. One of the key aspects of the token regulations 

is that we will be introducing the concept of regulating authorised sponsors who will be 

responsible for assuring compliance with disclosure and financial crime rules.46

Cryptocurrencies that operate solely as a decentralized virtual currency, such as bitcoin, are 

currently excluded from the token regulation proposals, but the GFSC is currently reviewing the 

possibility of regulating investment funds that involve these types of digital assets.47 

V. Financial Services 

The Gibraltar Funds and Investment Association formed a crypto fund committee to investigate 

the issues related to crypto currencies. The first resolution from the committee was to 

encourage the industry of Gibraltar to use Experienced Investor Funds (EIF)48 as the 

regulatory regime for crypto funds. . . . The industry that investors in crypto funds should 

be afforded the regulatory infrastructure and the protections that the EIFs regulations offer 

along with the support of experienced EIF directors, fund administrators and auditors, 

many of whom are notable absent in the establishment of some private funds.49

The Association has published a code of conduct that covers corporate governance, risk 

management, valuation, custody, corporate governance and anti-money laundering measures.50 

The Association stated that it “expects EIFs to comply with the guidance notes that deal with 

Protection of Client Assets, Systems and Securities Access and Resilience which apply to 

DLT providers.”51

 

45 Press Release, Minister for Commerce & GFSC, supra note 42. 

46 Id. 

47 Id. 

48 Financial Services (Experienced Investor Funds) Regulations 2018, LN 2018/226, 

https://www.gibraltarlaws.gov.gi/articles/2018s226.pdf, archived at https://perma.cc/6745-PZBE. 

49 Gibraltar: A Safe Haven for Crypto Funds, supra note 3. 

50 GIBRALTAR FUNDS AND INVESTMENT ASSOCIATION, CORPORATE GOVERNANCE CODE FOR GIBRALTAR CRYPTO 

FUNDS (2018), www.gfia.gi/images/pdf/GFIA-Code-of-Conduct-for-Crypto-Funds.pdf, archived at

https://perma.cc/SX9N-99GW. 

51 Press Release, GFSC, Statement on Funds Investing in Digital Assets (Oct. 17, 2018), https://www.fsc.gi/ 

news/statement-on-funds-investing-in-digital-assets-298, archived at https://perma.cc/73ES-HUR7. 
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VI. Money Laundering 

The Proceeds of Crime Act transposed the EU Anti-Money Laundering Directive into the national 

law of Gibraltar. Section 9(1)(p) extended the definition of “relevant financial business” 

to include 

undertakings that receive, whether on their own account or on behalf of another person, 

proceeds in any form from the sale of tokenised digital assets involving the use of 

distributed ledger technology or a similar means of recording a digital representation of 

an asset.52

This definition brings the sales of digital assets within the existing anti-money laundering (AML) 

laws, which are extensive and require relevant financial businesses to conduct customer due 

diligence measures including, but not limited to, verifying the identity of customers, keeping 

accurate records, and conducting risk assessments.53 Additional AML prevention mechanisms 

are put in place through the DLT framework, which mandates that a firm must have systems in 

place to prevent, detect and disclose any financial crime risks, including money laundering. 

VII. Taxation 

Gibraltar is a low tax jurisdiction, and capital gains tax or dividend tax is not charged on 

cryptocurrencies. Crypto exchanges are liable to pay corporate income tax, currently charged 

at 10%.54 

 

52 Proceeds of Crime Act 2015, Act No. 2015-22, § 9(1)(p), https://www.gibraltarlaws.gov.gi/articles/2015-

22o.pdf, archived at https://perma.cc/WEK3-A4MF. 

53 Id. Part III. 

54 Income Tax Act 2010, Act No. 2010-21, https://www.gibraltarlaws.gov.gi/articles/2010-21o.pdf, archived at

https://perma.cc/R34K-AYYN. 
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Hong Kong 

Laney Zhang 

Foreign Law Specialist

SUMMARY In Hong Kong, virtual currencies are not considered legal tender but are virtual 

commodities. Hong Kong’s Securities and Futures Commission (SFC) has clarified that 

virtual assets falling under the definition of “securities” are subject to the 

SFC's regulation. 

 More recently, in November 2018, the SFC issued guidance on a new regulatory 

approach to bring more virtual asset portfolio managers and distributors of virtual asset 

funds under its regulatory net. The SFC will impose licensing conditions on 

corporations that manage or intend to manage portfolios investing in virtual assets, 

where 10% or more of the gross asset value of the portfolio is invested in virtual assets, 

irrespective of whether the virtual assets meet the definition of “securities” or 

“futures contracts.” 

 Under the new regulatory framework, the SFC will allow licensed corporations that 

manage virtual asset portfolios to select the most appropriate custodial arrangement. 

For example, the assets may be held by the licensed corporation itself, with a third-party 

custodian, or by an exchange. 

 The SFC is also exploring the potential regulation of virtual asset trading platform 

operators. Such platform operators would be required to provide services only to 

professional investors. Virtual assets issued through an initial coin offering (ICO) 

would only be admitted for trading on the platform at least twelve months after the 

completion of the ICO or when the ICO project has started to generate profit. 

I. Approach to Assets Created Through Blockchain 

On January 8, 2014, in replying to a question raised at the meeting of the Legislative Council on 

the use of bitcoin, the Secretary for Financial Services and the Treasury said virtual currencies 

such as bitcoin are not considered legal tender but are virtual commodities in Hong Kong, and 

warned about the risks of using virtual currencies.1 

More recently, in a speech made on September 21, 2018, the Chief Executive of the Hong Kong 

Monetary Authority (HKMA) reiterated that cryptoassets are not money or currencies, and 

warned that “people wishing to invest or speculate in crypto-assets should do so without 

 

1 Press Release, Government of Hong Kong, LCQ1: Monitoring the Use of Bitcoins (Jan. 8, 2014), http://www. 

info.gov.hk/gia/general/201401/08/P201401080357.htm, archived at https://perma.cc/AY9N-B58F. 
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harboring the unrealistic expectation that they would one day become money or currencies that 

can be used as a means of exchange.”2

In a circular issued on March 18, 2019, the HKMA asked banks and other authorized institutions 

planning to engage in activities relating to cryptoassets to discuss with the HKMA and 

demonstrate that they have put in place appropriate systems and controls to identify and manage 

any risks associated with such activities. The circular was issued after the Basel Committee on 

Banking Supervision (BCBS) issued a statement on cryptoassets. The BCBS statement sets out its 

“prudential expectations regarding banks’ exposures to crypto-assets and related services in 

jurisdictions where banks are involved in such business activities.”3

A. Financial Regulation 

Hong Kong’s Securities and Futures Commission (SFC) has issued a number of circulars 

clarifying its regulatory stance on virtual assets. According to the SFC, where virtual assets fall 

under the definition of “securities” as defined in the Securities and Futures Ordinance, these 

products and related activities fall within the SFC’s ambit.4 

More recently, however, the SFC realized that many virtual assets do not amount to “securities.” 

By using the conventional regulatory approach, many investors in virtual assets are left 

unprotected. Having identified significant risks associated with investing in virtual assets, on 

November 1, 2018, the SFC issued its guidance on regulatory standards expected of virtual asset 

portfolio managers and fund distributors, aiming to bring virtual asset portfolio managers and 

distributors of virtual asset funds under its regulatory net. The SFC also stated that it was 

exploring the potential regulation of virtual asset trading platform operators, commonly known 

as crypotocurrency exchanges, and issued a conceptual framework with this regard. 5 

The SFC’s Statement on Regulatory Framework for Virtual Asset Portfolios Managers, Fund 

Distributors and Trading Platform Operators contains two appendixes, and an 

accompanying circular was also issued on the same day: 

 

2 Norman T.L. Chan, Chief Executive, Hong Kong Monetary Authority, Keynote Speech at Treasury Markets 

Summit 2018: “Crypto-assets and Money” (Sept. 21, 2018), https://www.hkma.gov.hk/eng/keyinformation/speech-speakers/ntlchan/20180921-1.shtml, archived at https://perma.cc/2GFJ-DYFU. 

3 Hong Kong Monetary Authority, BCBS Statement on Crypto-Assets (Mar. 18, 2019), 

https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2019/20190318e1.pdf, 

archived at https://perma.cc/K9WP-HLS6. 

4 Securities and Futures Commission (SFC), Statement on Regulatory Framework for Virtual Asset Portfolios 

Managers, Fund Distributors and Trading Platform Operators (Nov. 1, 2018) (Statement), 

https://www.sfc.hk/web/EN/news-and-announcements/policy-statements-and-announcements/regframework-virtual-asset-portfolios-managers-fund-distributors-trading-platform-operators.html, archived at

https://perma.cc/2MDU-2C3G. 

5 Id.
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 Appendix 1: Regulatory Standards for Licensed Corporations Managing Virtual 

Asset Portfolios;6 

 Appendix 2: Conceptual Framework for the Potential Regulation of Virtual Asset Trading 

Platform Operators;7

 Circular to Intermediaries Distribution of Virtual Asset Funds.8

1. Background 

In the statement, the SFC explained the background of its new regulatory approach on virtual 

assets as follows:

Under existing regulatory remits in Hong Kong, markets for virtual assets may not be 

subject to the oversight of the SFC if the virtual assets involved fall outside the legal 

definition of “securities” or “futures contracts” (or equivalent financial instruments). 

Therefore, investors who trade in virtual assets through unregulated trading platforms or 

invest in virtual asset portfolios which are managed by unregulated portfolio managers do 

not enjoy the protections afforded under the Securities and Futures Ordinance (SFO), such 

as requirements which ensure safe custody of assets and fair and open markets. If platform 

operators and portfolio managers are not regulated, their fitness and properness, including 

their financial soundness and competence, have not been assessed, and their operations 

are not subject to any supervision.9

2. Definition of Virtual Assets 

According to the SFC statement, a “virtual asset” is a digital representation of value, which is also 

known as “cryptocurrency,” “crypto-asset,” or “digital token.” Virtual assets “may be or claim to 

be, a means of payment, may confer a right to present or future earnings or enable a token holder 

to access a product or service, or a combination of any of these functions.”10

 

6 SFC, Regulatory Standards for Licensed Corporations Managing Virtual Asset Portfolios (Nov. 1, 2018) 

(Regulatory Standards), https://www.sfc.hk/web/EN/files/ER/PDF/App%201%20-

%20Reg%20standards%20for%20VA%20portfolio%20mgrs_eng.pdf, archived at https://perma.cc/2FLD-PG4P. 

7 SFC, Conceptual Framework for the Potential Regulation of Virtual Asset Trading Platform Operators (Nov. 

1, 2018) (Conceptual Framework), 

https://www.sfc.hk/web/EN/files/ER/PDF/App%202_%20Conceptual%20framework%20for%20VA%20tra

ding%20platform_eng.pdf, archived at https://perma.cc/DX59-TWVQ. 

8 SFC, Circular to Intermediaries Distribution of Virtual Asset Funds (Nov. 1, 2018) (Circular to Intermediaries), 

https://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=18EC77, archived at

https://perma.cc/VUM6-R68G. 

9 Statement, supra note 4. 

10 Id.
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3. Virtual Asset Portfolio Managers 

The SFC will impose licensing conditions on corporations that manage or intend to manage 

portfolios investing in virtual assets, where 10% or more of the gross asset value of the portfolio 

is invested in virtual assets, irrespective of whether the virtual assets meet the definition of 

“securities” or “futures contracts.”11 Only professional investors as defined by the Securities and 

Futures Ordinance are allowed to invest into virtual asset portfolio managed by these 

licensed corporations.12

4. Virtual Asset Fund Distributors 

In the Circular to Intermediaries Distribution of Virtual Asset Funds, the SFC provided detailed 

guidance and reminded firms that distribute funds investing in virtual assets that they should 

be registered with or regulated by the SFC and comply with its regulatory requirements, 

including the suitability obligations, when distributing these funds.13 Such funds should only be 

distributed to professional investors as defined by the Securities and Futures Ordinance, 

according to the Circular.14

5. Virtual Asset Trading Platform Operators 

For virtual asset trading platform operators, the SFC will explore whether they are suitable for 

regulation in the SFC Regulatory Sandbox: 

The SFC will observe the operations of interested trading platform operators and their 

compliance with proposed regulatory requirements in the Sandbox environment. . . . If it 

is decided at the end of this stage that it is appropriate to regulate platform operators, the 

SFC would then consider granting a licence and putting them under its close supervision. 

Alternatively, it may take the view that the risks involved cannot be sufficiently addressed 

and no licence shall be granted as protection for investors cannot be ensured.15

Under the conceptual framework, a platform operator would also be required to provide its 

services only to professional investors.16 Furthermore, a platform operator should only admit a 

virtual asset issued through an initial coin offering (ICO) for trading on its platform at least twelve 

months after the completion of the ICO, or when the ICO project has started to generate profit, 

whichever is earlier.17

 

11 Press Release, SFC, SFC Sets out New Regulatory Approach for Virtual Assets (Nov. 1, 2018), 

https://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=18PR126, 

archived at https://perma.cc/Y4D3-BEGU; Regulatory Standards, supra note 6, at 2. 

12 Regulatory Standards, supra note 6, at 3. 

13 Press Release, SFC, SFC Sets out New Regulatory Approach for Virtual Assets (Nov. 1, 2018), supra note 11; 

Circular to Intermediaries, supra note 8. 

14 Circular to Intermediaries, supra note 8. 

15 Press Release, SFC, SFC Sets out New Regulatory Approach for Virtual Assets (Nov. 1, 2018), supra note 11; 

16 Conceptual Framework, supra note 7, at 4. 

17 Id. 
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B. Anti-Money Laundering Law 

Under the conceptual framework for the potential regulation of virtual asset trading platform 

operators issued in November 2018, a virtual asset platform operator would be required to ensure 

that its anti-money laundering and countering financing of terrorism (AML/CFT) systems can 

adequately manage the money laundering and terrorist financing risks relating to the relevant 

activities. The conceptual framework also contains specific measures to be taken by a platform 

operator with this regard, such as obtaining sufficient contact information of the client, and 

suspending or terminating the account of any client who provides incomplete or suspicious 

contact information.18

Previously, on March 25, 2015, the Secretary for Financial Services and the Treasury responded 

to a question on the regulation of bitcoin trading activities raised at the meeting of the Legislative 

Council.19 The Secretary stated that the existing laws of Hong Kong provide for sanctions against 

unlawful acts such as money laundering, terrorist financing, fraud, pyramid schemes, and 

cybercrimes, with or without virtual commodities being involved. The Hong Kong Government 

and financial regulators would also keep a close watch on the development of bitcoin and other 

virtual commodities, he said 20

C. Taxation 

Hong Kong’s Inland Revenue Department does not appear to have issued any specific guidelines 

on how it would treat cryptocurrencies for the purpose of tax assessment. In general, there is no 

capital gains tax payable from the sale of financial instruments in Hong Kong, but the income tax 

and profits tax may apply on the income from cryptocurrency trading.21

II. Custodianship of Cryptocurrencies by Financial Institutions 

The SFC will allow licensed corporations that manage virtual asset portfolios to select the most 

appropriate custodial arrangement. For example, the assets may be held by the licensed 

corporation itself, with a third-party custodian, or by an exchange.22 

The following factors, among other matters, should be considered in the selection, appointment, 

and ongoing monitoring of custodians: 

 

18 Id. at 6–7. 

19 Press Release, Government of Hong Kong, LCQ4: Regulation of Trading Activities of Bitcoins (Mar. 25, 2015), 

http://www.info.gov.hk/gia/general/201503/25/P201503250463.htm, archived at https://perma.cc/WK74-

B453. 

20 Id.

21 Henry Yu, Hong Kong, in BLOCKCHAIN LAWS AND REGULATIONS 2019 (Global Legal Insights, Sept. 17, 2018), 

https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/hong-kong, archived at

https://perma.cc/W7PG-4SD5. 

22 Regulatory Standards, supra note 6, at 3. 
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(a) the experience and track record of the custodian in providing custodial services for 

virtual assets; 

(b) the regulatory status of the custodian, in particular, whether it is subject to any 

regulatory oversight over its virtual asset custodial business; 

(c) the corporate governance structure and background of the senior management of the 

custodian; 

(d) the financial resources and insurance cover of the custodian for the purpose of 

compensating its customers in the event of loss of customers’ assets; and 

(e) the operational capabilities and arrangements of the custodian, for example, the 

“wallet” arrangements and cybersecurity risk management measures.23

III. Regulation of Cryptocurrencies as Financial Securities 

As indicated above, under the new SFC regulatory approach announced in November 2018, the 

SFC will impose licensing conditions on firms that manage or intend to manage portfolios 

investing in virtual assets, irrespective of whether the virtual assets meet the definition of 

“securities” or “futures contracts.”24

Previously, in a statement on ICOs dated September 5, 2017, the SFC explained that, depending 

on the facts and circumstances of an ICO, digital tokens that are offered or sold may be 

“securities” as defined in the Securities and Futures Ordinance, and therefore subject to the 

securities laws of Hong Kong.25 According to the statement, where the digital tokens involved in 

an ICO fall under the definition of “securities,” dealing in or advising on the digital tokens, or 

managing or marketing a fund investing in such digital tokens, may constitute a “regulated 

activity.” Parties engaging in a “regulated activity” are required to be licensed by or registered 

with the SFC irrespective of whether the parties involved are located in Hong Kong, so long as 

such business activities target the Hong Kong public.26 

In another statement, dated February 9, 2018, the SFC alerted investors to the potential risks of 

dealing with cryptocurrency exchanges and investing in ICOs.27 In the alert, the SFC said it has 

taken regulatory action against a number of cryptocurrency exchanges and issuers of ICOs. The 

SFC had warned cryptocurrency exchanges in Hong Kong or with connections to Hong Kong 

that they should not trade cryptocurrencies that are “securities” as defined in the Securities and 

 

23 Id. at 4. 

24 Press Release, SFC Sets out New Regulatory Approach for Virtual Assets (Nov. 1, 2018), supra note 11. 

25 SFC, Statement on Initial Coin Offerings (Sept. 5, 2017), http://www.sfc.hk/web/ EN/news-andannouncements/policy-statements-and-announcements/statement-on-initial-coin-offerings.html, archived at

https://perma.cc/8VYV-W7D7. 

26 Id.

27 Press Release, SFC, SFC Warns of Cryptocurrency Risks (Feb. 9, 2018), https://www.sfc.hk/ 

edistributionWeb/gateway/EN/news-and-announcements/news/doc?refNo=18PR13, archived at

https://perma.cc/K72W-NUTC. 
Regulatory Approaches to Cryptoassets: Hong Kong 

The Law Library of Congress 112

Futures Ordinance without a license. The SFC had written to ICO issuers and most of them 

confirmed compliance with the SFC’s regulatory regime or immediately ceased to offer tokens to 

Hong Kong investors. The SFC stated it would continue to police the market and engage in 

enforcement actions when necessary, and also urged market professionals to do proper 

gatekeeping to prevent fraud or dubious fundraising, and to assist the SFC in ensuring 

compliance with the law.28 

IV. Treatment of Cryptoassets Not Considered Securities 

As mentioned above, the Secretary for Financial Services and the Treasury made a statement in 

2015, indicating that the existing laws of Hong Kong provide for sanctions against unlawful acts 

such as money laundering, terrorist financing, fraud, pyramid schemes, and cybercrimes, with or 

without virtual commodities being involved.29 In that statement, the Secretary said the police 

would take enforcement action if they find criminal conduct involving virtual commodities by 

conducting patrols, including searching for relevant information via public platforms on the 

Internet, the Secretary said.30

Cryptoassets not considered securities would be subject to the regulation of Hong Kong’s 

Customs and Excise Department (Customs) as virtual commodities. On January 30, 2014, the 

Hong Kong’s Customs issued a circular to money service operators, warning about the money 

laundering and terrorist financing risks associated with “virtual commodities such as Bitcoin.”31

“Virtual commodities which are transacted or held on the basis of anonymity by their nature pose 

significantly higher inherent ML/TF risks,” the circular states.32

 

28 Id.

29 Press Release, Government of Hong Kong, LCQ4: Regulation of Trading Activities of Bitcoins (Mar. 25, 2015), 

supra note 19. 

30 Id.

31 Customs and Excise Department, Circular to Money Service Operators, Anti-Money Laundering/CounterTerrorist Financing, Money Laundering and Terrorist Financing Risks Associated with Virtual Commodities 

(Jan. 30, 2014), https://www.customs.gov.hk/filemanager/common/pdf/circular_VC_30012014_en.pdf, 

archived at https://perma.cc/S3NZ-83N9.

32 Id.
The Law Library of Congress 113 

Ireland 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

I. Introduction 

Ireland does not appear to have any laws that specifically regulate cryptocurrencies.1 The Central 

Bank of Ireland has cautioned investors about the high risks that are associated with initial coin 

offerings due to the lack of regulation surrounding them.2 

II. Approach to Cryptocurrencies and Cryptoassets 

In 2018, the Department of Finance issued a discussion paper on virtual assets. The paper 

explicitly states that its purpose is not “[t]o provide guidance or set forth policy in relation to 

virtual currencies trading, purchasing, selling, or raising funds via Initial Coin Offerings (ICO).”3

One of the key considerations from the Department of Finance in the Discussion Paper was the 

need for a “clear legal & regulatory environment to ensure compliance when investing in 

blockchain linked businesses [and] Guidance in relation to tax and consumer 

protection matters.”4

 

The government introduced an Intra-Departmental Working Group to identify the risks and 

economic opportunities for Ireland, monitor developments into virtual currencies, and consider 

whether policy recommendations are required.5

 

 

1 DEPARTMENT OF FINANCE & DEPARTMENT OF JUSTICE AND EQUALITY, NATIONAL RISK ASSESSMENT FOR IRELAND:

MONEY LAUNDERING AND TERRORIST FINANCING 85, http://www.inis.gov.ie/en/JELR/National_Risk_ 

Assessment_ Money_Laundering_and_Terrorist_Financing_Oct16.pdf/Files/National_Risk_Assessment_ 

Money_Laundering_and_Terrorist_Financing_Oct16.pdf (last visited Mar. 20, 2018), archived at

https://perma.cc/W8BV-GGKU. 

2 Alert on Initial Coin Offerings, Information Notice December 2017, CENTRAL BANK OF IRELAND, https://www. 

centralbank.ie/consumer-hub/consumer-notices/alert-on-initial-coin-offerings, archived at

https://perma.cc/JR3C-NJX4.. 

3 DEPARTMENT OF FINANCE, DISCUSSION PAPER: VIRTUAL CURRENCIES AND BLOCKCHAIN TECHNOLOGIES (Mar. 

2018), available at https://assets.gov.ie/6284/070219124115-a1199ab02f0c4a8ba5589a7f40985a63.pdf, archived at 

https://perma.cc/VCK7-LZXM. 

4 Id., Table 2.3. 

5 Virtual Currencies and Blockchain Technology, DEPARTMENT OF FINANCE, https://www.gov.ie/en/publication/ 

67039d-b/ (last updated Feb. 13, 2019), archived at https://perma.cc/QB6Q-WASN. 
Regulatory Approaches to Cryptoassets: Ireland 

The Law Library of Congress 114

III. Anti-Money Laundering Legislation 

Ireland has no specific anti-money laundering laws that apply to cryptocurrencies.6 

IV. Taxation 

There is no taxation legislation in Ireland that applies specifically to cryptocurrencies. The current 

tax structure applies to cryptocurrencies and cryptoassets, such as income tax, corporation tax 

and capital gains tax, with the particular tax depending upon the activities the cryptocurrencies 

or assets are used for and the individual.7 

The Office of the Revenue Commissioners has noted that it considers bitcoin and other 

cryptocurrencies as “negotiable instruments” that are exempt from value-added tax (VAT).8 VAT 

does, however, arise on purchases made with virtual currencies.9 Any profits are liable to capital 

gains tax for an individual or corporation tax for a company, and losses may be written off.10 If 

virtual currencies are mined, any virtual assets acquired as a result of mining are subject to 

income tax.11

 

6 Blockchain & Cryptocurrency Regulation 2019 | Ireland, GLOBAL LEGAL INSIGHTS, https://www.globallegal 

insights.com/practice-areas/blockchain-laws-and-regulations/ireland (last visited Apr. 2, 2019), archived at

https://perma.cc/G3CY-5T8K. 

7 OFFICE OF THE REVENUE COMMISSIONERS, TAX AND DUTY MANUAL: TAXATION OF CRYPTOCURRENCY 

TRANSACTIONS (May 2018), https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-taxcorporation-tax/part-02/02-01-03.pdf, archived at https://perma.cc/B2FY-N8GT. 

8 VAT Consolidation Act 2010, No. 31 of 2010 § 6(1)(c), www.irishstatutebook.ie/eli/2010/act/31/enacted/ 

en/pdf, archived at https://perma.cc/NT5Z-84UT; see also id. ¶ 2.1. 

9 VAT Consolidation Act 2010 § 6(1)(d); see also id. ¶ 2.2. 

10 DEPARTMENT OF FINANCE, supra note 3. 

11 Id. 
The Law Library of Congress 115 

Indonesia 

Kelly Buchanan 

Foreign Law Specialist*

SUMMARY Indonesia’s commodity futures trading regulator, Bappebti, recently issued regulations 

that provide the legal framework for the trading of cryptoassets as commodities that 

can be subject to futures trading. The regulations contain requirements related to the 

approval of cryptoassets that can be traded, traders, exchanges, clearing houses, and 

storage providers. These include technical, structural, and security requirements, as 

well as requirements for entities to maintain certain levels of paid-up and closing 

capital. Exchanges are also subject to anti-money laundering obligations. 

 It appears that, despite these regulatory developments, Bank Indonesia continues to 

prohibit the use of cryptocurrency as a means of payment in the country. In addition, 

financial services institutions regulated by the Financial Services Authority appear to 

be prohibited from engaging in activities related to cryptocurrencies. 

I. Approach to Assets Created Through Blockchain 

Indonesia’s Commodity Futures Trading Regulatory Agency (known as Bappebti), which is part 

of the Ministry of Trade, issued four regulations in February 2019 that provide a legal framework 

for “the trading of crypto assets as commodities that could become the subjects of futures 

contracts and other derivative contracts traded in the stock market.”1 The four regulations are 

as follows:2

 Peraturan Bappebti No. 2 Tahun 2019 tentang Penyelenggaraan Pasar Fisik Komoditi di Bursa 

Berjangka3 [Bappebti Regulation No. 2/2019 concerning the Implementation of the 

Commodity Physical Market on the Futures Exchange] (Regulation No. 2/2019). 

 

*

 At present there are no Law Library of Congress research staff members versed in Indonesian. This report has 

been prepared by the author’s reliance on practiced legal research methods and on the basis of relevant legal 

resources, chiefly in English, currently available in the Law Library and online. 

1 Trade Ministry Issues Four Regulations on Crypto Assets, JAKARTA POST (Feb. 19, 2019),

https://www.thejakartapost.com/news/2019/02/19/trade-ministry-issues-four-regulations-on-cryptoassets.html, archived at https://perma.cc/2R9C-Y7J5. See also Yogita Khatri, Indonesia Passes Rules for Trading of 

Cryptocurrency Futures, COINDESK (Feb. 18, 2019), https://www.coindesk.com/indonesia-passes-rules-fortrading-of-cryptocurrency-futures, archived at https://perma.cc/Z5FN-KACT. 

2 Press Release, Bappebti, Bappebti Terbitkan Empat Peraturan Aset Kripto dan Emas Digital [Bappebti Issues 

Four Rules for Crypto and Digital Gold Assets] (Feb. 19, 2019), 

http://bappebti.go.id/resources/docs/siaran_pers_2019_02_18_gpfdzt8b_id.pdf, archived at

https://perma.cc/4EJS-DGD3. 

3 Peraturan Bappebti No. 2 Tahun 2019 tentang Penyelenggaraan Pasar Fisik Komoditi di Bursa Berjangka, 

http://bappebti.go.id/resources/docs/peraturan/sk_kep_kepala_bappebti/sk_kep_kepala_bappebti_2019_02

_01_9lpcqskp_id.pdf, archived at https://perma.cc/Q6QC-366Q. 
Regulatory Approaches to Cryptoassets: Indonesia 

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 Peraturan Bappebti No. 3 Tahun 2019 tentang Komoditi yang Dapat Dijadikan Subjek 

Kontrak Berjangka, Kontrak Derivatif Syariah dan/atau Kontrak Derivatif Lainnya yang 

Diperdagangkan di Bursa Berjangka4 [Bappebti Regulation No. 3/2019 concerning 

Commodities that Can be Subjected to Futures Contracts, Sharia Derivative Contracts and/or 

Other Derivative Contracts on the Futures Exchange]. 

 Peraturan Bappebti No. 4 Tahun 2019 tentang Ketentuan Teknis Penyelenggaraan Pasar Fisik 

Emas Digital di Bursa Berjangka5 [Bappebti Regulation No. 4/2019 concerning Technical 

Provisions for the Implementation of the Digital Gold Physical Market]. 

 Peraturan Bappebti No. 5 Tahun 2019 tentang Ketentuan Teknis Penyelenggaraan Pasar Fisik 

Aset Kripto (Crypto Asset) di Bursa Berjangka6 [Bappebti No. 5/2019 concerning Technical 

Provisions for the Implementation of the Physical Market for Crypto Assets on the Futures 

Exchange] (Regulation No. 5/2019). 

A news article on the regulations stated that 

[t]he new policy reportedly outlines a set of requirements in regard to any cryptocurrency 

circulating in Indonesia. Specifically, cryptocurrencies have to comply with risk 

assessment, anti-money laundering (AML) and combating the financing of terrorism (CFT) 

requirements. The policy also stipulates that cryptocurrency traders must keep transaction 

histories for at least five years and have a server located inside the country. 

Head of Bappepti Indrasari Wisnu Wardhana reportedly said that with the introduction of 

the new legislation, the agency wants to “give protection to people who want to invest in 

crypto assets so that they aren’t cheated by fraudulent sellers.”7

The new regulations followed the promulgation of two ministerial regulations related to trading 

cryptoassets and “digital gold” in October 2018 and January 2019: Peraturan Menteri 

Perdagangan No. 99 Tahun 2018 tentang Kebijakan Umum Penyelenggaraan Perdagangan 

Berjangka Aset Kripto (Crypto Asset)8 (Minister of Trade Regulation No. 99/2018 concerning the 

 

4 Peraturan Bappebti No. 3 Tahun 2019 tentang Komoditi yang Dapat Dijadikan Subjek Kontrak Berjangka, 

Kontrak Derivatif Syariah dan/atau Kontrak Derivatif Lainnya yang Diperdagangkan di Bursa Berjangka, 

http://bappebti.go.id/resources/docs/peraturan/sk_kep_kepala_bappebti/sk_kep_kepala_bappebti_2019_02

_01_zhwpqewx_id.pdf, archived at https://perma.cc/J7F2-MNG4. 

5 Peraturan Bappebti No. 4 Tahun 2019 tentang Ketentuan Teknis Penyelenggaraan Pasar Fisik Emas Digital di 

Bursa Berjangka, 

http://bappebti.go.id/resources/docs/peraturan/sk_kep_kepala_bappebti/sk_kep_kepala_bappebti_2019_02

_01_knhj9oc2_id.pdf, archived at https://perma.cc/5WRY-UNMN. 

6 Peraturan Bappebti No. 5 Tahun 2019 tentang Ketentuan Teknis Penyelenggaraan Pasar Fisik Aset Kripto 

(Crypto Asset) di Bursa Berjangka, 

http://bappebti.go.id/resources/docs/peraturan/sk_kep_kepala_bappebti/sk_kep_kepala_bappebti_2019_02

_01_w9i365pf_id.pdf, archived at https://perma.cc/DBT6-TBE6. 

7 Ana Alexandre, Indonesia: New Legislation Recognizes Crypto as Trading Commodity, COINTELEGRAPH (Feb. 15, 

2019), https://cointelegraph.com/news/indonesia-new-legislation-recognizes-crypto-as-trading-commodity, 

archived at https://perma.cc/H8VA-G6SA. 

8 Peraturan Menteri Perdagangan No. 99 Tahun 2018 tentang Kebijakan Umum Penyelenggaraan Perdagangan 

Berjangka Aset Kripto (Crypto Asset), 
Regulatory Approaches to Cryptoassets: Indonesia 

The Law Library of Congress 117

General Policy for the Implementation of Crypto Assets Futures Trading) and Peraturan Menteri 

Perdagangan No. 119 Tahun 2018 tentang Kebijakan Umum Perdagangan Pasar Fisik Emas 

Digital di Bursa Berjangka9 (Minister of Trade Regulation No. 119/2018 concerning the General 

Policy on the Trading of Physical Market for Digital Gold on the Futures Exchange). “Digital 

gold” is defined as gold for which ownership is digitally recorded.10

Bappebti had previously issued a formal decision on the status of cryptocurrencies in June 2018, 

which stated that “cryptocurrencies are a commodity that can be subject to futures trading.”11

Minister of Trade Regulation No. 99/2018 codified this designation and stated that further 

arrangements regarding the matter would be determined by Bappebti.12

When the Bappebti decision was issued in June 2018, it was reported that “[t]he issues of taxation 

were not fully addressed, but will be looked at by the Directorate General of Taxes. It was 

proposed that the trading will be subject to a final tax as well as taxes applied on the exchange.”13

No further information on developments in this area was located. 

 

Prior to these developments, Bank Indonesia (the central bank) issued a regulation in late 2017 

banning fintech companies from using cryptocurrency as a payment system.14 It has also issued 

several warnings to investors regarding the risks associated with digital assets.15 Following the 

promulgation of the new regulations on futures trading of cryptoassets, Bank Indonesia 

 

http://jdih.kemendag.go.id/backendx/image/regulasi/27191241_PERMENDAG_NOMOR_99_TAHUN_2018

.PDF, archived at https://perma.cc/LQP7-ZB5H. 

9 Peraturan Menteri Perdagangan No. 119 Tahun 2018 tentang Kebijakan Umum Perdagangan Pasar Fisik 

Emas Digital di Bursa Berjangka, 

http://jdih.kemendag.go.id/backendx/image/regulasi/22030103_PERMENDAG_NOMOR_119_TAHUN_201

8.PDF, archived at https://perma.cc/8VW9-U5XQ. 

10 Id. art. 1(5). 

11 Tim Copeland, Cryptocurrencies Are Now Commodities Subjected to Futures Trading in Indonesia, NEWS BTC (June 

4, 2018), https://www.newsbtc.com/2018/06/04/cryptocurrencies-are-now-commodities-subjected-tofutures-trading-in-indonesia/, archived at https://perma.cc/2XAM-C6QG. See also Cryptocurrencies Decided as 

Future Trading Commodity, JAKARTA POST (June 4, 2018),

https://www.thejakartapost.com/news/2018/06/04/cryptocurrencies-decided-as-future-tradingcommodity.html, archived at https://perma.cc/99V2-LJF2. 

12 Peraturan Menteri Perdagangan No. 99 Tahun 2018 tentang Kebijakan Umum Penyelenggaraan 

Perdagangan Berjangka Aset Kripto (Crypto Asset), arts. 1 & 2. 

13 Copeland, supra note 11. 

14 See Erwida Maulia, Bank Indonesia Declares Bitcoin Payment Illegal, NIKKEI ASIAN REVIEW (Dec. 7, 2017),

https://asia.nikkei.com/Economy/Bank-Indonesia-declares-bitcoin-payment-illegal, archived at

https://perma.cc/2VAR-3CQD; Peter Terlato, Indonesia Bans Cryptocurrency Payments, FINDER (Jan. 15, 2018),

https://www.finder.com/indonesia-bans-cryptocurrency-payments, archived at https://perma.cc/JR9CVPLK; SSEK, Indonesia: Virtual Currency is Here, So How is Indonesia Going to Regulate It?, MONDAQ (last updated 

Nov. 19, 2018), 

http://www.mondaq.com/x/756088/fin+tech/Virtual+Currency+Is+Here+So+How+Is+Indonesia+Going+to

+Regulate+It, archived at https://perma.cc/HZ8M-XPD3. 

15 See Indonesia, in LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY AROUND THE WORLD (June 

2018), https://www.loc.gov/law/help/cryptocurrency/world-survey.php#indonesia. 
Regulatory Approaches to Cryptoassets: Indonesia 

The Law Library of Congress 118

reportedly reiterated its position prohibiting cryptocurrency from being used as a means 

of payment.16

The Financial Services Authority (Otoritas Jasa Keuangan, OJK) is responsible for regulating and 

supervising the financial services sector in Indonesia. In a 2018 consumer education document, 

OJK stated that it prohibits financial services institutions using or marketing unregulated 

products, including cryptocurrencies. It also said it would continue to educate the public 

regarding the risks of cryptocurrencies.17 Several entities that provide cryptocurrency services are 

listed by OJK as being ones that consumers need to be aware of.18 Following Babbepti naming 

cryptocurrencies as a commodity that can be subject to trading in a futures exchange, OJK 

reportedly continued to assert that the financial services industry is prohibited from actively 

participating in cryptocurrency transactions.19

The Ministry of Finance and the Indonesian Financial Transaction Reports and Analysis Center 

have also issued a warnings related to cryptocurrencies.20

II. Custodianship of Cryptocurrencies by Financial Institutions 

Information regarding the requirements in Regulation No. 5/2019 for an entity to be approved 

as a Crypto-Asset Storage Provider in the context of futures trading is provided in Part IV, below. 

As noted above, financial services institutions in Indonesia are currently prohibited from 

engaging in cryptocurrency activities. 

III. Regulation of Cryptocurrencies as Financial Securities 

As indicated above, while Indonesia currently has regulations enabling cryptoassets to be traded 

as commodities on a futures exchange in Indonesia, no law or regulation brings cryptocurrencies 

into the regulatory regime for financial securities. 

 

16 Helen Patz, Indonesia’s Commodity Futures Regulator Releases Regulation for Crypto Futures Market, 

COINTELEGRAPH (Feb. 18, 2019), https://cointelegraph.com/news/indonesias-commodity-futures-regulatorreleases-regulation-for-crypto-futures-market, archived at https://perma.cc/45UH-V5XV. 

17 OTORITAS JASA KEUANGAN (OJK), EDUKASI KONSUMEN [CONSUMER EDUCATION] 24 (Mar. 2018), 

https://sikapiuangmu.ojk.go.id/FrontEnd/CMS/Download/469, archived at https://perma.cc/N8BS-8LRJ. 

18 OJK, SATGAS WASPADA INVESTASI [INVESTMENT ALERT TASKFORCE], PENJELASAN KEGIATAN USAHA 21 ENTITAS 

YANG PERLU DIWASPADAI OLEH MASYARAKAT [EXPLANATION OF BUSINESS ACTIVITIES OF 21 ENTITIES THAT NEED TO 

BE WATCHED BY THE PUBLIC] (undated), https://www.ojk.go.id/id/berita-dan-kegiatan/siaranpers/Documents/Pages/Siaran-Pers-Di-Penghujung-Tahun,-Satgas-Waspada-Investasi-Imbau-MasyarakatWaspada-terhadap-Kegiatan-Usaha-21-Entitas/SP%204%20Lampiran%2021%20entitas%20a.pdf (last visited 

Mar. 18, 2019), archived at https://perma.cc/G5T4-WXQX. 

19 OJK Asserts Cryptocurrencies, Bitcoins Barred for Trade, TEMPO (June 5, 2018),

https://en.tempo.co/read/918979/ojk-asserts-cryptocurrencies-bitcoins-barred-for-trade, archived at 

https://perma.cc/G4KQ-JXCR. 

20 See SSEK, supra note 14. 
Regulatory Approaches to Cryptoassets: Indonesia 

The Law Library of Congress 119

IV. Treatment of Cryptoassets Not Considered Securities 

According to an article in the Jakarta Post, Regulation No. 5/2019 on the implementation of 

physical markets for cryptoassets in futures exchanges “focuses among other things on good 

governance principles for crypto asset traders, legal certainty, consumer protection and the 

requirement for Bappebti to establish a physical market for crypto assets through electronic 

infrastructure.”21 The regulation “also regulates crypto assets that could be traded as well as 

mechanisms for crypto asset trading, starting from the opening of accounts, fund saving, crypto 

asset transactions, withdrawing crypto assets and withdrawing funds.”22

An Indonesian law firm has provided a detailed overview of the new regulations that establish 

the legal framework for futures trading of cryptoassets. It states that Regulation No. 5/2019 needs 

to be read in conjunction with Regulation No. 2/2019, which “establishes an amended regulatory 

framework for commodity futures trading in general.”23 According to the law firm, Regulation 

No. 5/2019 defines a “Crypto Asset” as “an intangible commodity in the form of a digital asset 

that uses cryptography, a peer-to-peer network and distributed-ledger technology to regulate the 

creation of new units, verify transactions and ensure transaction security without the 

involvement of a third party intermediary.”24 The regulation also defines the terms “Crypto-Asset 

Exchanges,” “Crypto-Asset Clearing Agencies,” “Crypto-Asset Traders, Crypto-Asset Clients,” 

and “Crypto-Asset Storage Providers.” For example, 

[a] Trader is defined as a “party that has been approved by Bappebti to conduct cryptoasset transactions on its own behalf and/or to facilitate crypto-asset transactions by 

Clients,” while a Client is defined as “a party that uses the services of a Trader to buy and 

sell crypto assets on the crypto-assets market.”25

Under Regulation No. 5/2019, 

[a] crypto asset may only be traded on a Crypto-asset Exchange if the crypto asset is 

approved by Bappebti and listed in Bappebti’s Schedule of Crypto Assets. 

To be approved by Bappebti, a crypto asset must, at a minimum, satisfy the 

following requirements: 

a. employs distributed ledger technology; 

b. is asset backed or utility-based; 

 

21 Futures Exchange Authority Issues Regulation on Cryptocurrency, JAKARTA POST (Feb. 13, 2019),

https://www.thejakartapost.com/news/2019/02/13/futures-exchange-authority-issues-regulation-oncryptocurrency.html, archived at https://perma.cc/N8N4-QZZW. 

22 Id. 

23 Elsie Hakim, Indonesia Establishes Legal Framework for Futures Trading of Crypto Assets, ABNR LAW (Feb. 18, 

2019), https://www.abnrlaw.com/news_detail.php?send_news_id=341&year=2019, archived at 

https://perma.cc/6HTT-9V72. 

24 Id.

25 Id.
Regulatory Approaches to Cryptoassets: Indonesia 

The Law Library of Congress 120

c. in the case of a utility-based crypto asset, the crypto asset must be among the top 500 in 

terms of market capitalization; 

d. it must be traded on the largest crypto asset exchange in the world; 

e. offers economic benefit; and 

f. has successfully passed a risk assessment, including as regards the anti-money 

laundering and combating the financing of terrorism and proliferation of weapons of mass 

destruction regulations.26

The regulation “expressly excludes initial coin offerings from the scope of its 

regulatory scheme.”27

Crypto-Asset Exchanges and Crypo-Asset Clearing Agencies must be approved by Bappebti. In 

addition to complying with the general requirements in Regulation 2/2019 and other subsidiary 

legislation, Bappebti explained in a statement that such entities “must have paid-up capital of at 

least 1.5 trillion Indonesian rupiahs ([US]$106 million) and must maintain a closing capital 

balance of at least 1.2 trillion Indonesian rupiahs ($85 million).”28 Exchanges must also have a 

“good level of system security” and “a minimum of three employees who are Certified 

Information System Security Professionals (CISSP). They must also undergo a risk assessment 

process, the agency said, including confirming anti-money laundering (AML) and combating the 

financing of terrorism (CFT) compliance.”29

A Crypto-Asset Trader must be 

incorporated as a limited liability company, be a member of a Crypto-asset Exchange and 

a Crypto-asset Clearing Agency, be designated as a Trader by the Crypto-asset Exchange 

and be approved by Bappebti. Separate Bappebti approvals are required for each type of 

transaction mechanism that is employed by the Trader. In addition, every such mechanism 

must be governed by trading rules that are approved by Bappebti.30

A trader must also have minimum paid-up capital of IDR 1 trillion (approx. US$70,475,000) and 

maintain a minimum closing capital balance of IDR 800 billion (approx. US$56,412,000). In 

addition, it “must have an organizational structure that, at a minimum, consists of an IT division, 

audit division, legal division, client-complaints division, client-support division and finance 

division.”31 Regulation No. 5/2019 also contains “a detailed list of technical requirements for 

Traders, including having ISO 27001 (Information Security Management System) certification. In 

addition, Traders that avail of Cloud storage must have ISO 27017 (cloud security) and ISO 27018 

 

26 Id.

27 Id.

28 Khatri, supra note 1. 

29 Id. 

30 Hakim, supra note 23. 

31 Id.
Regulatory Approaches to Cryptoassets: Indonesia 

The Law Library of Congress 121

(cloud privacy) certification.”32 A Trader’s online trading system “must be audited by a certified 

and competent independent agency before being approved by Bappebti.”33

A Crypto-Asset Storage Provider “must be approved by Bappebti based on a recommendation 

by a Crypto-Asset Exchange.”34 It must satisfy the same financial requirements as a Trader, meet 

detailed technical requirements (including ISO 27001 certification), and “have an organizational 

structure that consists of, at a minimum, an IT division, audit division and legal division.”35 A 

Storage Provider’s online storage system must also be independently audited. 

Both Traders and Storage Providers are accountable for the cryptoassets that they manage.36

In terms of trading operations, Regulation No. 5/2019 contains the following general provisions: 

Before opening a Client account and accepting funds from a Client, a Trader must provide 

the Client with information on the Trader’s corporate particulars, the risks involved in 

crypto-asset trading (including those related to price fluctuation and system failure), and 

enter into a contract with the Client. Traders are also required to apply Know Your 

Customer (KYC) in respect of the money laundering, terrorist financing and the financing 

of proliferation of weapons of mass destruction regulations. All suspicious transactions 

must be reported to the Financial-Transaction Analysis and Reporting Center (PPATK). 

A Trader is required to keep a minimum of 70 percent of the total crypto assets that it 

manages in “cold storage” (that is, in physical paper form). This may be undertaken (a) in 

collaboration with a Crypto-asset Storage Provider that provides token or wallet storage 

services: or (b) by the Trader itself, using a token or wallet storage mechanism. 

Every Client transaction that is facilitated by a Trader must be verified by the Crypto-asset 

Clearing Agency, and reported to the Crypto-asset Exchange for the purposes of setting 

price references and conducting supervision.37

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As noted above, cryptocurrency is permitted to be traded in Indonesia as a commodity, but 

cannot be used as a method of payment, and financial services institutions cannot engage in 

cryptocurrency activities. 

Based on Regulation No. 5/2019, it appears that local futures trading in cryptoassets (as defined 

by the regulation) that have not been approved by Bappebti is also prohibited. To be approved 

by Bappebti for trading on a futures exchange, cryptoassets must be asset-backed or utility-based. 

 

32 Id.

33 Id.

34 Id.

35 Id.

36 Id.

37 Id.
The Law Library of Congress 122 

Isle of Man 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY The Isle of Man currently provides for the registration of virtual currency businesses 

within its shores, but this registration is to ensure compliance with anti-money 

laundering laws rather than regulation of the industry. The Isle of Man’s Financial 

Services Authority continues to warn consumers as to the risks posed by investing in 

virtual currencies and cryptoassets. 

I. Introduction 

The Isle of Man is a Crown Dependency of the United Kingdom and is a low-tax jurisdiction with 

a robust online gambling industry and burgeoning financial sector. Referred to in some reports 

as “Bitcoin Island,” many establishments across the Island already accept bitcoins as payment 

alongside its national currency.1 

II. Approach to Assets Created through Blockchain 

The Isle of Man was an early adopter of legislation to regulate cryptocurrencies within its 

jurisdiction. The Isle of Man distinguishes between four different types of online currencies: 

Digital currency refers to any electronic representation of a fiat currency and this can 

include representations of virtual currency. 

Virtual currency is a narrower asset and is a digital representation of value which can be 

traded digitally. The nature of a virtual currency means that it does not need to be centrally 

controlled or administered. Virtual currency can be either convertible or non-convertible. 

Convertible virtual currency, which includes crypto-currency, can be converted into a fiat 

currency, either directly, or through an exchange. For a currency to be convertible, there 

does not need to be set rate or an established benchmark, but that merely a market exists 

and the ownership rights can be transferred from one person to another, whether for 

consideration or not. 

Non-convertible virtual currency, once purchased, cannot be transferred to another person 

and cannot be redeemed for fiat currency, either directly or through an exchange. (Note 

that the Schedule 4 to POCA [Proceeds of Crime Act] definition does not extend to nonconvertible currency businesses).2

 

1 Cahal Milmo, Bitcoin: How the Isle of Man Is Leading a Cryptocurrency Revolution, INDEPENDENT (London) (Jan. 3, 

2016), https://www.independent.co.uk/news/uk/home-news/bitcoin-how-the-isle-of-man-is-sparking-acryptocurrency-revolution-a6794756.html, archived at https://perma.cc/NUY8-XTS4. 

2 Isle of Man Financial Services Authority, Virtual Currency Business Sector Specific AML/CFT Guidance Notes

(Oct. 2016), at 4, available at https://www.iomfsa.im/media/1606/virtualcurrencyguidance.pdf, archived at

https://perma.cc/4UWC-S4BK. 
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The Designated Business (Registration and Oversight) Act 20153 provides that virtual currency 

businesses are designated businesses, requiring such businesses to register with, and be overseen 

by, the Isle of Man Financial Services Authority for compliance with anti-money laundering 

laws.4 Virtual currency businesses are defined in the Act as those that are in 

the business of issuing, transmitting, transferring, providing safe custody or storage of, 

administering, managing, lending, buying, selling, exchanging or otherwise trading or 

intermediating convertible virtual currencies, including crypto-currencies or similar 

concepts where the concept is accepted by persons as a means of payment for goods or 

services, a unit of account, a store of value or a commodity[.]5

In order to issue a convertible virtual currency, the business must be registered under the 

Designated Businesses (Registration and Oversight) Act 2015.6 For ICOs, the FSA has stated that 

it will not register an applicant if the ICO provides tokens that do not offer any benefit to the 

purchaser other than the token itself, because 

[s]uch characteristics are generally considered by the FSA to pose an unacceptably high 

risk that the money raised from the ICO could be used for unanticipated and illegal 

purposes, as well as posing a risk to consumers. It is because of these risks that it is the 

policy of the FSA to refuse to register this type of business.7 

The Isle of Man recently amended its online gambling laws to enable operators to accept 

virtual currencies.8

 

3 Designated Business (Registration and Oversight) Act 2015, No. 9 of 2015, 

https://legislation.gov.im/cms/images/ LEGISLATION/PRINCIPAL/2015/2015-

0009/DesignatedBusinessesRegistrationandOversightAct2015_6.pdf, archived at https://perma.cc/SMR3-

LYKL. 

4 Isle of Man Financial Services Authority Anti-Money Laundering and Countering the Financing of Terrorism 

Handbook (Nov. 2018), https://www.iomfsa.im/media/1475/amlcfthandbookfinalversiond.pdf, archived at

https://perma.cc/UMS5-Y4RK. 

5 Designated Business (Registration and Oversight) Act 2015, No. 9 of 2015, sched. 1(1), 

https://legislation.gov.im/ cms/images/LEGISLATION/PRINCIPAL/2015/2015-

0009/DesignatedBusinessesRegistrationandOversight Act2015_6.pdf, archived at https://perma.cc/SMR3-

LYKL. 

6 Questions & Answers in Respect of Persons Seeking to Issue Convertible Virtual Currency (Such as Via an Initial Coin 

Offering) in or from the Isle of Man, ISLE OF MAN FINANCIAL SERVICES AUTHORITY, https://www.iomfsa.im/ 

media/2365/icoguidanceforapplicants.pdf (last visited Apr. 3, 2019), archived at https://perma.cc/92PD6AMH. 

7 Initial Coin Offerings – Questions and Answers, ISLE OF MAN FINANCIAL SERVICES AUTHORITY, 

https://www.iomfsa. im/consumer-material/initial-coin-offerings-questions-and-answers/ (last visited Apr. 

3, 2019), archived at https://perma.cc/F6HF-HPWZ. 

8 Online Gambling (Amendments) Regulations 2016, SD 2016/0341, reg. 11(1)–(2), 

https://www.gov.im/media/ 1354648/online-gambling-amendments-regulations-2016.pdf, archived at

https://perma.cc/TJ24-UKYF. See also Isle of Man Gambling Supervision Commission, AML/CFT Guidance for 

Virtual Currencies (May 2017), available at https://www.gov.im/media/1356960/aml-guidance-notes-virtualcurrencies.pdf, archived at https://perma.cc/ 9856-6MJ2. 
Regulatory Approaches to Cryptoassets: Isle of Man 

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III. Consumer Protection 

While virtual currency businesses must be registered under the Designated Businesses 

(Registration and Oversight) Act 2015, this registration does not subject it to financial 

oversight regulation: 

[O]versight [of the Isle of Man Financial Services Authority] does not extend to conduct of 

business, prudential and solvency regulation or protection of client assets. For the 

avoidance of doubt, businesses operating as CVC businesses (including ICOs) fall under 

this category. . . . A Designated Business is not a regulated entity and must not hold out 

that it is anything but a registered Designated Business.9 

Thus, virtual currencies or tokens issued through initial coin offerings are not regulated 

investments in the Isle of Man as the virtual currencies or tokens do not fall within the definition 

of investment within the Regulated Activities Order 2011.10 Thus, tokens are not regulated 

investments in the Isle of Man11 and the protections to investors of traditional financial products 

regulated under the Financial Services Act 2008 are not provided to investors of ICOs.12 The Isle 

of Man Financial Services Authority has cautioned investors over the volatility and risks posed 

by investing in ICOs: 

[Y]our money is not protected. You should be prepared for the fact that you might lose all 

of the money you use for the purchase. Any money or assets provided to a virtual currency 

business is not covered by any compensation scheme, and not subject to any protections 

afforded by the Isle of Man Financial Ombudsman Scheme.13

IV. Taxation 

There does not appear to be any legislation that specifically applies to the taxation of 

virtual currencies. 

V. Anti Money Laundering Measures 

The Proceeds of Crime Act 2008 was amended in 2015 to include virtual currency businesses 

within its regulated sector as a “designated business,”14 specifically those that are in 

 

9 Questions & Answers in Respect of Persons Seeking to Issue Convertible Virtual Currency, ISLE OF MAN FINANCIAL 

SERVICES AUTHORITY, supra note 6, at 2. 

10 Regulated Activities Order 2011, SD 884/2011, 

https://www.iomfsa.im/media/1427/regulatedactivitiesorder 2011.pdf, archived at https://perma.cc/6PCXL2JL. 

11 Initial Coin Offerings – Questions and Answers, ISLE OF MAN FINANCIAL SERVICES AUTHORITY, supra note 7. 

12 Financial Services Act 2008, 8/20008, https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/ 

2008/2008-0008/FinancialServicesAct2008_15.pdf, archived at https://perma.cc/DE8S-Z7ES. 

13 Initial Coin Offerings - Questions and Answers, ISLE OF MAN FINANCIAL SERVICES AUTHORITY, supra note 7. 

14 Questions & Answers in Respect of Persons Seeking to Issue Convertible Virtual Currency, ISLE OF MAN FINANCIAL 

SERVICES AUTHORITY, supra note 6. 
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the business of issuing, transmitting, transferring, providing safe custody or storage of, 

administering, managing, lending, buying, selling, exchanging or otherwise trading or 

intermediating convertible virtual currencies, including crypto-currencies or similar 

concepts where the concept is accepted by persons as a means of payment for goods.15

This amendment brought businesses that engaged in these activities, including those that wish to 

offer initial coin offerings (ICO),16 within the ambit of its anti-money laundering laws.17 

Businesses registered under the Designated Business (Registration and Oversight) Act 2015 are 

required to submit annual returns that show compliance with anti-money laundering laws, 

requiring the use of know-your-customer practices, such as collecting identifying information, 

knowing the beneficial owner of any currency, and record keeping and reporting requirements 

for certain transactions.18 These businesses are overseen by the Isle of Man Financial Services 

Authority to ensure compliance with these laws.19 

 

15 Proceeds of Crime (Business in the Regulated Sector) Order 2015, 2015/0073, Sched., art. 1(1)(mm), 

https://www.gov.im/media/470633/proceedsofcrime-businessintheregulatedsector-order2015-final.pdf, 

archived at https://perma.cc/M83K-C2JM (amending Proceeds of Crime Act 2008, No. 13 of 2008, Sched. 4, 

http://www.legis lation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2008/2008-

0013/ProceedsofCrimeAct2008_6.pdf, archived at https://perma.cc/JX8R-EHNY). 

16 Questions & Answers in Respect of Persons Seeking to Issue Convertible Virtual Currency, ISLE OF MAN FINANCIAL 

SERVICES AUTHORITY, supra note 6. 

17 AML/CFT Handbook, supra note 4. 

18 Isle of Man Financial Services Authority, Virtual Currency Business: Sector Specific AML/CFT Guidance Notes, 

supra note 2. 

19 AML/CFT Handbook, supra note 4. 
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Israel 

Ruth Levush 

Senior Foreign Law Specialist

SUMMARY The regulation of cryptoassets created through blockchain is constantly being updated 

in Israel as authorities are following trends and developments in the field. The existing 

regulatory approach appears to depend on the particular classification of such assets. 

 The Committee for the Examination of Regulation for the Issuance of Distributed 

Cryptographic Coins to the Public, established in 2017, published its final report in 

March 2019. The Committee concluded that although the issuance of cryptoassets to the 

public is commonly viewed as constituting an offer of securities, a situation involving 

cryptoassets that are classified as “utility” assets that would not be considered securities 

could not be ruled out. The Committee opined that trading in cryptoassets is usually 

done for financial investment purposes. Therefore, supervision of such trading by 

Israel’s Security Authority was justified, even if the assets did not meet the definition 

of a security or a financial service. 

 Under current laws, providers of services related to and traders in “virtual currencies” 

are required to be licensed under legislation on securities and financial services. 

Companies trading in securities are expressly prohibited from taking advantage of 

customers’ lack of knowledge or experience. 

Providers of financial services, such as management of financial assets and securities, 

are also subject to current legislation against money laundering that imposes 

identification and reporting requirements. Israeli financial services regulators are 

reportedly currently working on anti-money laundering regulations that would contain 

specific disclosure and documentation requirements for financial service providers 

regarding the source of crypto-funds they receive. 

 For the purpose of income tax and value added tax requirements, cryptocurrency is 

viewed by Israel’s Tax Authority as “an asset” and is taxed in accordance with relevant 

transaction classifications under the tax laws. Additionally, utility token issuers are 

taxed at different stages in accordance with the nature of the issuing company’s 

operations and its business model. Special instructions regarding taxation of employees 

and directors receiving utility tokens as part of their compensations (employees’ 

tokens) apply. 

 There are currently no specific legislative provisions governing custodianship of 

cryptocurrencies or other cryptoassets. 

I. Approach to Assets Created Through Blockchain

On August 10, 2017, Shmuel Howzer, then-chairman of the Israel Securities Authority (ISA), 

appointed an interdepartmental Committee for the Examination of Regulation for the Issuance of 
Regulatory Approaches to Cryptoassets: Israel 

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Distributed Cryptographic Coins to the Public (the Committee). The Committee’s main objective 

was to examine the application of the Securities Law1 to the issuance, distribution of, and trading 

in cryptoassets that are based on distributed ledger technology.2

Following publication of its interim report in March 2018,3 the Committee held extensive public 

hearings as well as a series of additional meetings with activists from industry and academia. The 

final report was issued to Anat Gueta, the current ISA chairwoman, on March 5, 2019 (Final 

Report). According to the Final Report, the Committee continues to follow trends and 

developments in the regulation of cryptoassets worldwide.4

The Committee recognized the importance of the development of innovative technologies to the 

improvement of the financial market and to strengthening the Israeli economy. In its view, such 

developments might provide new means of financing for Israeli companies and improve public 

access to diverse investment channels.5 The Committee therefore 

considered it important that the Authority [ISA] be actively involved in creating a 

regulatory infrastructure and taking active measures to implement a technological 

advance in the capital market. At the same time, the Authority’s main function is to protect 

investors, and therefore the Authority must ensure that the use of innovative technology 

is performed in a fair manner, ensuring the preservation of the interest of the investing 

public and its confidence in the capital market.6

One of the questions evaluated by the Committee was whether and how the cryptoassets sector 

should be regulated in view of its special characteristics. The Committee’s main 

recommendations were the establishment of a dedicated platform for the trading of 

cryptocurrency, adaptation of disclosure requirements, and granting blockchain companies 

regulatory relief in the framework of a regulatory “sandbox.”7 A regulatory “sandbox,” according 

to the Final Report, was designed to enable “Fin Tech companies . . . [to] enjoy the benefits offered 

 

1 Securities Law, 5728-1968, SEFER HAHUKIM [SH, BOOK OF LAWS, official gazette] 5728 No. 541 p. 234, as 

amended. 

2 COMMITTEE FOR THE EXAMINATION OF REGULATION FOR THE ISSUANCE OF DISTRIBUTED CRYPTOGRAPHIC COINS TO 

THE PUBLIC, FINAL REPORT 2 (Mar. 2019) (Final Report), http://www.isa.gov.il/ הודעות

ופרסומים/Reports/177/Documents/CryptoCommitteeFinalReport.pdf (in Hebrew), archived at

https://perma.cc/39ZK-G696. 

3 COMMITTEE FOR THE EXAMINATION OF REGULATION FOR THE ISSUANCE OF DISTRIBUTED CRYPTOGRAPHIC COINS TO 

THE PUBLIC, INTERIM REPORT (Mar. 2018), http://www.isa.gov.il/ הודעות

ופרסומים/Reports/177/Documents/CryptoCommitteeInterimReport.pdf, archived at https://perma.cc/3K35-

WEYC. 

4 Final Report, supra note 2, at 2. 

5 Id.

6 Id., translation from Hebrew here and below are by author, R.L. 

7 Id. at 2; Roi Ktsiri, The Securities Authority has Determined: This is How the Digital Coins Market in Israel will be 

Regulated, GLOBES (Mar. 6, 2019) (in Hebrew), https://www.globes.co.il/news/article.aspx?did=1001276905 , 

archived at https://perma.cc/YN7G-JK3R. 
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by the high-tech world while moderating the level of risk to which the public is exposed.”8 The 

Committee further recommended examination of the application of a model similar to crowd 

funding for projects involving cryptoassets that are securities.9

The existing regulatory approach to cryptoassets created through blockchain appears to depend 

on their particular classification. 

II. Classification of Cryptoassets 

The Final Report surveyed developments in the cryptoassets market, such as the introduction of 

security tokens (STOs), including equity tokens (ETOs), and security tokens platforms.10 The 

Final Report noted the distinctions that had been made in the Committee’s prior interim report 

among three groups of cryptographic assets: 

(1) Currency - Assets to be used as a means of payment, exchange or clearing; (2) 

Investments or Security - Assets designed to grant ownership rights, membership or 

participation in a specific venture or rights...; (3) Utility - assets intended to grant access 

rights or use of a service or a product offered by a particular enterprise. . . . 

It was further explained in the report that the determination whether a cryptographic asset 

is a security asset depends on the circumstances of the case and the nature of the real 

transaction, and is not based on the label attached to it. In general, assets from the first 

group (Currency), i.e. assets intended to be used only as a method of payment, settlement 

or exchange, other than in a specific enterprise, that do not confer additional rights other 

than their own ownership, and are not controlled by a central entity, shall not be 

considered a security. 

On the other hand, assets from the second and third groups are not intended solely as an 

exchange instrument but to grant additional rights. These rights are generally broader than 

the mere right to own the currency, and include among other [,] rights in connection with 

a specific venture. Another fundamental difference between a cryptographic asset that is 

intended to transfer value to cryptographic assets from the second and third groups is the 

human factor behind it - in contrast to assets of a distributed ledger, tokens and the project 

for which they were designed were usually developed by a central issuer, sometimes at an 

initial stage where the design or development of the product have not yet been completed. 

. . . 

In the interim report[,] it was explained that while for assets from the category of Security 

there is an agreement that . . . [they are] in the category of security, for Utility assets, an 

examination of the properties of the assets is required and it was specifically stated that 

the following characteristics should be considered: (1) The purpose of the investment in 

the eyes of the tokens’ purchasers; (2) the degree of the token’s functionality in the IPO 

stage, i.e. how much token purchasers can use it for the purpose for which it is intended; 

(3) representations and undertakings of the issuer, including a promise to achieve yield 

 

8 Final Report, supra note 2, at 33. 

9 Id. at 3. 

10 Id. at 24-25. Additional types of assets mentioned include Stable Coins; digital fiat; Asset Backed tokens; 

Reverse ICO; Non-fungible tokens (NFTs), and Decentralized Credit Networks. Id at 26-28. 
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and the creation of a secondary market, and significant efforts to create a secondary market 

after the issue.11

Stating that although the issuance of cryptoassets to the public is commonly viewed as 

constituting an offer of securities, the Committee opined in its Final Report that a situation in 

which cryptographic assets that are classified as “utility” assets will not be considered securities 

cannot be ruled out, depending on the circumstances of the case.12

III. Current Financial Regulation and Consumer Protection 

A comprehensive regulatory approach to cryptographic assets is still evolving. As of the writing 

of this report in March 2019, it appears that the following regulatory and consumer protection 

provisions would apply depending on the particular cryptoasset’s classification: 

A. Financial Services Law

Under the Supervision on Financial Services (Regulated Financial Services) Law, 5776-2016, 

persons engaging in providing services involving a “financial asset” are required to obtain a 

license issued by the Supervisor on Financial Services Providers.13 The license enumerates 

conditions and types of activities approved to be carried out the licensee.14 “Virtual currency” is 

included in the definition of “financial asset” in this context.15 

A license will generally be issued to an Israeli citizen or a resident who has reached the age of 

majority; is legally competent; and has not been declared bankrupt or, in the case of a corporation, 

has not been required to dissolve. Additional licensing requirements include that the licensee has 

a minimum specified equity and, for individuals, has not been convicted of an offense that due 

to its nature makes the licensee unfit to handle financial transactions.16

B. Securities Law 

Cryptoassets that constitute an offering of securities are subject to the provisions of the Securities 

Law, 5728-1968.17 This law requires traders in securities to be licensed.18 The Law further prohibits 

trading companies from “tak[ing] advantage of the customer’s lack of knowledge or lack of 

 

11 Id. at 35-36. 

12 Id. at 36. 

13 Supervision on Financial Services (Regulated Financial Services) Law 5776-2016, § 12, SH 5776 No. 2570 p. 

1098, as amended. 

14 Id. §§ 2 & 12. 

15 Id. § 11(7) (defining “financial asset”). 

16 Id. § 15. 

17 Securities Law, 5728-1968, SH 5728 No. 541 p. 234, as amended. 

18 Id. § 44. 
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experience in order to enter into the transaction under unreasonable conditions, give, or receive 

an unreasonably different consideration from the accepted consideration.”19

C. Regulation of Non-Security Cryptoassets 

In reality, the Committee opined, trading in cryptoassets is usually done for financial investment 

purposes. Therefore, subordination of trading in such assets to ISA supervision was justified, 

“even if the assets they did not enter the definition of security or a financial service, especially 

when it involves systems that enable multi party transactions”20 

IV. Anti-Money Laundering Law 

The Prohibition on Money Laundering Law, 5760-2000, imposes special duties on providers of 

business services. Such services include the management of financial assets and securities.21

Duties imposed by the Law include client identification, reporting, and 

registration requirements.22

According to an Israeli practitioner, as of November 6, 2018, the Israeli financial services 

regulators were working on specific anti-money laundering regulations that would contain 

specific disclosure and documentation requirements for financial service providers regarding the 

sources of crypto-funds they receive. Accordingly, providers would have to report the source of 

cryptoassets by disclosing the address (Public Key) of the person or entity depositing funds; their 

IP address; and transactions involving any of the following elements that would automatically 

qualify the transactions as suspicious: 

 Transactions using crypto-funds based on ZKP (Zero Knowledge Protocol). ZKP’s 

involve technology, which results in high or even complete levels of anonymity of its 

users, making it effectively impossible to securely record the identity of the person or 

entity using their services. ZCash and Monero are example of such ZKP currencies 

and, though it not illegal to transact with these currencies, such transactions would 

likely be listed as suspicious and have to be reported. 

 Transactions from Mixer Platforms—on mixer platforms, funds are all mixed together 

and randomly assigned to wallets, preventing proper identification of the source of 

the crypto funds. 

 Transactions from Dark Net 

 

19 Id. § 44S. 

20 Final Report, supra note 2, at 38. 

21 Prohibition on Money Laundering Law, 5760-2000, § 8B(a)(3), SH 5760 No. 1753 p. 293, as amended. 

22 Id. §§ -9. 
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 Transactions with inconsistencies between IP Address and other geographical 

indicators.23

V. Taxation 

A. Virtual Currencies 

The Bank of Israel reportedly said in a January 2018 statement that “it would not recognize virtual 

currencies such as bitcoin as actual currency and . . . it was difficult to devise regulations to 

monitor the risks of such activity to the country’s banks and their clients.”24 

Although virtual currencies are not recognized as actual currency by the Bank of Israel, the Israel 

Tax Authority (ITA) has proposed that the use of virtual currencies should be considered as a 

“means of virtual payment” and subject to taxation.25 Specifically, for the purpose of income tax 

and value added tax requirements, virtual currency is viewed as “an asset” and is taxed in 

accordance with relevant transaction classifications under the Income Tax Ordinance (New 

Version), 1961, and the Value Added Tax Law, 5736-1975.26 Accordingly, 

[u]nlike a regular currency, the Israel Tax Authority will regard an increase in the value of 

a cryptocurrency as a capital gain rather than an exchange fluctuation, making it subject to 

capital gains tax. Individual investors will not be liable for value-added tax, but anyone 

engaging in cryptocurrency mining will be classified as a “dealer” and subject to VAT, 

according to the circular. Anyone trading as a business will be classified as a “financial 

institution” for tax purposes, meaning that they will be unable to reclaim VAT on expenses 

but will be subject to an extra 17 percent “profit tax” applied to financial institutions.27

B. Utility Tokens 

In March 2018, the ITA issued a circular addressing the tax consequences of initial offerings of 

utility tokens. According to the circular, utility token issuers will be taxed at different stages in 

 

23 Patricia de Hemricourt, Blockchain’s Regulations Trends and Reality Checks (Focus on Israel), HACKER NOON (Dec. 

5, 2018), https://hackernoon.com/blockchains-trends-and-reality-checks-with-a-focus-on-israelea1dbddda45b, archived at https://perma.cc/AC25-RMB9. 

24 Steven Scheer, Bitcoin Is an Asset, Not a Currency - Israel’s Central Bank, REUTERS (Jan. 8, 2018), 

https://www.reuters.com/article/uk-bitcoin-israel/bitcoin-is-an-asset-not-a-currency-israels-central-bankidUSKBN1EX18E, archived at https://perma.cc/3458-ZY58. 

25 Israel Tax Authority, Circular No. 05/2018: Taxation of Activity by Means of Virtual Payment (Known as 

‘Virtual Currencies’) (Jan. 17, 2018), https://taxes.gov.il/incometax/documents/hozrim/hor_acc 

%2015.2.18.pdf (in Hebrew), archived at https://perma.cc/NDH8-VFZP. 

26 Id. §§ 3.1–3.2; Income Tax Ordinance (New Version), 1961, 1 LAWS OF THE STATE OF ISRAEL [LSI] (New 

Version) 1967 & Value Added Tax Law, 5736-1975, 30 LSI 46 (1975/76), both as amended. 

27 Matthew Kalman, Israel Taxman’s Guidelines Killing Cryptocurrency Boom?, BNA (Feb. 21, 2018), 

https://www.bna.com/israel-taxmans-guidelines-n57982089034/, archived at https://perma.cc/J8DE-6AJQ. 
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accordance with the nature of the issuing company’s operations and its business model.28

Accordingly, “the tax on the proceeds from the sale of the issued tokens will be deferred until the 

platform begins to provide services, or if the company goes bankrupt, if that occurs earlier.”29

The circular further provides special instructions regarding employees and directors receiving 

utility tokens as part of their compensations (employees’ tokens).30 Taxes on these tokens will be 

due at marginal rates upon the earlier of the sale or the exercise of the rights embedded in the 

tokens. The company can choose in advance, however, that its employees’ tokens will be taxable 

at the date of the actual offering. In such a case, the taxable income will be at the level of the 

tokens’ market value on the date of offering, minus the incremental realization, if any.31

VI. Custodianship of Cryptocurrencies by Financial Institutions 

There are no specific legislative provisions governing custodianship of cryptocurrencies or 

other cryptoassets. 

On February 25, 2018, the Supreme Court issued a temporary injunction prohibiting a bank from 

blocking activities in an account held by a company engaging in trade in bitcoin.32 

According to the bank, its decision to block the company’s activities had been reached based on 

a 2014 warning by the Bank of Israel and other regulatory agencies regarding risks associated 

with the bitcoin trade.33 The bank further asserted that the dangers described in the warning had 

in fact materialized “by the occurrence of several events perceived to be connected to fraud, 

furtherance of criminal objectives including suspicions for money laundering and financing of 

terrorism.”34 The bank alleged that activities exposing the bank to such unlawful acts might harm 

its reputation and public trust in the bank.35

In granting the temporary injunction, Justice Anat Baron noted that the reasonableness of a bank’s 

decision to refuse to enable trading activities involving virtual currencies was an issue that had 

not yet been determined by the Supreme Court. An examination of the legal questions regarding 

the proper balancing between the duty of a bank to provide banking services vis-à-vis its 

 

28 Israel Tax Authority, Circular No. 7/2018: ICO Issuing “Digital Tokens” for the Provision of Services and/or 

Products Under Development (Utility Tokens), Part 3(1) (Mar. 13, 2018), https://taxes.gov.il/incometax/ 

documents/hozrim/hoz_07_2018_acc.docx.pdf (in Hebrew), archived at https://perma.cc/A5PM-N7RQ. 

29 de Hemricourt, supra note 23. 

30 Israel Tax Authority, Circular No. 7/2018, supra note 28, Part 3.3. 

31 Id. ¶ 3.3.1.2. 

32 CA 6389/17 Bits of Gold Ltd. v. Bank Leumi LeIsrael Ltd., ¶¶ 3–4, available in the Nevo Legal Database, 

http://www.nevo.co.il (by subscription, in Hebrew), archived at https://perma.cc/R76Z-2AQX. 

33 Press Release, Bank of Israel et al., Notice to the Public Regarding Possible Risks in Decentralized Virtual 

Currencies (Such as Bitcoin) (Feb. 19, 2014), https://www.boi.org.il/en/NewsAndPublications/Press 

Releases/Pages/19-02-2014-BitCoin.aspx, archived at https://perma.cc/3GD6-CHL4. 

34 CA 6389/17 Bits of Gold Ltd. v. Bank Leumi LeIsrael Ltd. ¶ 4. 

35 Id. 
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responsibility to prevent prohibited activity such as money laundering or the financing of 

terrorism, among others, led Justice Baron to conclude that the chances of the appeal could not 

be said to be null.36 

A search for further developments in this lawsuit has not identified a final decision as of March 

25, 2019.37

 

36 Id. ¶ 12.

37 Nevo Legal Database, search for “CA 6389/17 Bits of Gold Ltd. v. Bank Leumi LeIsrael Ltd” under ”Life 

Cycle” (in Hebrew), https://www.nevo.co.il/PsikaSearchResults.aspx (last visited Mar. 25, 2019), archived at

https://perma.cc/N2V2-ASCN. 
The Law Library of Congress 134 

Italy 

Dante Figueroa 

Senior Legal Information Analyst 

SUMMARY Pursuant to legislation passed in 2017, the Italian government is to issue regulations 

establishing the requirements for carrying out cryptocurrency-related operations 

throughout the country. At least two relevant EU directives applicable to the use of 

cryptocurrencies for money laundering purposes have already been implemented in 

Italy. In addition, a resolution by the Italian Revenue Agency issued in 2016 addresses 

the tax treatment of cryptocurrencies, including the application of value-added tax 

and corporate income taxes. Finally, a comprehensive legislative bill regulating 

cryptocurrencies was introduced in the Italian Parliament in 2016 and is still pending. 

I. Financial Regulation and Consumer Protection 

Legislative Decree No. 90 of 2017 subjected virtual currency providers (prestatori di servizi relativi 

all’utilizzo di valuta virtuale) to the regulations established for traditional money exchange 

operators.1 To that effect, Legislative Decree No. 90 charged the Ministry of the Economy and 

Finance with issuing a ministerial decree setting forth the requirements and timelines for the legal 

performance of such activities throughout the country.2 Accordingly, in early 2018 the Treasury 

Department, which is part of the Ministry of Economy and Finance, commenced a public 

consultation process on the proposed text of a ministerial decree on the methods and timing 

according to which providers of virtual currency services will be required to submit information 

concerning their Italian operations.3 A draft of the ministerial decree is available online for 

review.4 It is expected that the ministerial decree will be issued during 2019. 

 

1 L.D. No. 90, art. 8 ¶ 1, extending the application of article 17-bis of Decreto Legislativo decreto legislativo 13 

agosto 2010, n. 141 Attuazione della Direttiva 2008/48/CE relativa ai Contratti di Credito ai Consumatori, 

nonche’ Modifiche del Titolo VI del Testo Unico Bancario (Decreto Legislativo n. 385 del 1993) in merito alla 

disciplina dei Soggetti Operanti nel Settore Finanziario, degli Agenti in Attivita’ Finanziaria e dei Mediatori 

Creditizi (Legislative Decree No. 141 of August 13, 2010, Implementation of Directive 2008/48/CE on Credit 

Agreements for Consumers, as well as Amendments to Title VI of the Single Banking Text (Legislative Decree 

No. 385 of 1993), related to Operators in the Financial Sector, Agents in Financial Activities and Credit 

Brokers), G.U. Sept. 4, 2010, n. 207, www.gazzettaufficiale.it/eli/id/2010/09/04/010G0170/sg, archived at 

https://perma.cc/8GCJ-4RRZ. 

2 Id.

3 Dipartimento del Tesoro [Treasury Department], Esiti della Consultazione Pubblica sulla Bozza di Decreto 

Ministeriale di cui all’Articolo 17-bis, comma 8-ter del Decreto Legislativo 13 agosto 2010, n.141 e Successive 

Modificazioni [Results of the Public Consultation on the Ministerial Decree referred to by Article 17-bis, 

Paragraph 8-ter of Legislative Decree No. 141 of August 13, 2010, and Successive Amendments], 

http://www.dt.tesoro.it/export/sites/sitodt/modules/documenti_it/regolamentazione_bancaria_finanziaria

/consultazioni_pubbliche/Monete_Virtuali_Esiti_della_consultazione_pubblica_sulla_bozza_di_decreto_minis

teriale.pdf (last visited March 27, 2019), archived at https://perma.cc/ND4R-5FPA. 

4 Ministry of the Economy and Finance, Draft Ministerial Decree pursuant to Legislative Decree No. 90 of 2017, 

art. 8 ¶ 1 and Legislative Decree No. 141 of 2010, art. 17-bis, 

http://www.dt.tesoro.it/modules/documenti_it/regolamentazione_bancaria_finanziaria/consultazioni_pubb
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II. Anti-Money Laundering 

Italy has implemented several EU Directives related to money laundering and cryptocurrencies 

through the following legislation: 

 Legislative Decree No. 90 of May 25, 2017, Implementing Directive (EU) 2015/849 of the 

European Parliament and of the Council of 20 May 2015 on the Prevention of the Use of the 

Financial System for the Purposes of Money Laundering or Terrorist Financing;5 and 

 Legislative Decree No. 231 of November 21, 2007, Implementation of EU Directive 

2005/60/CE) on the Prevention of the Use of the Financial System for purposes of Money 

Laundering from Criminal Activities and Terrorist Financing as well as EU Directive 

2006/70/CE, containing Implementing Measures.6

III. Taxation 

A Ministerial Resolution of September 2016 issued by the Revenue Agency (Agenzia delle Entrate)7

addressed aspects of the tax treatment of bitcoin and other cryptocurrencies. This Resolution 

implemented the decision issued by the European Court of Justice (ECJ) in the case of Skatteverket

 

liche/31.01.18_bozza_DM_prestatori_val_virtuale_.pdf, archived at https://perma.cc/MG5C-E3D4 (last visited 

Mar. 28, 2019). 

5 Decreto Legislativo 25 maggio 2017, n. 90 Attuazione della Direttiva (UE) 2015/849 Relativa alla Prevenzione 

dell’Uso del Sistema Finanziario a Scopo di Riciclaggio dei Proventi di Attivita Criminose e di Finanziamento 

del Terrorismo [Legislative Decree No. 90 of May 25, 2017, Implementing Directive (EU) 2015/849 of the 

European Parliament and of the Council of 20 May 2015 on the Prevention of the Use of the Financial System 

for the Purposes of Money Laundering or Terrorist Financing.] (L.D. No. 90), G.U. June 19, 2017, n. 140, 

www.gazzettaufficiale.it/eli/id/2017/06/19/17G00104/sg, archived at https://perma.cc/YQX5-BJWK.

6 Decreto Legislativo 21 novembre 2007, n. 231 Attuazione della direttiva 2005/60/CE concernente la 

Prevenzione dell’Utilizzo del Sistema Finanziario a scopo di Riciclaggio dei Proventi di Attività Criminose e di 

Finanziamento del Terrorismo nonché della Direttiva 2006/70/CE che ne reca Misure di Esecuzione 

[Legislative Decree No. 231 of November 21, 2007, Implementation of EU Directive 2005/60/CE on the 

Prevention of the Use of the Financial System for purposes of Money Laundering from Criminal Activities and 

Terrorist Financing as well as EU Directive 2006/70/CE, containing Implementing Measures], GAZZETTA 

UFFICIALE [G.U.] [OFFICIAL GAZETTE] No. 290 (Dec. 14, 2007), 

www.gazzettaufficiale.it/eli/id/2007/12/14/007X0246/sg, archived at https://perma.cc/557J-XDBA. 

Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC 

(Anti-Money Laundering Directive, AMLD), 2015 O.J. (L 141) 73, are available at https://eurlex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02015L0849-

20180709&qid=1552510550346&from=EN, archived at http://perma.cc/W7KN-PCPM. 

7 Risoluzione Ministeriale 72/E del 2 settembre 2016, Interpello ai sensi dell’art. 11, legge 27 luglio 2000, n. 212, 

Trattamento Fiscale Applicabile alle Societa che Svolgono Attivita di Servizi Relativi a Monete Virtuali 

[Ministerial Resolution 72/E of September 2, 2016, Rule Issued According to Art. 11 of Law No. 212 of July 27, 

2000, Fiscal Treatment Applicable to Companies that Develop Service Activities Related to Virtual Currencies] 

(Agenzia Entrate) (Ministerial Resolution 72/E), https://www.finaria.it/pdf/bitcoin-tasse-agenzia-entrate.pdf, 

archived at https://perma.cc/9EAZ-LS79. 
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v. David Hedqvist,8 which held that the value-added tax (VAT) does not apply to transactions in 

which crypocurrencies are exchanged for traditional currencies or vice versa.9

In addition, the 2016 Resolution indicates that for purposes of the corporate income tax (Imposta 

sul Reddito sulle Società, IRES) and the Italian regional production tax (Imposta Regionale sulle 

Attività Produttive, IRAP), profits and losses arising from such transactions constitute corporate 

income or losses subject to taxation.10 The Resolution contains specific requirements for the 

registration of cryptocurrency operations, including names, amounts, dates, and other 

information on transactions.11 Cryptocurrency operations performed by individuals who hold 

bitcoin for other than commercial or corporate purposes do not generate taxable income, 

according to the Resolution.12

IV. Pending Legislative Bill 

A bill introduced in the Italian Parliament in 201613 would establish the following rules 

regarding cryptocurrencies: 

 Forbid the use of total anonymisation techniques in transactions in relation to payers, paid 

subjects, as well as to the amount of the transaction;14

 Allow the use of cryptocurrencies that involve total anonymisation techniques only when 

they are equipped with mechanisms for recognizing outgoing conversion transactions, as 

long as they are available to the national judicial authorities in a manner established by law;15

 

8 Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718 (ECJ Oct. 22, 2015), http://curia.europa.eu/juris/ 

document/document.jsf?text=&docid=170305&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1

&cid=302749, archived at https://perma.cc/JYH8-Q6AL. 

9 Paolo Luigi Burlone, Dichiarazione dei Redditi e Bitcoin [Declaration of Income and Bitcoin], COINLEX (Apr. 26, 

2016), https://coinlexit.wordpress.com/2016/04/26/dichiarazione-dei-redditi-e-bitcoin/, archived at 

https://perma.cc/QSN8-XSHV. 

10 Id. 

11 Ministerial Resolution 72/E, at 6. 

12 Bitcoin e Tasse: Come Fare per la Dichiarazione dei Redditi? [Bitcoin and Taxes: How to Make the Declaration of 

Income?], MERCATI 24, https://www.mercati24.com/bitcoin-tasse/ (last visited Mar. 28, 2019), archived at 

https://perma.cc/S3W4-5BP5. 

13 Proposta di Legge 4119 del 26 Ottobre 2016, Divieto di Utilizzo delle Criptovalute che Impiegano Tecniche di 

Anonimizzazione Totale nelle Transazioni Economiche [Bill No. 4119 of October 26, 2016, Prohibition of Use of 

Cryptocurrencies Using Total Anonymization Techniques in Economic Transactions], Chamber of Deputies, 

XVII Legislature, http://documenti.camera.it/_dati/leg17/lavori/stampati/pdf/17PDL0060630.pdf, archived 

at https://perma.cc/XMQ4-EPEL. 

14 Id. art. 1(1). 

15 Id. art. 1(2). 
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 Prohibit the establishment of cryptocurrency exchange service providers with total 

anonymisation as well as the offer, promotion, or facilitation of access, in any way, to currency 

exchange services with total anonymisation that have been established abroad;16

 Permit the operation of suppliers and the offer of foreign exchange services only when these 

are equipped with mechanisms for recognizing outgoing conversion transactions, as long as 

they are available to national judicial authorities in a manner established by law;17

 Require pseudonym cryptocurrency changers to block any conversion into another 

cryptocurrency coming from anonymisation services included in a list established in the law, 

and to inform the competent supervisory bodies of the identification details of the subjects 

requesting the money changing operations;18

 Require the competent authority established by a ministerial decree to publish and keep 

updated, in collaboration with international organizations having a similar role, the list of the 

anonymisation services of pseudonym cryptocurrencies;19

 Mandate the Ministry of Economy and Finance to issue a special decree containing operating 

instructions for the planning and control, by the competent supervisory authorities, of the use 

of cryptocurrencies with total anonymisation that differ from those mentioned in the bill, in 

order to counter their use and dissemination, as well as to regulate the exercise, offer and 

promotion of pseudonymous cryptocurrency anonymisation services that differ from those 

established in the bill;20 and 

 Establish penalties of fines and imprisonment for the violation of prohibitions related to 

cryptocurrencies.21

 

16 Id. art. 2(1). 

17 Id. art. 2(2). 

18 Id. art. 3(1). 

19 Id. art. 3(2). 

20 Id. art. 4(1). 

21 Id. art. 4(3). 
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Japan 

Sayuri Umeda 

Senior Foreign Law Specialist

SUMMARY Currently, virtual currency exchange businesses are regulated by the Payment Services 

Act. Virtual currency exchange business operators must be registered with a competent 

local finance bureau. A bill to amend the Payment Services Act and other acts that was 

submitted in March 2019 would change the name of virtual currency to “crypto assets,” 

require cold wallet for storage of cryptoassets, recognize and regulate cryptoasset 

custodian businesses, and regulate ICOs. 

I. Definition of Virtual Currency 

The Payment Services Act defines “virtual currency”1 as 

 property value that can be used as payment for the purchase or rental of goods or provision 

of services by unspecified persons, that can be purchased from or sold to unspecified persons, 

and that is transferable via an electronic data processing system; or 

 property value that can be mutually exchangeable for the above property value with 

unspecified persons and is transferable via an electronic data processing system.2 

The Act also states that virtual currency is limited to property values that are stored electronically 

on electronic devices; currency and currency-denominated assets are excluded.3 

Virtual currency is not currently included in the definition of securities in the Financial 

Instruments and Exchange Act4 or its enforcement order.5

 

1 In Japanese, the term 仮想通貨 (“virtual currency”) is used. 

2 資金決済に関する法律 [Payment Services Act], Act No. 59 of 2009, amended by Act No. 62 of 2016, art. 2, para. 

5. 

3 Id. 

4 金融商品取引法 [Financial Instruments and Exchange Act], Act No. 25 of 1948, amended by Act No. 46 of 2017, 

art. 2, para. 1, http://www.japaneselawtranslation.go.jp/law/detail/?printID=&id=3186&re=&vm=02, 

archived at https://perma.cc/LK7Y-BXTH. 

5 金融商品取引業等に関する内閣府令 [Cabinet Office Order on Financial Instruments Business, etc.], Cabinet 

Office Order No. 52 of 2007, amended by Cabinet Office Order No. 55 of 2017, 

http://www.japaneselawtranslation.go.jp/law/detail/?printID=&ft=2&re=02&dn=1&yo=Financial+Business

+Instruments&ia=03&ph=&x=43&y=11&ky=&page=1&vm=02, archived at https://perma.cc/H6JA-Q7EK.
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II. Regulation of Virtual Currency Exchange Businesses 

Under the Payment Services Act, only business operators registered with a competent local 

finance bureau are allowed to operate a virtual currency exchange business.6 The operator must 

be a stock company or a “foreign virtual currency exchange business” that is a company with a 

representative who is resident in Japan and an office in Japan.7 A “foreign virtual currency 

exchange business” means a virtual currency exchange service provider that is registered with a 

foreign government in the foreign country under a law that provides an equivalent registration 

system to the system under the Japanese Payment Services Act.8 

The Act requires virtual currency exchanges businesses to establish security systems to protect 

the business information they hold.9 When such a business entrusts part of its operations to a 

contractor, it must take measures to ensure that business is appropriately conducted.10 Virtual 

currency exchange businesses must separately manage customers’ money or virtual currency 

apart from their own. The state of such management must be reviewed by certified public 

accountants or accounting firms.11 

Virtual currency exchange businesses must keep accounting records of virtual currency 

transactions12 and submit annual reports to the Financial Services Agency (FSA).13 The FSA is 

authorized to order exchange businesses to submit reports and reference materials and to 

dispatch its officials to inspect the offices of an exchange business where necessary to ensure 

proper conduct.14 The FSA may issue orders to such businesses to improve their practices,15

rescind registration of a virtual currency exchange business, or suspend its business for up to six 

months in certain cases.16 

 

6 Id. arts. 63-2 & 63-3. Because the Cabinet delegates its authority over most of the matters under the Payment 

Services Act to the Financial Services Agency (FSA) (id. art. 104), the FSA is the regulatory agency that handles 

virtual currency transactions. See also Details of Screening for New Registration Application as Virtual Currency 

Exchange Service Provider, FSA, http://www.fsa.go.jp/en/news/2017/20170930-1/02.pdf (last visited Apr. 30, 

2018), archived at https://perma.cc/BVU7-PGSW. 

7 Payment Services Act, art. 63-5, para. 1. 

8 Id. art. 2, para. 9. 

9 Id. art. 63-8. 

10 Id. art. 63-9. 

11 Id. art. 63-11. 

12 Id. art. 63-13. 

13 Id. art. 63-14. 

14 Id. art. 63-15. 

15 Id. art. 63-16. 

16 Id. art. 63-17. 
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III. Pending Bill to Amend the Payment Services Act 

The Cabinet submitted a bill to amend the Payment Services Act and other acts on March 15, 

2019.17 The bill proposes to change the name of virtual currency to “crypto asset.”18 

The bill would require cryptoasset exchange businesses to manage customers’ cryptoassets, 

except for the part that is necessary for running the business, using reliable methods that would 

be described in a Cabinet order,19 such as a “cold wallet” that is disconnected from the internet.20 

Cryptoasset exchange businesses would be required to maintain a holding of cryptoassets 

(guarantee cryptoassets) that are the same kind as customers’ cryptoassets in an amount 

equivalent to the customers’ cryptoassets that are not stored in cold wallet. Such guarantee 

cryptoassets must be stored separately from their other cryptoassets.21 

The bill would add businesses that only manage cryptoassets (custodian businesses) to 

cryptoasset exchange businesses under the Payment Services Act.22 Therefore, cryptoasset 

custodian businesses would be registered in the same way as crypto currency exchange 

businesses, and would be obligated to confirm the identity of owners and store customers’ assets 

separately from their own.23 

The bill would obligate cryptoasset exchange businesses to report changes to the cryptoassets that 

they deal with, in advance, to the FSA.24 This is to screen problematic cryptoassets for which 

trading records are not disclosed and, therefore, which can be used for money laundering.25 

The bill also amends the Financial Instruments and Exchange Act. The amendment would add 

cryptoassets to a category of financial instruments.26 Therefore, cryptocurrency sales would be 

subject to regulation under the Act. Cryptoasset margin transactions, which are currently not 

 

17 Cabinet Bill No. 49 of 198th Diet Session, http://www.shugiin.go.jp/internet/itdb_gian.nsf/html/gian/ 

honbun/houan/g19809049.htm (in Japanese), archived at https://perma.cc/32MU-VJ2V. 

18 Payment Services Act, as amended by Cabinet Bill No. 49 of 198th Diet Session (hereinafter “Proposed Payment 

Services Act”), art. 1 & art. 2, item 5. 

19 Proposed Payment Services Act, art. 63-11, para. 2. 

20 FSA,「情報通信技術の進展に伴う金融取引の多様化に対応するための資金決済に関する法律等の一部を改正

する法律案」説明資料 (Explanatory Material of “Bill to Amend Part of Payment Services Act, etc. in Order to 

Adjust to Diversified Financial Transactions by Development of Information Communication Technologies”) 2 

(Mar. 2019) (hereinafter “Explanatory Material”), https://www.fsa.go.jp/common/diet/198/02/setsumei.pdf, 

archived at https://perma.cc/DH48-E3PH. 

21 Proposed Payment Services Act, art. 63-11-2. 

22 Id. art. 2, item 7. 

23 Explanatory Material, supra note 20, at 2. 

24 Proposed Payment Services Act, art. 63-3, para. 1, item 7 & art. 63-6, para. 1. 

25 Explanatory Material, supra note 20, at 3. 

26 Financial Instruments and Exchange Act, as amended by Cabinet Bill No. 49 of 198th Diet Session (hereinafter 

“Proposed Financial Instruments and Exchange Act”), art. 2, para. 24. 
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regulated, would be limited to leverage up to 25 times more than traders’ deposits, the same as 

forex leverage.27

IV. Anti-Money Laundering Regulation 

The Act on Prevention of Transfer of Criminal Proceeds subjects virtual currency exchange 

businesses to the requirements under the anti-money laundering regulations.28 Virtual currency 

exchange businesses are therefore obligated to check the identities of customers who open 

accounts, keep transaction records, and notify authorities when a suspicious transaction 

is identified.29

V. ICO Regulation 

To date, it has not been clear what existing regulations are applicable to initial coin offerings 

(ICOs).30 The proposed amendments to the Financial Instruments and Exchange Act would 

clarify that the Act is applicable to the issuance of tokens in exchange for cryptoassets.31 ICOs 

would be subject to similar regulations to stock issue, such as disclosure of information.32

VI. Taxation 

The National Tax Agency (NTA) treats the profit earned from sales of virtual currency, in 

principle, as miscellaneous income,33 rather than capital gains,34 under the Income Tax Act.35 

 

27 Explanatory Material, supra note 20, at 4. 

28 犯罪による収益の移転防止に関する法律 [Act on Prevention of Transfer of Criminal Proceeds], Act No. 22 of 

2007, amended by Act No. 67 of 2017, art. 2, para. 2, item 31. 

29 Id. arts. 4, 7–8. 

30 Explanatory Material, supra note 20, at 4. See also Taro Awataguchi, Japan, in BLOCKCHAIN AND 

CRYPTOCURRENCY REGULATION 2019 (Global Legal Insights, Jan. 2019), 

https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/japan, archived at

https://perma.cc/6VVF-YAT9. 

31 Proposed Financial Instruments and Exchange Act, art. 2, paras. 3 & 8, art. 3 & art. 28. See also Explanatory 

Material, supra note 20, at 4. 

32 Explanatory Material, supra note 20, at 4. 

33 所得税法 [Income Tax Act], Act No. 33 of 1965, amended by Act No. 74 of 2017, art. 35. 

34 Id. art. 33. 

35 NTA, 仮想通貨に関する所得の計算方法等について(情報)[Regarding Calculation Method of Income 

Relating to Virtual currency (Information), Individual Taxation Information], No. 4 (Dec. 1, 2017), 

http://www.nta. go.jp/law/joho-zeikaishaku/shotoku/shinkoku/171127/01.pdf, archived at

https://perma.cc/M22N-53MF. 
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Miscellaneous income is added to the amount of other income, excluding specified capital gains,36

when a person’s taxable income is calculated and taxed.37 

 

36 租税特別措置法 [Act on Special Measures concerning Taxation], Act No. 26 of 1957, amended by Act No. 4 of 

2017, arts. 8 through 8-5. 

37 Income Tax Act, art. 89. 
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Jersey 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist

SUMMARY Jersey has introduced legislation that regulates cryptocurrency exchanges with an 

annual turnover of £150,000 (approximately US$210,000) or more. These exchanges are 

supervised by the Jersey Financial Services Commission and must comply with antimoney laundering and counter-financing of terrorism laws, including know-yourcustomer requirements. By excluding exchanges with a turnover below £150,000, Jersey 

aims to create a means for companies to test various methods of financial technology 

without being subject to regulation. 

I. Introduction 

Jersey is a Crown Dependency of the United Kingdom and is a low-tax jurisdiction with a large 

financial sector. 

II. Regulation of Cryptocurrencies 

Jersey issued a consultation paper on the regulation of cryptocurrencies in 2015, noting “[t]he 

creation of a business-friendly framework that encourages innovation, jobs and growth in both 

the financial services and digital sectors is a priority for the Government of Jersey.”1 The majority 

response to the consultation paper was that cryptocurrencies should be regulated only insofar as 

necessary to ensure compliance with anti-money laundering laws and to counter the financing of 

terrorism.2 The government of Jersey rejected “a full prudential and conduct of business regime” 

for cryptocurrencies, as it considered it was too early to issue such regulations given that 

cryptocurrencies are in the early stages of development and that doing so could restrict 

development and innovation.3 The legislative framework that applies to cryptocurrencies 

mirrors these recommendations. 

The result of the consultation process was the issuance of a policy document that aims to 

further enhance Jersey’s proposition as a world leading Fintech jurisdiction . . . [and] 

outline Jersey’s commitment to creating an environment that encourages confidence and 

innovation in the digital sector whilst protecting the Island from the most prominent 

 

1 CHIEF MINISTER’S DEPARTMENT, REGULATION OF VIRTUAL CURRENCY: CONSULTATION PAPER (July 9, 2015), 

http://www.statesassembly.gov.je/assemblyreports/2015/r.80-2015.pdf, archived at https://perma.cc/K5PYGZRP. 

2 CHIEF MINISTER’S DEPARTMENT, REGULATION OF VIRTUAL CURRENCY: POLICY DOCUMENT para. 1.1 (Oct. 21, 2015), 

https://www.gov.je/SiteCollectionDocuments/Government and administration/P Regulation of Virtual 

Currency 20151021 GP.PDF, archived at https://perma.cc/9QBL-YQNT. 

3 Id. para. 1.2. 
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money laundering and terrorist financing risks that are presented by virtual currencies in 

their current form.4

The Jersey Financial Services Commission (JFSC) has stated that 

most ICOs are unlikely to be regulated by the JFSC. Instead, the JFSC places some 

conditions on an issuer of an ICO (an ICO issuer) through the powers conferred on the 

JFSC in the Island’s statutory instrument governing the raising of capital, the Control of 

Borrowing (Jersey) Order 1958.5 

Thus, while there are no specific regulations in Jersey that apply to cryptocurrencies and initial 

coin offereings (ICOs), certain types of ICOs may fall under the existing financial regulatory 

regime in Jersey, depending on the form the offer takes.6 If an ICO does fall under the Jersey 

financial regulatory regime, 

[a]s a general policy, Jersey based ICO issuers are required to be incorporated as a Jersey 

company and administered through a trust and company service provider licensed by the 

JFSC under the Financial Services (Jersey) Law 1998 to carry on trust company business.7

To provide clarity the JFSC issued guidance to aid companies in determining whether or not they 

fall within the legislative framework.8 In order to fall within this framework, all ICO issuers in 

Jersey are required to meet the following criteria: 

3.2.1 be incorporated as a Jersey company with its registered office being provided by the 

TCSP appointed by the issuer 

3.2.2 receive consent under the COBO from the JFSC before it undertakes any activity; 

3.2.3 comply with the JFSC’s Sound Business Practice Policy; 

3.2.4 apply relevant AML/CFT requirements to persons that either purchase tokens from, 

or sell tokens back to, the issuer of those tokens; 

3.2.5 appoint and maintain a TCSP; 

3.2.6 appoint and maintain a Jersey resident director who is a natural person and also a 

principal person of the TCSP appointed by the issuer; 

3.2.7 be subject to an ongoing audit requirement; 

3.2.8 have procedures and processes in place to (i) mitigate and manage the risk of retail 

investors investing inappropriately in the ICO, and (ii) to ensure retail investors 

understand the risks involved; 

3.2.9 prepare and submit to the JFSC an Information Memorandum (which may be in the 

form of a White Paper) which complies with certain content requirements required of a 

 

4 Id. at 2. 

5 JERSEY FINANCIAL SERVICES COMMISSION, THE APPLICATION PROCESS FOR ISSUERS OF INITIAL COIN OFFERINGS 

(ICOS): GUIDANCE NOTE (July 2018), https://www.jerseyfsc.org/media/1999/gn-ico-july-2018.pdf, archived at

https://perma.cc/9VML-8NRN. 

6 Press Release, Jersey Financial Services Commission, JFSC Warning on Initial Coin Offerings (Nov. 30, 2017), 

https://www.jerseyfsc.org/media/1612/jfsc-warning-initial-coin-offerings.pdf, archived at

https://perma.cc/S3EG-QMDU. 

7 Id. 

8 JERSEY FINANCIAL SERVICES COMMISSION, supra note 5. 
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prospectus issued by a company under the Companies (Jersey) Law 1991; and 3.2.10 ensure 

that any marketing material (including the Information Memorandum) is clear, fair and 

not misleading.9

In cases where the ICO requires consent under the Control of Borrowing (Jersey) Order, the JFSC 

may impose certain conditions on the company, which 

require the issuer of the ICO to take certain measures to manage, amongst other things, 

financial crime and investor risks. The conditions reflect the guiding principles pursuant 

to which the JFSC discharges its functions as the Island's financial services regulator (the 

Guiding Principles) which are to have regard to: 

1.3.1. the reduction of the risk to the public of financial loss due to dishonesty, 

incompetence, malpractice or the financial unsoundness of financial service 

providers; 

1.3.2. the protection and enhancement of Jersey's reputation and integrity in 

commercial and financial matters; 

1.3.3. the best economic interests of Jersey; 

1.3.4. and the need to counter financial crime both in Jersey and elsewhere.10

While the JFSC may, in some cases, regulate ICOs, it “does not take any responsibility for the 

financial soundness of any schemes or for the correctness of any statements made or opinions 

expressed with regard to them.”11

III. Anti-Money Laundering Laws

A. Application 

Jersey’s anti-money laundering and counter-financing of terrorism (AML/CFT) laws were 

extended to cover cryptocurrencies, with the changes coming into force on September 26, 2016.12 

“Virtual currencies” are defined in the Proceeds of Crime Act as a currency rather than a 

commodity, thus enabling it to fall within the pre-existing regulatory framework and be 

regulated by the JFSC.13 Specifically, the Proceeds of Crime Act defines virtual currency as 

(4) . . . any currency which (whilst not itself being issued by, or legal tender in, 

any jurisdiction)– 

(a) digitally represents value; 

 

9 Id. 

10 Id. 

11 Id. 

12 Proceeds of Crime (Miscellaneous Amendments) (Jersey) Regulations 2016, R&O 63/2016, 

https://www.jersey law.je/laws/enacted/PDFs/RO-063-2016.pdf, archived at https://perma.cc/F2H5-2KNV; 

Proceeds of Crime (Supervisory Bodies) (Virtual Currency Exchange Business) (Exemption) (Jersey) Order 

2016, REVISED LAWS OF JERSEY, https://www.jerseylaw.je/laws/revised/PDFs/08.785.80.pdf, archived at

https://perma.cc/A8W9-7753. 

13 Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 9, https://www.jerseylaw.je/laws/revised/Pages/08.780. 

aspx#_ Toc468266188, archived at https://perma.cc/K2YU-7KA4. 
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(b) is a unit of account; 

(c) functions as a medium of exchange; and 

(d) is capable of being digitally exchanged for money in any form. 

(5) For the avoidance of doubt, virtual currency does not include any instrument which 

represents or stores (whether digitally or otherwise) value that can be used only to 

acquire goods and services in or on the premises of, or under a commercial 

agreement with, the issuer of the instrument.14

A “virtual currency exchange” is defined in the Act as “the exchange of virtual currency for 

money in any form, or vice versa,” but “a reference to providing a service to third parties shall 

not include a company’s providing that service to a connected company.”15 

Virtual currencies were also brought within the ambit of the Money Laundering (Jersey) Order 

2008,16 which requires individuals operating a “money service business” to register with the 

JFSC17 and comply with the jurisdiction’s AML/CFT laws if they have an annual turnover greater 

than £150,000 (approx. US$210,000).18 These laws require such businesses to adopt policies and 

procedures to prevent and detect money laundering and terrorist financing, appoint a money 

laundering compliance officer and reporting officer, and ensure that record keeping and 

customer due diligence measures are implemented,19 such as know-your-customer measures, 

prior to entering into a business relationship with a person, or before conducting a “one-off” for 

all transactions greater than €1,000 (approx. US$1,220).20 

Businesses that trade in goods and receive payments in cryptocurrency of €15,000 (approx. 

US$18,500) and above per transaction, or in groupings of transactions, are considered to be “high 

value dealers” under the Proceeds of Crime Act 1999.21 Such dealers must be registered and 

supervised by the JFSC and comply with Jersey’s AML/CFT laws.22 

 

14 Id. Sched. 2, Part B, ¶¶ 4, 5. 

15 Id. Sched. 2, Part B, ¶ 9(2)(a)–(b). 

16 Money Laundering (Jersey) Order 2008, REVISED LAWS OF JERSEY,

https://www.jerseylaw.je/laws/revised/Pages/ 08.780.30.aspx, archived at https://perma.cc/2ENA-U4AQ. 

17 Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008, REVISED LAWS OF JERSEY, https://www.jerseylaw. 

je/laws/revised/PDFs/08.785.pdf, archived at https://perma.cc/U5CQ-EQGY. 

18 Money Laundering (Jersey) Order 2008, REVISED LAWS OF JERSEY, https://www.jerseylaw.je/laws/revised/ 

Pages/08.780.30.aspx, archived at https://perma.cc/PT5L-A4X6. 

19 “Customer due diligence measures” are defined in the Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 3. 

20 REGULATION OF VIRTUAL CURRENCY: POLICY DOCUMENT, supra note 2, par. 1.14. See also Money Laundering 

(Jersey) Order 2008. 

21 Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 4. 

22 Id.; JERSEY FINANCIAL SERVICES COMMISSION, AML/CFT HANDBOOK FOR ESTATE AGENTS AND HIGH VALUE 

DEALERS (effective Aug. 14, 2015), https://www.jerseyfsc.org/pdf/Consolidated-Estate-Agents-and-HVDSection-1-to-10.pdf, archived at https://perma.cc/H5CA-UEGK. 
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B. Exemptions 

Individuals who operate a virtual currency exchange as a business but have an annual turnover 

of less than £150,000 are exempt from the Act. These businesses must notify the JFSC that they 

are conducting such a business, but that they are exempt.23 There is no fee for this notification, 

but it makes the business known to the JFSC and enables them to “build a good profile of the 

businesses in this sector”24 and to investigate the business for any suspected breaches of 

legislation.25 The aim of this exemption is to create “an innovative regulatory sandbox . . . 

allowing Exchangers with turnover of less than £150,000 per calendar year to test virtual currency 

exchange delivery mechanisms in a live environment without the normal registration 

requirements and associated costs.”26

IV. Taxation 

There do not appear to be specific legislative provisions that apply solely to the taxation of 

cryptocurrencies. The government of Jersey has issued guidance on the tax treatment of 

cryptocurrencies, particularly with regard to the mining of cryptocurrencies, the exchange of 

cryptocurrencies to conventional currencies, and the use of cryptocurrencies to pay for goods 

and services.27 

The government has stated that income generated from mining cryptocurrencies on a small or 

irregular scale are generally not to be considered as a trading activity, and that mining alone does 

not make a person liable for income tax.28 Costs associated with mining are also typically not 

deductible as an expense. If mining is accompanied by“trading in cryptocurrencies on a 

sufficiently commercial scale that they would be regarded as trading on application of the ‘Badges 

of Trade’ principles.”29 

Occasional transactions that involve the exchange of cryptocurrencies that result in a gain or loss 

are generally not taxable. Exchange of cryptocurrencies to and from conventional currencies by 

businesses or entities renders them liable to income tax if the activity is considered to be trading, 

 

23 Proceeds of Crime (Supervisory Bodies) (Virtual Currency Exchange Business) (Exemption) (Jersey) Order 

2016, REVISED LAWS OF JERSEY, https://www.jerseylaw.je/laws/revised/PDFs/08.785.80.pdf, archived at

https://perma.cc/A8W9-7753. See also Jersey Strengthens Financial Crime Regulation with Extension to Cover 

Virtual Currency, JERSEY FINANCE (Oct. 24, 2016), https://www.jerseyfinance.je/news/jersey-strengthensfinancial-crime-regulation-with-extension-to-cover-virtual-currency#.WrI4_v6os5s, archived at

https://perma.cc/TX8J-KE5R. 

24 REGULATION OF VIRTUAL CURRENCY: POLICY DOCUMENT, supra note 2, para. 1.8. 

25 Id. 

26 Virtual Currency Regulation in Jersey Takes Effect, OGIER (Oct. 4, 2016), http://www.ogier.com/publications/ 

virtual-currency-regulation-in-jersey-takes-effect, archived at https://perma.cc/AHT8-HJBZ. 

27 Cryptocurrency Tax Treatment, GOV.JE, 

https://www.gov.je/taxesmoney/incometax/technical/guidelines/pages/cryptocurrenciestreatment.aspx

(last visited April 4, 2019), archived at https://perma.cc/Z5K5-3R68. 

28 Id. 

29 Id. 
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or if features of trading are met.30 Businesses that use cryptocurrency transactions are taxable 

under income tax rules, but must convert the transaction to the local currency (sterling).31 In cases 

where goods and services are paid for in cryptocurrency, the transaction must be converted to 

the local currency in order to apply the goods and service tax.32 

V. Consumer Protection 

In November 2017, the JFSC issued a warning on ICOs, noting that these types of offerings are 

speculative, risky and are typically unregulated, and thus not subject to typical investor 

protection requirements.33

 

30 Id. 

31 Id. 

32 Id. 

33 Press Release, Jersey Financial Services Commission, JFSC Warning on Initial Coin Offerings (Nov. 30, 2017), 

https://www.jerseyfsc.org/media/1612/jfsc-warning-initial-coin-offerings.pdf, archived at

https://perma.cc/S3EG-QMDU. 
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Liechtenstein 

Jenny Gesley 

Foreign Law Specialist

SUMMARY In 2017, Liechtenstein amended its Due Diligence Act to extend the scope to exchange 

offices that exchange virtual currencies against fiat money and vice versa. It also 

included a definition of virtual currencies in that law. In addition, initial coin offerings 

(ICOs) may be subject to financial market law, depending on the specific design and de 

facto function of the tokens. 

 On August 28, 2018, the government of Liechtenstein adopted a consultation report on 

a proposed Blockchain Act. The goal of the Blockchain Act is to take advantage of the 

potential of blockchain technology, create legal certainty for market participants, 

protect users of blockchain technology from potential abuse, and reduce potential 

reputation risks for Liechtenstein. The report also proposed a further extension of the 

scope of the Due Diligence Act to include other participants in the blockchain industry. 

However, the final adoption of the Blockchain Act has been delayed and it will most 

likely not enter into force until 2020. 

I. Approach to Assets Created Through Blockchain 

In 2017, Liechtenstein amended its Due Diligence Act to extend the scope to exchange offices that 

exchange virtual currencies against fiat money and vice versa. It also included a definition of 

virtual currencies in that law. Besides this amendment, there is currently no specific legislation 

for assets created through blockchain in Liechtenstein. However, on August 28, 2018, the 

government of Liechtenstein adopted a consultation report on a proposed Blockchain Act.1 The 

goal of the Blockchain Act is to take advantage of the potential of blockchain technology, create 

legal certainty for market participants, protect users of blockchain technology from potential 

abuse, and reduce potential reputation risks for Liechtenstein.2 The government also aims to 

define the minimum requirements for blockchain-based activities and have them registered by 

                                                            

1 See Jenny Gesley, Liechtenstein: Government Adopts Consultation Report on Draft Blockchain Act, GLOBAL LEGAL 

MONITOR (Sept. 20, 2018), http://www.loc.gov/law/foreign-news/article/liechtenstein-government-adoptsconsultation-report-on-draft-blockchain-act/, archived at http://perma.cc/JE7C-HUSW. 

2 MINISTERIUM FÜR PRÄSIDIALES UND FINANZEN [MINISTRY FOR GENERAL GOVERNMENT AFFAIRS AND FINANCE],

VERNEHMLASSUNGSBERICHT DER REGIERUNG BETREFFEND DIE SCHAFFUNG EINES GESETZES ÜBER AUF 

VERTRAUENSWÜRDIGEN TECHNOLOGIEN (VT) BERUHENDE TRANSAKTIONSSYSTEME (BLOCKCHAIN-GESETZ; VTGESETZ; VTG) UND DIE ABÄNDERUNG WEITERER GESETZE. [CONSULTATION REPORT ON ENACTING AN ACT ON 

TRANSACTION SYSTEMS BASED ON TRUSTWORTHY TECHNOLOGIES (TT) (BLOCKCHAIN ACT; TT ACT; VTG) AND THE 

AMENDMENT OF FURTHER ACTS] (hereinafter “Consultation Report”) (Aug. 28, 2018), 

https://www.llv.li/files/srk/vnb-blockchain-gesetz.pdf, archived at http://perma.cc/W8GW-YUQQ; 

unofficial English translation available at https://www.regierung.li/media/attachments/VNB-BlockchainGesetz-en-full-clean.pdf?t=636869640270903690, archived at http://perma.cc/QS55-YN3W. See also Press 

Release, Government of the Principality of Liechtenstein, Consultation Launched on Blockchain Act (Aug. 29, 

2018), https://www.regierung.li/en/press-releases/212310, archived at http://perma.cc/M76B-AKE6. 
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the Financial Market Authority of Liechtenstein (FMA).3 The deadline for comments on the 

consultation report (consultation period) was November 16, 2018. The consultation procedure is 

a preliminary voluntary step in the legislative process before the draft is submitted to Parliament 

for debate. However, the final adoption of the Blockchain Act has been delayed and it will most 

likely not enter into force until 2020.4 The parliament is planning to debate the report and draft 

of the government before the summer recess of 2019.5

In addition, initial coin offerings (ICOs) may be subject to financial market law depending on the 

specific design and de facto function of the tokens. 

A. Draft Blockchain Act 

1. Scope of Application 

The proposed Blockchain Act applies to all trustworthy technologies (TT) service providers, 

unless the TT system is available only to a closed user group.6 “Trustworthy” technologies are 

defined as “technologies that ensure the integrity of tokens, their unambiguous allocation to the 

owner whom [sic] possesses the power of disposal and their disposal without an operator.”7 The 

rules on the control and use of tokens are only applicable when tokens are generated or issued 

by a TT service provider who is subject to Liechtenstein law, or when the Blockchain Act declares 

them applicable.8 The Consultation Report on the draft Act states that the term “trustworthy 

technologies” was chosen as a technology-neutral term to encompass a wide range of technology 

options instead of the narrower terms “blockchain” and “distributed ledgers.” Furthermore, 

technology-neutral terms ensure that the law will not be outdated after a few years and only have 

a limited scope.9 

2. Tokens and Related Concepts 

The Consultation Report uses the word “tokens” to describe all types of technical implementation 

methods of the blockchain technology, even if the system does not actually use a “token” to 

implement it. “Token” is understood in an abstract and not in a technological sense.10 The draft 

Blockchain Act defines “tokens” as “information on a TT-system that can embody fungible claims 

or membership rights to an individual, goods, and/or other absolute or relative rights and 

                                                            

3 Consultation Report (English version), supra note 2, at 6. 

4 Landtag des Fürstentums Liechtenstein [Parliament of the Principality of Liechtenstein], Kleine Anfrage. 

Kryptowährungen und Liechtensteins Blockchain-Gesetz [Parliamentary Interpellation. Cryptocurrencies and 

Liechtenstein’s Blockchain Act] 1 (Feb. 27, 2019), https://www.landtag.li/kleineanfragenprint.aspx?id=15514, 

archived at http://perma.cc/69SV-9RXL. 

5 Id. at 3. 

6 Consultation Report (English version), supra note 2, at 130 et seq., Draft Blockchain Act, arts. 2 & 4. 

7 Id. at 130, Draft Blockchain Act, art. 3, para. 1. 

8 Id. at 135, Draft Blockchain Act, art. 11. 

9 Id. at 38. 

10 Id. at 43. 
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ensuring [sic] the allocation to one or more public keys.”11 A token functions as a “container” that 

represents all types of rights on a TT-system. “Empty containers,” meaning tokens like Bitcoin 

that do not represent a specific right, are also possible.12 The report states that the Blockchain Act 

serves as a framework law for all types of token-based applications.13 It was decided to establish 

autonomous rules for ownership of tokens and TT-systems instead of modifying the existing 

property rules.14

A “public key” is defined as “consist[ing] of a series of characters representing a unique publicly 

accessible address contained in a TT-system to which tokens can be uniquely allocated.”15 A 

“private key” on the other hand consists of a series of characters that, by themselves or together 

with other private keys, enable the use and transfer of the public key.16 A transfer of a token by 

the person who owns the private key causes a transfer of the right that is represented by the token, 

meaning the online transfer precedes the offline transfer.17 

3. General Requirements for Persons Involved in Token Transactions 

The draft Blockchain Act introduces a number of requirements for persons involved in token 

transactions. In general, TT services may be provided only by persons who have full capacity to 

act and are trustworthy.18 Trustworthiness exists when a person has not been convicted by a court 

of fraudulent bankruptcy or similar offenses and there are no other reasons that would give rise 

to serious doubts regarding the provider’s trustworthiness.19 In addition, TT service providers 

may provide services only if they have a clear organizational structure, including procedures to 

deal with conflicts of interest; written internal control mechanisms; and a minimum capital of 

CHF100,000 (about US$100,565) or equivalent of collateral.20 

4. Specific Requirements for Selected TT Service Providers 

For selected TT service providers, in particular token issuers, token generators, physical 

validators, TT depositors, and TT protectors, the draft Blockchain Act sets out additional 

requirements and establishes a duty to register with the Financial Market Authority of 

Liechtenstein (FMA). 

                                                            

11 Id. at 131, Draft Blockchain Act, art. 5, para. 1, no. 1. 

12 Id. at 42. 

13 Id. at 27. 

14 Id. at 44. 

15 Id. at 131, Draft Blockchain Act, art. 5, para. 1, no. 2. 

16 Id. at 131, Draft Blockchain Act, art. 5, para. 1, no. 3. 

17 Id. at 46; id. at 133, Draft Blockchain Act, arts. 6, 7. 

18 Id. at 136, Draft Blockchain Act, art. 13, para. 1. 

19 Id. at 136, Draft Blockchain Act, art. 13, para. 3. 

20 Id. at 136, Draft Blockchain Act, art. 13, para. 4. 
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5. Token Issuers 

A “token issuance” is defined as the “public offering of tokens.”21 Token issuers (Token Emittenten) 

are persons who perform the token issuance in their own name or on a professional basis on 

behalf of a third party.22 They must set up appropriate internal control mechanisms to 

 ensure the disclosure of basic information as defined in articles 28–32 during the token 

issuance and for at least ten years after the issuance; 

 ensure the proper execution of the token issuance; 

 prevent the repeat token issuance for the same rights; 

 note a previous token issuance for a subsequent issuance on related rights; and 

 ensure business continuity in the case of disruptions during the token issuance.23

The rules are similar to the ones found in the Securities Prospectus Act, which may therefore be 

used as an additional interpretation aid.24 

6. Token Generators 

“Token generators” (Token Erzeuger) are defined as “persons who generate one or more tokens 

and make them available on a TT-system.25 Token generators must ensure by appropriate means 

that the transfer of the token causes the transfer of the represented right and that any other 

transfer of the represented right is not possible.26 The law does not specify what the appropriate 

means are.27 In addition, token generators must establish internal control mechanisms to ensure 

the technical operability of the generated tokens during the token generation and for the 

following three years.28

7. Physical Validators 

“Physical validators” are defined as persons who ensure the enforcement of property rights 

within the meaning of property law that are represented by the tokens on a TT-systems.29 They 

must establish internal control mechanisms to ensure at all times 

                                                            

21 Id. at 131, Draft Blockchain Act, art. 5, para. 1, no. 5. 

22 Id. at 132, Draft Blockchain Act, art. 5, para. 1, no. 8. 

23 Id. at 138, Blockchain Act, art. 14. 

24 Id. at 64; Wertpapierprospektgesetz [WPPG] [Securities Prospectus Act], May 23, 2007, LIECHTENSTEINISCHES 

LANDESGESETZBLATT NUMMER [LGBL.-NR.] [LIECHTENSTEIN OFFICIAL LAW GAZETTE NO.] 2007.196, as amended, 

https://www.gesetze.li/konso/pdf/2007196000?version=9, archived at http://perma.cc/9Y6H-8MW8. 

25 Consultation Report (English version), supra note 2, at 132, Draft Blockchain Act, art. 5, para. 1, no. 9. 

26 Id. at 133, Draft Blockchain Act art. 7, para. 2. 

27 Id. at 46. 

28 Id. at 140, Draft Blockchain Act, art. 19. 

29 Id. at 132, Draft Blockchain Act, art. 5, para. 1, no. 11. 
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 that the person initiating the token generation is the actual owner of the object at the time of 

the token generation; 

 that a collision of rights concerning the same object is avoided; and 

 that they will be held liable if the rights guaranteed by them cannot be enforced as stipulated 

in the contract. They must also ensure that the owner of the token has a direct claim against 

the insurance company of the physical validator or against the insurance for the 

specific object.30 

8. TT Depositories 

“TT depositories” (VT Verwahrer) are defined as persons who provide custodial services for 

private keys of third parties on a TT-system.31 They must establish internal control mechanisms 

to ensure 

 the establishment of appropriate security measures that prevent the loss or misuse of private 

keys by unauthorized third parties; 

 asset separation between the business assets of the TT custodian and the private keys of the 

customers; and 

 business continuity in the case of disruptions.32 

9. TT Protectors 

“TT protectors” are defined as “persons who hold tokens as a trustee in their own name on behalf 

of third parties.”33 They are required to obtain an authorization according to the Trustee Act or 

the Banking Act.34

10. Duty to Register 

The following persons must register with the Financial Market Authority of Liechtenstein (FMA) 

if they intend to provide TT services on a professional basis in Liechtenstein: 

                                                            

30 Id. at 140, Draft Blockchain Act, art. 20. 

31 Id. at 132, Draft Blockchain Act, art. 5, para. 1, no. 10. 

32 Id. at 138, Draft Blockchain Act art. 15. 

33 Id. at 132, Draft Blockchain Act art. 5, para. 1, no. 12. 

34 Id. at 139, Draft Blockchain Act, art. 18; Treuhändergesetz [TrHG] [Trustee Act], Nov. 8, 2013, LGBL.-

NR. 2013.421, as amended, https://www.gesetze.li/konso/pdf/2013421000?version=8, archived at 

http://perma.cc/7ENE-8ZMK, unofficial English translation available at

https://www.regierung.li/media/medienarchiv/173_520_01_01_2017_en_636650151936919292.pdf?t=7, 

(English version updated through Jan. 1, 2017), archived at http://perma.cc/5QSE-SSUM; Gesetz über die 

Banken und Wertpapierfirmen [Bankengesetz] [BankG] [Act on Banks and Investment Firms] [Banking Act], 

Oct. 21, 1992, LGBL.-NR. 1992.108, as amended, https://www.gesetze.li/konso/pdf/1992108000?version=28, 

archived at http://perma.cc/52EK-DCD5, unofficial English translation available at

https://www.regierung.li/media/medienarchiv/952_0_24_04_2018_en_636632620673283491.pdf?t=7 (English 

version updated through Apr. 24, 2018), archived at http://perma.cc/SF6P-L43H. 
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 Token issuers 

 TT protectors 

 TT custodians 

 TT exchange office operators 

 Physical validators 

 TT identity service providers as defined in article 5, paragraph 1, number 16 of the 

Blockchain Act35 

Other TT service providers, including token generators, may register with the FMA on a 

voluntary basis.36 Registered TT service providers are to be listed in a publicly accessible TT 

service provider registry by the FMA.37 

11. Protections in Bankruptcy Proceedings 

Tokens that are held by TT protectors or private keys that are held by TT custodians do not 

become part of the bankruptcy estate when the TT service provider becomes bankrupt and are to 

be held separately for the benefit of the customer.38 

12. Fines 

TT service providers that do not comply with the obligations set out in the draft Blockchain Act 

are subject to a fine of CHF20,000–30,000 (about US$20,150–30,225) depending on the type 

of violation.39 

B. Anti-Money Laundering Law 

As noted above, in 2017, Liechtenstein amended its Due Diligence Act (DDA) to extend the scope 

to virtual currency exchange offices. The due diligence obligations codified in the DDA serve to 

combat money laundering, organized crime, and terrorist financing.40 The DDA obligates certain 

                                                            

35 Consultation Report (English version), supra note 2, at 132, at 150, Draft Blockchain Act art. 36, para. 1. 

36 Id. at 150, Draft Blockchain Act art. 36, para. 2. 

37 Id. at 152, Draft Blockchain Act, art. 37, at 155, Draft Blockchain Act, art. 41. 

38 Id. at 142 et seq., Draft Blockchain Act arts. 24, 25. 

39 Id. at 160 et seq., Draft Blockchain Act, art. 49. 

40 Gesetz über berufliche Sorgfaltspflichten zur Bekämpfung von Geldwäscherei, organisierter Kriminalität und 

Terrorismusfinanzierung [Sorgfaltspflichtgesetz] [SPG] [Act on Professional Due Diligence to Combat Money

Laundering, Organized Crime, and Terrorist Financing], Dec. 11, 2008, LGBl.-Nr. 2009.047, as amended, 

https://www.gesetze.li/konso/pdf/2009098000?version=20, archived at http://perma.cc/3YY9-BST6, 

unofficial English translation available at 

https://www.regierung.li/media/medienarchiv/952_1_14_6_18_en.pdf?t=7 (English version updated 

through June 14, 2018), archived at http://perma.cc/5TBM-FQZ4. 
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entities and persons to identify their contracting partner by means of valid documentation.41

Among others, it applies to bureaux de change (exchange offices), which are defined as “natural 

or legal persons whose activities consist in the exchange of legal tender at the official exchange 

rate or of virtual currencies against legal tender and vice versa.”42 Virtual currencies are defined 

as “digital monetary units, which can be exchanged for legal tender, used to purchase goods or 

services or to preserve value and thus assume the function of legal tender.”43

The Consultation Report on the draft Blockchain Act proposes to widen the scope of the Due 

Diligence Act. It includes token issuers, TT protectors, physical validators, TT custodians, TT 

identity service providers, and TT exchange offices (bureaux de change) operators among the 

persons subject to the due diligence requirements.44 

C. Taxation 

The tax authorities of Liechtenstein have not given out any specific guidance with regard 

to cryptocurrencies. 

II. Custodianship of Cryptocurrencies by Financial Institutions 

As mentioned above, the draft Blockchain Act defines “TT depositories” and sets out their 

obligations when they provide custodial services.45 They must establish internal control 

mechanisms to ensure 

 the establishment of appropriate security measures that prevent the loss or misuse of private 

keys by unauthorized third parties; 

 asset separation between the business assets of the TT custodian and the private keys of the 

customers; and 

 business continuity in the case of disruptions.46

III. Regulation of Cryptocurrencies as Financial Securities 

The FMA states in its guidance on ICOs that they may be subject to financial market law; however, 

it depends on the specific design and de facto function of the tokens.47 An example are tokens 

that have characteristics of equity securities or other investments. If they are classified as financial 

                                                            

41 Id. arts. 3, 5. 

42 Id. art. 2, para. 1(l), art. 3, para. 1(f). 

43 Id. art. 2, para. 1(l). 

44 Consultation Report (English version), supra note 2, at 164, amendment of Due Diligence Act, art. 3. 

45 See above, part I.A(8). 

46 Consultation Report (English version), supra note 2, at 138, Draft Blockchain Act art. 15. 

47 FMA, FACT SHEET ON INITIAL COIN OFFERINGS 2 (Sept. 10, 2017), https://www.fma-li.li/files/fma/fmafactsheet-ico.pdf, archived at http://perma.cc/8W3X-N572. 
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instruments, they are subject to licensing by the FMA on the basis of special legislation and may 

require publication of a prospectus.48

                                                            

48 Id. 
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Lithuania 

Astghik Grigoryan 

Legal Research Analyst

SUMMARY In 2018, the Lithuania Ministry of Finance issued ICO guidelines that reiterated the 

differentiated approach to cryptocurrencies adopted by the Bank of Lithuania in 2017. 

The guidelines stated that there is no single piece of legislation that governs 

cryptocurrencies and cryptoassets. Applicable laws will depend on the nature of 

particular cryptocurrencies, their purpose, and their potential utilization. 

I. Introduction 

In 2017, the Bank of Lithuania adopted a definition of virtual currency similar to that of the 

European Banking Authority. It states that “virtual currency shall mean ungoverned and 

unregulated digital money, which may be used as a means of payment, but is issued into 

circulation and guaranteed by an institution other than the central bank.”1 According to the Bank, 

virtual currencies can serve various purposes and have various forms, including as a means of 

payment, accumulation of saving, and as a tool for investments (including derivatives, 

commodities, or securities).2

In 2018, the Ministry of Finance of Lithuania issued guidelines on initial coin offerings (ICO 

Guidelines) with an aim of providing more certainty and transparency regarding the regulatory, 

taxation, accounting, and other requirements, as well as better cooperation between 

different stakeholders.3

According to the Guidelines, organizing an ICO is not regulated by specific legislation. However, 

taking into account different ICO models and different characteristics of tokens, in some cases 

such an activity may be subject to the requirements of certain legislation and to the supervision 

of the Bank of Lithuania.4

Various provisions of Lithuanian legislation could apply depending on the conditions of the ICO 

issue and the rights acquired in the process of the issuance of tokens. 

 

1 Position of the Bank of Lithuania on Virtual Currencies and Initial Coin Offering (Oct. 10, 2017), 

https://www.lb.lt/uploads/documents/docs/19814_21cc129916894b000a0dce69199828c5.pdf, archived at

https://perma.cc/K2J4-R46X. 

2 Id. 

3 MINISTRY OF FINANCE, ICO GUIDELINES 3 (2018), http://finmin.lrv.lt/uploads/finmin/documents/files/ICO 

Guidelines Lithuania.pdf, archived at https://perma.cc/NB9Z-TAUB.

4 Id. at 4. 
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II. Financial Regulation and Consumer Protection 

According to the Guidelines, only entities that are planning to provide regulated financial 

services and/or projects that release tokens that have the characteristics of securities will be under 

the scrutiny of Bank of Lithuania. 

A Financial Market Participant (FMP) can provide services associated with virtual currencies 

provided there is proper separation of the services by the FMP. According to the Guidelines and 

the position of the Bank of Lithuania, FMPs must ensure that their regulated financial services, 

including their name, brands, domain, and other corporate attributes, including managed 

environment (website, platform, mobile application, online account, etc.) or other elements are 

not linked to services associated with virtual currencies. 

FMPs should ensure compliance with the requirements of anti-money laundering and counterfinancing of terrorism (AML/CFT) legislation, and take appropriate measures to manage the 

risks associated with of money laundering and terrorist financing.5

As noted above, the intent and the character of tokens issued through an ICO process determine 

the applicable legislation. This differentiated approach was set forward in the position of the Bank 

of Lithuania concerning ICOs and reiterated in the Ministry of Finance guidelines. The ICO 

Guidelines provide for two types of ICO based on their purpose: 

 ICOs that do not grant profits or governing rights

If an ICO grants a right to use a product or service then the provisions of the Civil Code would 

apply. When ICOs are used as a payment instrument or are considered to be a charity, the 

AML/CFT legislation would apply.6

 ICOs that grant profits or governing rights 

If the tokens issued by an ICO have the characteristics of securities then the provisions of the Law 

on Securities would apply. When an ICO is used in crowdfunding of a project the provisions of 

the Law on Crowdfunding would apply.7 For example, a newly-launched ICO platform called 

DESICO, which aims to create a safe and regulated environment in order to develop global 

financial and blockchain technologies, is governed by the Law on Crowdfunding.8 

When an ICO is used as a financial instrument or when entities are engaged in the secondary 

trading of tokens, the Law on Markets in Financial Instruments would be the governing 

legislation. If the funds generated through an ICO are collectively invested by entities in certain 

 

5 Id. at 5. 

6 Id. at 6. 

7 Id.

8 Lithuania Introduces World’s First Security ICOs Platform, Opens up for Global Blockchain Based Businesses, 

MINISTRY OF FINANCE (Mar. 5, 2018), http://finmin.lrv.lt/en/news/lithuania-introduces-world-s-first-securityicos-platform-opens-up-for-global-blockchain-based-businesses, archived athttps://perma.cc/8JQ4-WWPB. 
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projects, the provisions of the Law on Collective Investment Subjects, the Law on Collective 

Investment Undertakings Intended for Informed Investors, and the Law on Collective Investment 

Undertakings Intended for Professional Investors would apply.9 

If the funds raised through an ICO are intended for the formation of the capital of a newly 

established FMP, the capital formation requirements applicable to a specific form of financial 

institution shall apply.10

III. Taxation 

The State Tax Inspectorate has issued a position paper with regard to the taxation of virtual 

currencies.11 The tax treatment of virtual currencies is differentiated based on their purpose. The 

position paper states that, from the standpoint of the Law on Corporate Income Tax and the Law 

on Personal Income Tax, “according to the substance and economic sense of the transactions 

carried out, ‘a virtual currency’ is recognized as current assets which may be used as payment 

means for goods and services or stored for sale, while for VAT purposes, ‘a virtual currency’ is 

considered as the same currency as euros, dollars and etc.”12

Tax laws are applicable to the following transactions involving virtual currencies: mining, 

purchase, sale of virtual currencies, payment by such currencies for purchased/sold goods or 

services.13 For accounting purposes, all transactions in virtual currencies should be reported in 

Euro. The exchange rate of virtual currency (or tokens) against the Euro is not regulated by 

legislation. Therefore, in selecting the exchange rate to be applied, “all available information and 

comparable data on the market may be used.”14 

A. Corporate Income Tax 

The production of virtual currency is not taxable. However, any profit incurred from selling of 

the produced virtual currency being the difference in the cost associated with the production of 

the virtual currency and sale price, is taxable.15 

B. Personal Income Tax 

For the purposes of Lithuanian tax legislation, virtual currency is considered to be property; 

therefore, income incurred from the sale of virtual currency is taxable in the same way as any 

 

9 ICO GUIDELINES, supra note 3, at 6. 

10 Id.

11 Position of State Tax Inspectorate Concerning Application of the Provisions of Tax Laws to the Activities 

Related to Virtual Currencies and Tokens, http://finmin.lrv.lt/uploads/finmin/documents/files/STI General 

Provisions on ICO(1).pdf (last visited Apr. 8, 2019), archived at https://perma.cc/NX34-PBPV.

12 Id. at 1. 

13 Id.

14 Id.

15 Id. at 2. 
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other form of income. In this case, the difference between the sales price and the acquisition price 

is taxed. It should be noted that a virtual currency or similar instrument is not considered as 

personal income in itself. A personal income tax obligation only arises when a person sells virtual 

currency.16 Income in the amount of EUR 2,500 (approximately $2,80) or less incurred from the 

sale of virtual currency is not taxable.17 Starting from January 1, 2018, income from the sale or 

purchase of virtual currencies will be subject to personal income tax rate of 15%.18

1. Tax Treatment of Wages (Incentives) in Virtual Currency 

According to article 139(3) of the Labor Code of the Republic of Lithuania, wages must be paid in 

cash.19 Transferred items or services provided by the employer or other persons are not 

considered part of wages. Therefore, the incentives transferred in a virtual currency by the right 

of ownership to the employee are considered income in-kind for the purposes of Lithuanian tax 

legislation. Such income is attributed as work-related income, from which the employer must 

calculate, pay, and declare income tax.20

2. Tax Treatment of Tokens Provided to the Founders of a Company 

Locked or non-activated tokens received by founders without payment are not considered to be 

subject of income tax. When the sale, exchange, or transfer of tokens takes place, the tokens will 

become subject to income tax.21

C. Value-Added Tax 

For the purposes of value-added tax (VAT), tokens issued by an ICO are divided into three 

categories: 

 Tokens with characteristics of securities. In this case, the funds raised by an entity through an 

ICO are not subject to corporate income tax or VAT. 

 Tokens having the same characteristics as virtual currencies. Their supply is exempt from 

VAT. 

 Tokens with characteristics of coupons. Consideration received for the supply of such tokens 

will be considered as advance payment and will not be subject to VAT.22

 

 

16 Id.

17 Id.

18 Id. at 3. 

19 Lietuvos Respublikos Darbo Kodeksas [Labor Code of the Republic of Lithuania], art. 139(3), Sept. 19, 2016, 

https://www.infolex.lt/ta/368200, archived at https://perma.cc/2EZU-JMJB.

20 Position of State Tax Inspectorate Concerning Application of the Provisions of Tax Laws to the Activities 

Related to Virtual Currencies and Tokens, supra note 11, at 4. 

21 Id. at 5. 

22 Id. at 11. 
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IV. Anti-Money Laundering Law 

According to the ICO Guidelines, Lithuania is in the process of updating its anti-money 

laundering legislation with regard to cryptocurrency operations.23 The Guidelines state that all 

FMPs engaged in cryptocurrency operations should comply with existing anti-money 

laundering legislation.24 

 

23 ICO GUIDELINES, supra note 3, at 14. 

24 Id. at 5.
The Law Library of Congress 162 

Luxembourg 

Nicolas Boring 

Foreign Law Specialist

Luxembourg has recently taken some steps towards establishing a regulatory framework for 

cryptoassets. Specifically, on March 1, 2019, the government of Luxembourg adopted a law that 

officially recognized tokenized securities as having the same status as traditional securities.1 This 

new law confirms the fungible character of tokenized securities, and specifies that transfers made 

using blockchain-type technologies are legally considered as transfers between 

brokerage accounts.2

Additionally, the government of Luxembourg issued instructions on the tax treatment of 

cryptocurrencies on July 26, 2018.3 This document establishes that Luxembourg does not consider 

cryptocurrencies to be actual currencies. Rather, cryptocurrencies are considered to be intangible 

assets for tax purposes.4 Furthermore, the use of a cryptocurrency as a means of payment does 

not affect the nature of the income for tax purposes, and normal Luxembourger tax laws apply 

according to the income’s nature.5

 

1 Loi du 1er mars 2019 portant modification de la loi modifiée du 1er août 2001 concernant la circulation de 

titres [Law of 1 March 2019 Amending the Amended Law of 1 August 2001 Regarding the Circulation of 

Securities], http://data.legilux.public.lu/eli/etat/leg/loi/2019/03/01/a111/jo, archived at 

https://perma.cc/QMX5-TJ5Z. 

2 Chambre des Députés [Chamber of Deputies], Projet de loi portant modification de la loi modifiée du 1er août 

2001 concernant la circulation de titres [Bill Amending the Amended Law of 1 August 2001 Regarding the 

Circulation of Securities], No. 7363, Commentaire de l’article unique [Commentary on the Sole Article], 

https://chd.lu/wps/PA_RoleDesAffaires/FTSByteServingServletImpl?path=941A5ADDCBD 

2A7967FA717045881789D441DD9A03654CB056EB4C1BD77207AD3A680CD9F7B06B38FF5BDE9B7845E2E09$2

0CD81147AB6C983B2B378482C9F6417, archived at https://perma.cc/T364-F4QT. 

3 Circulaire du directeur des contributions [Circular of the Director of Contributions], L.I.R. No. 14/5 – 99/3 – 

99bis/3 du 26 juillet 2018 [L.I.R. No. 14/5 – 99/3 – 99bis/3 of 26 July 2018], https://impotsdirects. 

public.lu/dam-assets/fr/legislation/legi18/circulaireLIR14-5-99-3-99bis-3du26072018.pdf, archived at

https://perma.cc/ED8J-QZLH. 

4 Id.

5 Id.
The Law Library of Congress 163 

Malaysia 

Kelly Buchanan 

Foreign Law Specialist

SUMMARY In January 2019, the Securities Commission Malaysia (SC) issued an order that sets out 

the characteristics of “digital currency” and “digital tokens” that are prescribed as being 

securities for the purposes of Malaysia’s securities law. It subsequently issued 

amendments to its recognized market guidelines, which now include a framework for 

operators of digital asset platforms to be approved by the SC as recognized market 

operators. This includes requirements related to an entity’s structure and governance, 

risk management processes, client asset protection, transparency, and market integrity. 

 In March 2019, the SC published a consultation paper on its proposed approach to 

regulating initial coin offerings (ICOs). This approach would include approval of the 

ICO by the SC based on various criteria and the registration of a disclosure document 

that meets certain requirements. 

 Digital currency exchanges were previously made subject to Malaysia’s anti-money 

laundering and counter-financing of terrorism system, which is overseen by the central 

bank. The Inland Revenue Board has also previously indicated that income earned 

through cryptocurrency trading is subject to the Income Tax Act 1967, although it has 

not yet issued any specific guidance on this issue. 

I. Approach to Assets Created Through Blockchain 

A. Financial Regulation and Consumer Protection 

The Securities Commission Malaysia (SC) and Bank Negara Malaysia (BNM), the central bank, 

issued a joint statement in December 2018 “to provide clarity on the regulatory approach for the 

offering and trading of digital assets in Malaysia,”1 stating as follows: 

The SC will regulate issuances of digital assets [including digital currencies and digital 

tokens] via initial coin offerings (ICO) and the trading of digital assets at digital asset 

exchanges in Malaysia. Regulations are currently being put in place to bring digital assets 

within the remit of securities laws to promote fair and orderly trading and ensure 

investor protection. 

ICO issuers and digital asset exchanges which are involved in the issuance or dealing of 

digital assets with a payment function will need to comply with relevant BNM laws and 

regulations relating to payments and currency matters. In addition, ICO issuers and digital 

 

1 Press Release, Securities Commission Malaysia (SC) & Bank Negara Malaysia (BNM), Joint Statement on 

Regulation of Digital Assets in Malaysia (Dec. 6, 2018), https://www.sc.com.my/news/media-releases-andannouncements/joint-statement-on-regulation-of-digital-assets-in-malaysia, archived at 

https://perma.cc/F4DL-ADV2. 
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asset exchanges are subject to the SC’s Guidelines on Prevention of Money Laundering and 

Terrorism Financing. 

BNM wishes to reiterate that digital assets are not legal tender in Malaysia. Members of 

the public are advised to carefully evaluate the risks associated with dealings in 

digital assets. 

In order to implement the regulatory framework on digital assets, the SC and BNM will 

enter into coordination arrangements to ensure compliance with laws and regulations 

under the purview of both regulators.2

The SC subsequently issued the Capital Markets and Services (Prescription of Securities) (Digital 

Currency and Digital Token) Order 2019 (Prescription Order), which came into force on January 

15, 2019.3 This instrument, which was made under the Capital Markets and Services Act 2007,4

set out the characteristics of digital currency and digital tokens that are prescribed as being 

securities for the purposes of Malaysia’s securities law. The SC then issued a statement regarding 

the implementation of the Order, including transitional arrangements, saying that 

the SC has invited and engaged with existing digital asset platform operators. 

Arrangements have been put in place to facilitate the operations of these platforms for a 

transitional period until 1 March 2019, subject to them fulfilling the conditions specified 

by the SC. During this period, these platform operators will not be permitted to accept new 

investors and will only be allowed to facilitate the withdrawal or transfer of client assets 

with the written instruction of the investor. 

Existing platform operators who failed to or did not attend the engagement with the SC 

on 17 January 2019 are advised to contact the SC immediately and not later than 25 January 

2019, failing which they shall be deemed to be operating a market in breach of the 

securities laws. 

Once the relevant guidelines have been issued, existing platform operators will be required 

to apply to the SC for authorisation if they intend to operate beyond the transitional period. 

Prospective operators can also apply to the SC for authorisation once the guidelines are 

issued. The SC will evaluate all applications and will only authorise market operators that 

fulfil the relevant requirements. 

With regard to initial coin offerings (ICOs), no person shall conduct an ICO without the 

prior authorisation of the SC. In this regard, the guidelines for ICOs will be issued by the 

 

2 Id. 

3 Capital Markets and Services (Prescription of Securities (Digital Currency and Digital Token) Order 2019, 

P.U.(A) 12/2009 (Jan. 8, 2019), https://www.sc.com.my/api/documentms/download.ashx?id=8c8bc467-c750-

466e-9a86-98c12fec4a77, archived at https://perma.cc/SUR8-882U. 

4 Capital Markets and Services Act 2007 (Act 671), as at Nov. 1, 2016, 

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20671%20-

Reprint%202016.pdf, archived at https://perma.cc/5M78-536V. 
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end of Q1 2019. In the meantime, ongoing ICOs should cease all activities and return all 

monies or digital assets collected from investors.5

The SC’s amended Guidelines on Recognized Markets were subsequently released on January 31, 

2019,6 setting out the requirements and framework for operators of digital asset platforms to 

apply to the SC to be registered as recognized market operators.7 The guidelines “establish criteria 

for determining fit and properness of issuers and exchange operators, disclosure standards and 

best practices in price discovery, trading rules and client asset protection.”8 The SC also stated 

that “[t]hose dealing in digital assets will be required to put in place anti-money laundering and 

counter-terrorism financing (AML/CFT) rules, cyber security and business 

continuity measures.”9

On March 6, 2019, the SC published a public consultation paper on the proposed regulatory 

framework for the issuance of digital assets through ICOs.10 The paper “discusses the proposed 

framework for, among others, the eligibility of issuers, the need for transparent and adequate 

disclosures as well as utilisation of proceeds of the ICO.”11 The period for comments on the paper 

closed on March 29, 2019. The paper states that 

[t]he SC recognises the potential use cases of blockchain and digital assets in enhancing 

efficiencies in the capital market including lowering post trade latency and counterparty 

risks, and enabling seamless regulatory reporting and compliance. Digital assets also have 

the potential to act as an alternative asset class for investors. As such, in line with the SC’s 

mandate to promote the development of the capital market, the SC seeks to develop a 

regulatory framework that will balance promoting innovation with ensuring proper 

safeguards to protect the integrity of the capital market and investors’ interest.12

 

5 Press Release, SC, Media Statement on Implementation of Digital Assets Prescription Order (Jan. 17, 2019), 

https://www.sc.com.my/news/media-releases-and-announcements/media-statement-on-implementation-ofdigital-assets-prescription-order, archived at https://perma.cc/H5DB-D69L. 

6 See Recognized Markets, SC, https://www.sc.com.my/regulation/guidelines/recognizedmarkets (last visited 

Mar. 14, 2019), archived at https://perma.cc/WM2V-5JTL. 

7 Press Release, SC, SC Introduces Framework to Facilitate Trading of Digital Assets in Malaysia (Jan. 31, 2019), 

https://www.sc.com.my/news/media-releases-and-announcements/sc-introduces-framework-to-facilitatetrading-of-digital-assets-in-malaysia, archived at https://perma.cc/XX6N-P7CB. 

8 Press Release, SC, SC to Regulate Offering and Trading of Digital Assets (Jan. 14, 2019), 

https://www.sc.com.my/news/media-releases-and-announcements/sc-to-regulate-offering-and-trading-ofdigital-assets, archived at https://perma.cc/T8MB-BJ3W. 

9 Id.

10 SC, PUBLIC CONSULTATION PAPER NO. 1/2019: PROPOSED REGULATORY FRAMEWORK FOR THE ISSUANCE OF 

DIGITAL ASSETS THROUGH INITIAL COIN OFFERINGS (ICOS) (hereinafter ICO CONSULTATION PAPER) (Mar. 6, 2019), 

https://www.sc.com.my/api/documentms/download.ashx?id=d3067bf4-ba39-4bce-8dc4-1b660ff37977, 

archived at https://perma.cc/M4VS-GVJM. 

11 Press Release, SC, SC Seeks Public Feedback on Proposed Initial Coin Offering and Property Crowdfunding 

Frameworks (Mar. 6, 2019), https://www.sc.com.my/news/media-releases-and-announcements/sc-seekspublic-feedback-on-proposed-initial-coin-offering-and-property-crowdfunding-frameworks, archived at 

https://perma.cc/6HVU-A2X2. 

12 ICO CONSULTATION PAPER, supra note 10, at 4. 
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Prior to these recent developments, the SC had issued a statement warning investors about the 

risks associated with ICOs and similar activities.13 The BNM has also issued warnings on digital 

currencies, stating in January 2014 that “[t]he Bitcoin is not recognised as legal tender in Malaysia. 

The Central Bank does not regulate the operations of Bitcoin. The public is therefore advised to 

be cautious of the risks associated with the usage of such digital currency.”14 

In addition to the Capital Markets and Services Act 2007, securities law in Malaysia includes the 

Securities Commission Malaysia Act 199315 and the Securities Industry (Central Depositories) Act 

1991,16 and associated regulations.17 These laws are administered and enforced by the SC. In 

addition, BNM has powers to regulate and supervise the financial system and financial 

institutions under several laws, including the Central Bank of Malaysia Act 2009, Financial 

Services Act 2013, Islamic Financial Services Act 2013, Money Services Business Act 2011, and 

AML/CFT legislation.18

B. Anti-Money Laundering Law 

Information on the BNM website advises persons operating a business relating to digital 

currencies that, “[p]ursuant to the Anti-Money Laundering, Anti-Terrorism Financing and 

Proceeds of Unlawful Activities Act 2001 (AMLA), persons carrying on activities specified in 

paragraph 25 of the First Schedule of the AMLA are subject to obligations as a reporting 

 

13 Press Release, SC, Media Statement on Initial Coin Offerings (Sept. 7, 2017), 

https://www.sc.com.my/news/media-releases-and-announcements/media-statement-on-initial-coinofferings, archived at https://perma.cc/742Z-RF2M. See also Malaysia, in LAW LIBRARY OF CONGRESS,

REGULATION OF CRYPTOCURRENCY AROUND THE WORLD (June 2018), 

https://www.loc.gov/law/help/cryptocurrency/world-survey.php#malaysia. 

14 Press Release, BNM, Statement on Bitcoin (Jan. 3, 2014), 

http://www.bnm.gov.my/index.php?ch=en_announcement&pg=en_announcement&ac=49&lang=en, 

archived at https://perma.cc/TV92-GSE4. See also Press Release, BNM, Caution on Unauthorized 

Cryptocurrency Investment Platform Coinzer (Mar. 11, 2018), 

http://www.bnm.gov.my/index.php?ch=en_announcement&pg=en_announcement&ac=616&lang=en, 

archived at https://perma.cc/LM9T-EW2H. 

15 Securities Commission Malaysia Act 1993 (Act 498), as at Mar. 1, 2016, 

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20498%20-

diluluskan%20TPPUU%20(29%2002%202016).pdf, archived at https://perma.cc/DZA2-HEZ2. 

16 Securities Industry (Central Depositories) Act 1991 (Act 453), as at Mar. 1, 2013), 

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20453%20-

%20Securities%20Industry%20(Central%20Depositories)%20Act%201991.pdf, archived at 

https://perma.cc/FP2Q-WN94. 

17 See Capital Markets and Services Act 2007, SC, https://www.sc.com.my/regulation/acts/capital-markets-andservices-act-2007 (last visited Mar. 14, 2019), archived at https://perma.cc/49DW-HUTF; Securities Commission 

Malysia Act 1993, SC, https://www.sc.com.my/regulation/acts/securities-commission-malaysia-act-1993 (last 

visited Mar. 14, 2019), archived at https://perma.cc/K2EN-85CN; Securities Industry (Central Depositories) Act 

1991, SC, https://www.sc.com.my/regulation/acts/securities-industry-central-depositories-act-1991 (last 

visited Mar. 14, 2019), archived at https://perma.cc/42F2-P2YJ. 

18 Legislation, BNM, http://www.bnm.gov.my/index.php?lang=en&ch=en_legislation (last visited Mar. 14, 

2019), archived at https://perma.cc/CXM8-NPMB. 
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institution under the AMLA.”19 The First Schedule lists the activities that, if performed by an 

entity, would make it a reporting institution under the Act. Paragraph 25 reads as follows: 

(1) Activities carried out by any person who provides any or any combination of the 

following services: 

(a) exchanging digital currency for money; 

(b) exchanging money for digital currency; 

(c) exchanging one digital currency for another digital currency, 

whether in the course of carrying on a digital currency exchange business or otherwise. 

(2) For the purpose of this paragraph, “digital currency” means a digital representation of 

value that functions as a medium of exchange and is interchangeable with any money, 

including through the crediting or debiting of an account, but does not include electronic 

money, as defined under the Financial Services Act 2013 [Act 758] and the Islamic Financial 

Services Act 2013 [Act 759], issued by an approved issuer of electronic money under 

those Acts.20

In February 2018, the BNM issued a policy document regarding digital currencies and 

AML/CFT,21 which “aims to ensure that effective measures are in place against money 

laundering and terrorism financing risks associated with the use of digital currencies and to 

increase the transparency of digital currency activities in Malaysia.”22

C. Taxation

Prior to the recent developments with respect to the regulation of digital assets as securities, it 

appears that the Inland Revenue Board (IRB) considered that the Income Tax Act 1967 was 

applicable to cryptocurrency traders. Section 3 of the Act provides that tax shall be charged upon 

the income of any person accruing in or derived from Malaysia.23 The IRB had, for example, taken 

 

19 Digital Currency, BNM, http://www.bnm.gov.my/index.php?ch=en_digital_currency&lang=en (last visited 

Mar. 14, 2019), archived at https://perma.cc/WYS7-SFH4. 

20 Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613), 

as at Dec. 1, 2015, sch. 1, para. 25, 

http://www.agc.gov.my/agcportal/uploads/files/ACT%20613%20diluluskan%20TPPUU%20Dis%202015.pd

f, archived at https://perma.cc/8HLS-HA2Q. 

21 BNM, Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 

6) (undated), http://amlcft.bnm.gov.my/document/PD%20Digital%20currency-v2.pdf (last visited Mar. 14, 

2019), archived at https://perma.cc/92H2-NGE7. 

22 Press Release, BNM, Bank Negara Malaysia Issues Policy Document for Digital Currencies (Feb. 27, 2018), 

http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=4628&lang=en, archived at 

https://perma.cc/M3MP-8QZ6. 

23 Income Tax Act 1967 (Act 53), as at Feb. 1, 2018), s. 3, 

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Draf%20Muktamad%20Act%2053

%20(13.12.2018).pdf, archived at https://perma.cc/JZ5A-NSJL. 
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action against a cryptocurrency exchange business in early 2018, freezing its account in Malaysia 

and seeking to ensure it was complying with tax and record-keeping requirements.24

Malaysia “does not tax capital gains from the sale of investments or capital assets other than those 

related to land and buildings.”25 The IRB has so far not provided specific guidance regarding the 

impact of the Prescription Order and the shift to regulating digital assets as securities on the 

application of the Income Tax Act. 

 

II. Custodianship of Cryptocurrencies by Financial Institutions 

As further referenced in Part III, below, the updated Guidelines on Recognized Markets includes a 

requirement that operators of Digital Asset Exchanges, which deal in digital assets that are 

prescribed securities under the Prescription Order, must “establish and maintain a sufficiently 

and verifiably secured storage medium designated to store Digital Assets from investors.”26 There 

does not appear to be a requirement for particular cryptocurrencies to otherwise be subject to 

custodianship by financial institutions. 

The Securities Industry (Central Depositories) Act 1991 may also be relevant in the context of the 

custody of tokens that are prescribed securities. The purpose of this Act is “to provide for the 

regulation of central depositories, and the deposit, holding, withdrawal of, and dealings in, 

securities deposited therewith and to provide for matters incidental thereto.”27 A company that 

wishes to establish and maintain a central depository must apply to the Minister of Finance 

for approval.28

III. Regulation of Cryptocurrencies as Financial Securities 

A. Digital Assets as Prescribed Securities 

Under the Prescription Order, “digital currency” is defined as 

a digital representation of value which is recorded on a distributed digital ledger whether 

cryptographically-secured or otherwise, that functions as a medium of exchange and is 

 

24 IRB: Cryptocurrency Not Regulated but Traders Still Subject to Malaysian Income Tax Law, THE STAR ONLINE (Jan. 

19, 2018), https://www.thestar.com.my/tech/tech-news/2018/01/19/irb-cryptocurrency-not-regulated-buttraders-still-subject-to-malaysian-income-tax/, archived at https://perma.cc/YG9G-FQHL.

25 DELOITTE, TAXATION AND INVESTMENT IN MALAYSIA 2018, at 9 (updated Apr. 2018), 

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-malaysiaguide2018.pdf, archived at https://perma.cc/2EVF-2HX9. 

26 SC, GUIDELINES ON RECOGNIZED MARKETS 42 (rev. Jan. 31, 2019), 

https://www.sc.com.my/api/documentms/download.ashx?id=eb8f1b04-d744-4f9a-a6b6-ff8f6fee8701, 

archived at https://perma.cc/2N6C-W2X4. 

27 Securities Industry (Central Depositories) Act 1991, Long title. 

28 Id. s. 4. 
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The Law Library of Congress 169

interchangeable with any money, including through the crediting or debiting of 

an account[.]29

“Digital token” means “a digital representation which is recorded on a distributed digital ledger 

whether cryptographically-secured or otherwise.”30

The central provision of the Order, prescribing such assets to be securities, states as follows: 

(1) A digital currency which— 

(a) is traded in a place or on a facility where offers to sell, purchase, or exchange of, the 

digital currency are regularly made or accepted; 

(b) a person expects a return in any form from the trading, conversion or redemption 

of the digital currency or the appreciation in the value of the digital currency; and 

(c) is not issued or guaranteed by any government body or central banks as may be 

specified by the Commission, 

is prescribed as securities for the purposes of the securities laws. 

(2) A digital token which represents a right or interest of a person in any arrangement 

made for the purpose of, or having the effect of, providing facilities for the person, 

where— 

(a) the person receives the digital token in exchange for a consideration; 

(b) the consideration or contribution from the person, and the income or returns, are 

pooled; 

(c) the income or returns of the arrangement are generated from the acquisition, 

holding, management or disposal of any property or assets or business activities; 

(d) the person expects a return in any form from the trading, conversion or redemption 

of the digital token or the appreciation in the value of the digital token; 

(e) the person does not have day-to-day control over the management of the property, 

assets or business of the arrangement; and 

(f) the digital token is not issued or guaranteed by any government body or central 

banks as may be specified by the Commission, 

is prescribed as securities for the purposes of the securities laws.31

All securities laws are stated as being applicable to such assets, other than division 3 of Part VI of 

the Capital Markets and Services Act 2007,32 which contains the requirement for a prospectus to 

be registered in relation to securities.33 

 

29 Prescription Order, cl. 2. 

30 Id. 

31 Id. cl. 3. 

32 Id. cl. 4. 

33 Capital Markets and Services Act 2007, pt. VI, div. 3. 
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B. Additional Requirements for Digital Asset Exchanges 

The amendments to the Guidelines on Recognized Markets, issued on January 31, 2019, included a 

new chapter on additional requirements to be complied with by a person who wishes to operate 

a digital asset exchange (DAX). The Guidelines explain the differences between an approved 

market, exempt market, and recognized market, stating that 

[a] recognized market essentially covers an alternative trading venue, marketplace or 

facility that brings together purchasers and sellers of capital market products. The level of 

regulation in comparison to approved markets is not as stringent. Terms and conditions 

may be imposed on the [recognized market operator] to commensurate with the risk 

profile, nature and scope of the proposed recognized market operations.34

Part B of the Guidelines sets out the requirements and criteria for a person to register as a 

recognized market operator (RMO).35 Part C states that, in registering an RMO, the SC may 

impose any term or condition, and may also issue a direction to the RMO, the board, chief 

executive, controller, or other person in relation to a list of matters.36 It also lists the obligations 

that must be met by an RMO (including in relation to compliance with its rules, disclosures, fees 

and charges, and AML/CFT processes) and by the RMO’s board, as well requirements to submit 

rules and reports to the SC.37 Part D relates to cessation of business, withdrawal of registration, 

and SC reviews of an RMO.38 

Part G of the Guidelines contains the new chapter, Chapter 15, which sets out the additional 

requirements relating to a DAX.39 These include the following: 

 DAX operators (RMOs who operate a DAX) must be locally incorporated and have a 

minimum paid-up capital of RM5 million (approx. US$1,229,500). 

 Where a DAX operator is a public company, at least one member of the board must be an 

independent director. 

 Additional requirements applicable to a DAX operator’s framework relating to conflicts 

of interest. 

 A prohibition on a DAX operator providing financial assistance to investors to invest or trade 

in digital assets on its platform. 

 Additional requirements relating to the establishment of a risk management framework. 

 A requirement for a DAX operator to have a business continuity plan “that addresses events 

posing a significant risk of disrupting operations,” including the use of a secondary site. 

 

34 GUIDELINES ON RECOGNIZED MARKETS, supra note 26, at 4. 

35 Id. at 7–13. 

36 Id. at 14–15. 

37 Id. at 16–19 

38 Id. at 20–22. 

39 Id. at 38–43. 
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 A requirement to carry out periodic reviews, audits, and testing of systems, policies, 

procedures, and controls relating to risk management and the business continuity plan. 

 A requirement to notify the SC of any systems error, failure, or malfunction. 

 A prohibition on facilitating the trade of any digital asset unless this has been approved the 

by the SC, and a list of matters that must be covered in the relevant application to trade in 

the asset. 

 Additional obligations of a DAX operator, including ensuring the orderly, fair, and 

transparent operation of its platform and that all disclosures are fair, clear, and 

not misleading. 

 DAX operators must only allow investors to invest or trade in digital assets using Ringgit 

Malaysia or “any foreign currency that is recognized as legal tender.” 

 Requirements relating to client asset protection, including maintaining records, safeguarding 

assets from conversion (including implementing multi-signature arrangements), establishing 

trust accounts in a licensed Malaysian financial institution to hold monies received from 

investors, establishing and maintaining “a sufficiently and verifiably secured storage medium 

designated to store Digital Assets from investors,” and having arrangements and processes 

in place to protect against the risk of loss, theft, or hacking. 

 Requirements related to ensuring orderly, clear, and efficient clearing and 

settlement arrangements. 

 A statement that the SC can impose a fee or levy on all transactions conducted on a DAX. 

 Various market integrity provisions, including requirements related to arrangements and 

processes to deter manipulative activities, manage excessive volatility of the market, manage 

error trades, manage systems error or malfunction, and manage investors’ assets in the event 

of any suspension or outages of the platform, and provisions related to market transparency 

and market-making activities. 

C. Proposed ICO Regulation 

The ICO consultation paper proposes a “two-pronged approach” to regulating ICOs in order to 

“mitigate instances of fraud while protecting market integrity.”40 This entails “an authorisation 

for the offering or issuance of the ICO and the registration of a disclosure document (Whitepaper) 

which complies with prescribed minimum requirements set by the SC.”41 Furthermore, 

[t]he SC proposes that an ICO issuer be required to approach a third party to agree to 

“host” the ICO and assess its Whitepaper. In this regard, the ICO issuer will be required 

to undergo an assessment conducted by an independent third party authorised by the SC, 

prior to it submitting a formal application to the SC. . . . 

. . . 

 

40 ICO CONSULTATION PAPER, supra note 10, at 8. 

41 Id. 
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It is proposed that the third party “host” is a recognised market operator or alternatively 

any other person recognised by the SC as having the necessary skills and expertise. In this 

regard, the SC will be introducing a separate framework in relation to the authorisation of 

the third party who will carry out this role.42

The paper proceeds to list potential assessment criteria for the evaluation of an ICO by the SC.43

It also proposes that only a company that is locally incorporated, with its main business operation 

in Malaysia, that is not a public listed company, and that has a minimum paid-up capital of 

RM500,000 (approx. US$123,000) be eligible to undertake ICOs.44 In addition, the board of 

directors and senior management team would need to collectively have a 50% equity holding in 

the ICO issuer, and they would not be able to dispose of their equity holding for a period of 

eighteen months.45 In terms of governance, an ICO issuer would need to ensure that directors and 

senior managers are fit and proper, and at least half of the board would be required to be 

Malaysian. A responsible person would be appointed as the main contact for the SC, and the 

entity would need to have conflict of interest and risk management processes in place, as well as 

a business continuity management and a cyber-resiliency framework.46

The consultation paper proposes to limit the amount that can be raised through an ICO to a 

multiple of ten times the shareholders’ funds, subject to a ceiling of RM100 million (approx. 

US$24,586,000).47 Furthermore, at least 50% of the proceeds would be required to be utilized in 

Malaysia. If the ICO is asset-backed, at least 50% of the assets must be based in Malaysia.48 An 

ICO issuer would only be able to withdraw or utilize investors’ monies “based on milestones 

disclosed in the Whitepaper.”49

Other proposed obligations on ICO issuers include having processes in place to monitor 

AML/CFT requirements, a prohibition on third party endorsement of the ICO, and annual and 

quarterly reporting to the SC and to investors “in relation to information as may be specified by 

the SC.”50 In addition, an ICO issuer would be required to deposit funds raised through an ICO 

in a separate trust account with a licensed bank.51

The consultation paper also lists information to be contained in the Whitepaper that would be 

required to accompany an ICO, including details of the board and senior management team and 

the shares and/or digital token they hold; the objective and timeline of the ICO; a business plan; 

 

42 Id. at 9–10. 

43 Id. at 11. 

44 Id. at 12. 

45 Id. 

46 Id. at 13. 

47 Id. at 14. 

48 Id. 

49 Id. 

50 Id. at 16. 

51 Id. at 17. 
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the targeted amount to be raised through the ICO and a scheduled timeline for utilization of the 

proceeds; any rights or functions attached to the digital tokens issued; details of the independent 

custodian, escrow agents, or entity acting in the capacity of a trustee; discussion on the 

determination of the price per token; financial information; a detailed technical description of the 

protocol, platform, or application and the associated benefits of the technology; and details of 

associated challenges and risks, including any conflict of interest.52

IV. Treatment of Cryptoassets Not Considered Securities 

Given the definitions contained in the Prescription Order, it appears that all cryptoassets created 

through blockchain would be considered securities. For example, the SC’s recent consultation 

paper on ICOs states that “[t]he PO [Prescription Order] provides that a digital asset must be 

recorded on a distributed ledger. As such, discount cards, e-money or e-payment etc. will not be 

considered as securities unless it is recorded on a distributed ledger and satisfies the 

PO’s requirements.”53

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

It appears that the above regulatory approach applies to all cryptocurrencies that utilize digital 

ledger technology or blockchain. There does not appear to be any specific restrictions on the sale 

of, or investments in, a particular type of cryptocurrency. 

 

52 Id. at 18–19. 

53 Id. at 5. 
The Law Library of Congress 174 

Malta

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY The Maltese government enacted a series of laws in 2018 aimed at providing regulatory 

certainty over the use and development of cryptocurrencies within its jurisdiction. The 

laws provide a framework through which virtual currencies themselves and the 

individuals or entities that work with these currencies are regulated. Specifically, they 

provide a licensing system for providers of virtual financial asset services and regulate 

activities connected with virtual financial assets, including the initial offerings of these 

assets and the certification of platforms that these assets are offered on, and designate 

a regulatory body to oversee the application and enforcement of the framework. 

I. Introduction 

The Maltese government has actively encouraged the development of cryptocurrency and has 

issued many consultation documents and other papers that discuss its regulation and 

development, with the aim of providing “the necessary legal certainty to allow this industry to 

flourish.”1 In 2018, Malta enacted the Virtual Financial Assets Act (VFA Act),2 the Innovative 

Technology Arrangement and Services Act (ITAS Act),3 and the Malta Digital Innovation 

Authority Act (MDIA Act).4 The intention behind these laws is to provide regulatory certainty, 

protect those who invest in virtual currencies, and encourage development in the innovative 

technology sector in Malta. 5 

This report provides a high-level summary of these Acts, paying particular attention to the VFA 

Act and how it regulates virtual financial assets (VFAs). 

 

1 Ivan Martin, Malta Digital Innovation Authority Unveiled: Government Working on Green Paper on AI and Internet 

of Things, TIMES OF MALTA (Feb. 16, 2018), https://www.timesofmalta.com/articles/ view/20180216/ 

local/malta-digital-innovation-authority-unveiled.670847, archived at https://perma.cc/7P7W-7V3R. 

2 Virtual Financial Assets Act (VFA Act), cap. 590, http://www.justiceservices.gov.mt/Download 

Document.aspx?app=lom& itemid=12872&l=1, archived at https://perma.cc/8QZA-NW8W. 

3 Innovative Technology Arrangement and Services Act (ITAS Act), cap. 592, http://www.justiceservices.gov. 

mt/DownloadDocument.aspx?app=lom& itemid=12874&l=1, archived at https://perma.cc/XTY2-JDDD. 

4 Malta Digital Innovation Authority Act (MDIA Act), cap. 591, http://www.justiceservices.gov.mt/Download 

Document.aspx?app= lom&itemid=12873&l=1, archived at https://perma.cc/A5BF-XZRA. 

5 MALTA FINANCIAL SERVICES AUTHORITY (MFSA), VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED 

QUESTIONS FAQ 6.1 (Oct. 2018), https://www.mfsa.com.mt/wpcontent/uploads/2019/01/20190125_VFARFAQs_v1.01.pdf, archived at https://perma.cc/TS4D-WKBY. 
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II. Virtual Financial Assets Act 

The VFA Act regulates a number of activities relating to VFAs when conducted in, or from within, 

Malta. These activities encompass 

 the issuance of Initial VFA Offerings (commonly known as initial coin offerings, or ICOs); 

 the application of a VFA issuer to trade the VFA on a distributed ledger technology 

(DLT) exchange; 

 the activities of a VFA agent; and 

 VFA service providers, such as eWallet providers, brokerages, and cryptocurrency exchanges. 

Individuals or entities that provide Virtual Financial Services (VFS) must be licensed. Individuals 

engaged in these activities are all identified as “subject persons” and must comply with the antimoney laundering and counter-financing of terrorism laws of Malta.6 

The VFA Act designates the Malta Financial Services Authority (MFSA) as the competent 

authority responsible for overseeing and enforcing its provisions.7

A. Definitions 

The VFA Act contains a vast array of definitions and includes cryptocurrency under the term 

“virtual financial asset,” which is defined as 

any form of digital medium recordation that is used as a digital medium of exchange, 

unit of account, or store of value and that is not 

(a) electronic money;[8] 

(b) a financial instrument;[9] or 

(c) a virtual token; 

“virtual token” means a form of digital medium recordation whose utility, value or 

application is restricted solely to the acquisition of goods or services, either solely 

within the DLT platform on or in relation to which it was issued or within a limited 

network of DLT platforms[.]10

 

6 VFA Act arts. 5, 9, & 23. See also VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra

note 5. 

7 VFA Act Parts III-V. 

8 The VFA Act provides that the term “electronic Money” has the meaning provided by the Financial 

Institutions Act, sched. 3. Id. art. 2. 

9 Article 2 of the VFA Act provides that the term “financial instrument” has the meaning provided by the 

Financial Institutions Act, sched. 2. Id. 

10 Id. art. 2(2). 
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The VFA Act provides that if a virtual token can be converted into another DLT asset type, it will 

be treated as the asset type to which it can be converted.11 Thus, a virtual token has no utility or 

value outside of the DLT platform on which it was issued, or within a limited group of DLT 

platforms,12 and may only be redeemed on the platform by the issuer of the DLT asset. 

The VFA Act defines DLT as “a database system in which information is recorded, consensually 

shared, and synchronised across a network of multiple nodes.”13 Article 2 defines a “DLT asset” 

as “(a) a virtual token; (b) a virtual financial asset; (c) electronic money; or (d) a financial 

instrument, that is intrinsically dependent on, or utilises, Distributed Ledger Technology.”14

A DLT exchange is defined as “any trading and, or exchange platform or facility, whether in 

Malta or in another jurisdiction, on which any form of DLT asset may be transacted in accordance 

with the rules of the platform or facility.”15 The VFA Act distinguishes between DLT exchanges 

and DLT platforms, and specifically excludes DLT exchanges from the definition of DLT 

platforms. The MFSA has advised that “this definition should not thus be interpreted as excluding 

fiat currencies from its scope. Therefore, the VFA exchange licence under the Act will encompass (i) 

VFA-to-VFA, (ii) fiat-to-VFA and (iii) VFA-to-fiat transactions.”16

A license must be obtained from the MFSA for individuals or entities that wish to offer a VFA or 

provide VFA services,17 and such licenses can only be obtained by an application submitted to 

the MFSA through a VFA agent. 18 The application must include “a programme of operations 

setting out the systems, security access protocols and any other matters as may be required to be 

set out by the competent authority from time to time.”19 An individual or entity that obtains a 

VFA license is able to facilitate the exchange of VFAs or provide services in the VFA sector. 

B. Role of the MFSA 

The MFSA is the regulatory body charged as the competent authority under the VFA Act. It may 

determine a person or entity is engaged in an activity that constitutes a VFA service, or that a 

DLT asset is a financial asset, virtual token, electronic money, or financial instrument. The MFSA 

may also make a determination that a VFA service is provided from or within Malta or that an 

initial VFA offering has been made, or is being made, in or from within Malta. When such a 

determination is made, the individual or entity has a right to appeal the MFSA’s decision.20

 

11 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 2-3. 

12 Id. 

13 VFA Act art. 2(2). 

14 Id. 

15 Id. 

16 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 5.19. 

17 VFA Act art. 13. 

18 Id. art. 14. 

19 Id. art. 14(1)(d). 

20 Id. art. 13. 
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C. VFA Agents 

The VFA Act provides for a system of VFA agents, who must be 

 an accountant, auditor, or advocate; 

 a firm that provides these services or corporate services; 

 a legal organization held by an aforementioned person or firm; or 

 a person the MFSA considers suitable to perform the duties of a VFA agent listed in the 

VFA Act.21 

The VFA agent is responsible for a variety of obligations under the VFA Act, including 

conducting a “fitness and properness” assessment before accepting a client; advising the issuer 

as to the obligations contained in the VFA Act; ensuring the issuer complies with the provisions 

of the VFA Act; cooperating with the MFSA; and ensuring the anti-money laundering laws of 

Malta are complied with. The MFSA has issued a rulebook that sets out in detail the obligations 

and responsibilities of VFA agents.22

VFA agents are considered gatekeepers and are required to have a “know your client” system in 

place, which includes verifying the source of funds of those whose primary wealth originates from, 

or includes, DLT assets, such as bitcoins.23 The MFSA has specifically stated that it “will not be 

endorsing any specific know your client software solutions.”24 It expects the VFA agents to have 

“robust Know Your Client (‘KYC’) systems and controls in place in order to address and mitigate 

the money laundering/funding of terrorism risks pertaining to their specific business model. It is 

emphasised that there is no ‘one-size-fits-all’ approach in this respect.”25 

D. Initial Virtual Financial Asset Offering 

An “initial VFA offering” (commonly known as an initial coin offering, or ICO) is defined as “a 

method of raising funds whereby an issuer is issuing virtual financial assets and is offering them 

in exchange for funds.”26 The issuer of a VFA offering must comply with the VFA Act and the 

Virtual Financial Assets Rulebook issued by the MFSA.27 The issuer of the initial VFA offering 

must be a legal person formed under any law in Malta that proposes to issue, or actually issues, 

 

21 Id. arts. 7, 14. 

22 MFSA, VIRTUAL FINANCIAL ASSETS RULEBOOK, CHAPTER 1 VIRTUAL FINANCIAL ASSETS RULES FOR VFA AGENTS

(Oct. 2018), https://www.mfsa.com.mt/wp-content/uploads/2019/02/VFAR_ Chapter1_FINAL.pdf, archived 

at https://perma.cc/8RBP-LYXZ. 

23 Id.; VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 3.8. 

24 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 3.9. 

25 Id. FAQ 3.8. 

26 VFA Act art. 2(2). 

27 MFSA, VIRTUAL FINANCIAL ASSETS RULEBOOK, CHAPTER 2 VIRTUAL FINANCIAL ASSETS RULES FOR ISSUERS OF 

VFAS (Oct. 2018), https://www.mfsa.com.mt/wp-content/uploads/2019/02/VFAR_ Chapter2_FINAL.pdf, 

archived at https://perma.cc/K9XW-BFLS. 
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VFAs in or from within Malta.28 The issuer must appoint a VFA agent, who must be registered 

with the MFSA.29 The issuer itself is not required to be registered with the MFSA, but the VFA 

Act requires that issuers of initial VFA offerings register a white paper with the MFSA, which 

must be done through the VFA agent of the issuer. The white paper must be clearly written, 

easily understood, and set out information that, “according to the particular nature of the issuer 

and of the virtual financial assets offered to the public, is necessary to enable investors to make 

an informed assessment of the prospects of the issuer, the proposed project and of the features of 

the virtual financial asset. “30

The white paper must be approved by the MFSA31 and is valid for six months after such 

approval.32 The VFA Act sets out extensive specifications concerning the information the white 

paper must include. The white paper is intended to protect investors by providing transparency. 

It must include a summary in non-technical language that provides key information about the 

VFAs.33 Unless the disclosure of such information would be contrary to the public interest or is 

seriously detrimental to the issuer, the white paper must also include a detailed description of 

various aspects of the VFA offering, including 

 the reason behind the initial offering; 

 a technical description of the platform and its benefits; 

 the sustainability of the project; 

 the challenges, risks, and mitigating measures of the offering; 

 the characteristics of the financial assets offered; 

 a description of the issuer; 

 a description of the wallet(s) the issuers will use; 

 security safeguards against cyber threats; 

 the life cycle of the offering; 

 the targeted investor base; 

 the exchange rate of the VFAs; 

 the underlying protocol’s interoperability with other protocols; 

 how funds raised through the offering will be allocated; 

 the amount and purpose of the issue; 

 

28 VFA Act art. 7. 

29 Id. art. 2(2). 

30 Id. arts. 3-4 & sched. 1 art. 2(1). 

31 Id. arts. 2(2), 7. 

32 Id. sched. 1 art. 13. 

33 Id. sched. 1 art. 4(1). 
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 the total number of financial assets to be issued and the features of these assets; 

 the distribution of financial assets; 

 the incentive mechanism to secure any transactions; 

 the methods of payment; 

 the estimated speed of transactions; 

 the applicable taxes; 

 the time during which the offer is open; 

 any restrictions on the transferability of the virtual financial assets; 

 any soft or hard cap for the offering, and how investors can retrieve their money if the cap is 

not met; 

 the risks associated with the offering; 

 details of the issuer, including the name, registered address and registered number, the 

issuer’s objectives, the group of undertakings the issuer belongs to, and if applicable, the 

members who directly or indirectly exercise, or could exercise, a role in the 

issuer’s administration; 

 the issuer’s principal activities, and any legal proceedings against the issuer that would 

impact the issuer’s financial position; 

 details of the issuer’s board of administration; and 

 the financial track records of issuers that have been established for three or more years.34

The MFSA states that financial track records are needed 

in order to ensure that investors are adequately safeguarded. Investor protection is 

achieved predominantly through transparency. This means that investors need to have all 

the necessary information in order to be able to make an informed assessment of the 

prospects of the Issuer, the proposed project and of the features of the VFA.35

An individual or entity that includes false statements in a white paper, or publishes them to a 

website or advertisement, and thus causes any person to lose money is liable to pay damages 

whether the statements were made intentionally or through gross negligence.36 

The VFA Act requires individuals that wish to submit VFAs to be traded on a DLT exchange to 

submit an application for admission, and include almost the same information required by issuers 

of VFAs in a white paper.37 

 

34 Id. sched. 1 art. 7. 

35 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 4.6. 

36 VFA Act art. 10. 

37 Id. art. 4 & sched. 1; VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 

4.7. 
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E. Determinations of DLT Assets 

The MFSA has developed a financial instrument test, along with guidelines,38 designed to aid 

individuals and entities within the financial sector in determining whether a product or service 

falls under traditional financial services legislation or within the new VFA legislative 

framework.39 The test aims to provide clarity over whether a DLT asset is a virtual token, a VFA, 

electronic money, or a financial asset.40 The test is aimed at issuers that offer DLT assets to the 

public, or on a DLT exchange from within Malta, or those providing VFA services or activities 

with a DLT asset that has not yet been classified under the VFA Act or under the traditional 

financial services framework.41 The test operates as follows: 

 If the DLT asset is a virtual token, then any activities in relation to the token are 

not regulated.42 

 If deemed a financial instrument or electronic money, then the traditional financial services 

framework applies.43 

 If determined to be neither a virtual token, financial instrument, nor electronic money, then 

the asset is considered to be a VFA and will be regulated by the VFA framework.44

Thus, a DLT asset may not be listed as both a VFA and a financial instrument. It either qualifies 

as a VFA regulated by the VFA framework, as a financial instrument regulated by the traditional 

financial services framework, or as a virtual token that is not subject to any regulations.45

The result of the test must be signed by either a VFA agent for issuers of initial VFA offerings, the 

compliance officer for license holders under the traditional financial services framework or VFA 

framework, or the VFA agent or legal advisor of any person or entity without a license.46 

The MFSA has stated that it intends to create a public register of DLT assets that have been 

determined in accordance with the test. 

 

38 MFSA, GUIDANCE NOTE TO THE FINANCIAL INSTRUMENT TEST (July 2018), https://www.mfsa.com. mt/wpcontent/uploads/2019/01/20180724_GuidanceFITest1.pdf, archived at https://perma.cc/UNH6-LKNP. 

39 Financial Instruments Test, MFSA, https://www.mfsa.com.mt/fintech/virtual-financial-assets/ 

guidance/financial-instrument-test/ (last visited Mar. 6, 2019), archived at https://perma.cc/723Y-FCWG. 

40 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 2.7. 

41 Id. FAQ 2.9. 

42 Id. FAQ 2.9. 

43 Id. FAQ 2.12. 

44 Id. FAQ 2.14. 

45 Id. FAQ 5.18. 

46 Id. FAQ 2.8. 
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F. VFA Services 

Schedule 2 of the VFA Act sets out what VFA services are, and covers activities provided in 

connection with a DLT asset that has been determined to be a VFA, including 

 receiving or transmitting orders; 

 executing orders on behalf of another person; 

 managing a portfolio of assets containing or including more than one VFA; 

 acting as a custodian or nominee holder of a VFA or cryptographic key; 

 providing investment advice; 

 marketing newly issued VFAs; or 

 operating a VFA exchange.47

Individuals or entities that provide VFA services in, or from within, Malta must comply with the 

provisions of the VFA Act and the Rulebook issued by the MFSA.48 In order to provide a VFA 

service in, or from within, Malta a license must be obtained from the MFSA, which must be 

applied for through a VFA agent.49 The Central Bank of Malta and other members of the 

European System of Central Banks and national bodies along with liquidators, individuals 

managing their own accounts, and individuals providing VFA services for their parent company 

or subsidiaries are exempted from the requirement to have a license to provide VFA services.50 

VFA service licenses are divided into four different classes: 

 Class 1: Authorized to receive and hold orders and provide investment advice to VFAs, but 

not authorized to hold or control clients’ assets or money. 

 Class 2: Authorized to provide any VFA service and hold or control clients’ assets or money 

in the course of providing VFA services, but not authorized to operate a VFA exchange or 

deal with their own account. 

 Class 3: May provide any VFA service other than a VFA exchange and hold or control clients’ 

assets or money in the course of providing VFA services. 

 Class 4: May provide any VFA service, or hold or control clients’ assets or money in the course 

of providing a VFA service.51

 

47 VFA Act sched. 2. 

48 MFSA, VIRTUAL FINANCIAL ASSETS RULEBOOK, CHAPTER 3 VIRTUAL FINANCIAL ASSETS RULES FOR VFA SERVICE 

PROVIDERS (Oct. 2018), https://www.mfsa.com.mt/wp-content/uploads/2019/ 

03/VFAR_Chapter3_Updated.pdf, archived at https://perma.cc/3VGJ-4BBT. 

49 VFA Act art. 14. 

50 Innovative Technology Arrangements and Services (Fees) S.L. 592.01, art. 4, http://www.justice 

services.gov.mt/DownloadDocument.aspx?app=lom&itemid=12916&l=1, archived at https://perma.cc/J8DQMTDZ. 

51 Id. art. 8. 
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The MFSA has stated that the VFA services license is limited to the purposes of acting as a VFA 

services license holder and that traditional financial services license holders would be conducting 

activities that are not compatible with the VFA Act, as “a purpose or object referring to any activity 

that requires any kind of authorisation whatsoever by the MFSA under any Maltese law, other than 

the Act, shall be deemed to be incompatible with the services of a VFA Service Provider.”52

The MFSA notes that traditional financial services license holders that wish to be a VFA service 

provider can do so, but must establish a separate entity.53

The VFA Act contains a variety of offenses relating to activities regulated under the VFA Act, and 

issuers or license holders can, upon conviction, be fined up to €10 million (approx. US$11.3 

million) or three times the profits made or losses avoided due to the offense and/or imprisonment 

for up to six years.54 Upon conviction of an offense under the VFA Act, VFA agents can be fined 

up to €500,000 (approx. US$565,000) and/or be sentenced to up to six months’ imprisonment.55

III. Innovative Technology Arrangement and Services Act

The ITAS Act regulates innovative technology arrangements and designated innovative 

technology service providers, which are overseen by the MDIA. The MDIA Act defines 

innovative technology arrangements as “the intrinsic elements including software, codes, 

computer protocols and other architectures which are used in the context of DLT, smart contracts 

and related applications.”56 The ITAS Act lists what it considers to be an innovative technology 

arrangement to include 

1. software and architectures which are used in designing and delivering DLT which 

ordinarily, but not necessarily: 

(a) uses a distributed, decentralized, shared and, or replicated ledger; 

(b) may be public or private or hybrids thereof; 

(c) is permissioned or permissionless or hybrids thereof; 

(d) is secure to a high level against retrospective tampering, such that the history 

of transactions cannot be replaced; 

(e) is protected with cryptography; and 

(f) is auditable; 

2. smart contracts and related applications, including decentralised autonomous 

organisations, as well as other similar arrangements; 

3. any other innovative technology arrangement which may be designated by the Minister, 

on the recommendation of the Authority, by notice from time to time.57 

 

52 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQ 5.7. 

53 Id. FAQ 5.7. 

54 VFA Act art. 54. 

55 Id. 

56 ITAS Act art. 2. 

57 Id. sched. 1 art. 1. 
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Information technology services are defined in the ITAS Act as 

1. the review or audit services referred to in this Act with reference to innovative 

technology arrangements provided by system auditors; 

2. the technical administration services referred to in this Act with reference to 

innovative technology arrangements provided by technical administrators.58

The ITAS Act provides for the certification of innovative technology arrangements if they contain 

certain qualities, features, attributes, behaviors, or aspects, as determined by the MDIA.59 The 

ITAS Act provides for the registration of innovative technology services, which is handled by the 

MDIA. The MDIA maintains an electronic register of the details of all providers registered, which 

is publicly available.60 This certification and registration process provides formal recognition of 

these arrangements and services and “will be undertaken in full respect of the importance of not 

hindering innovation,” while ensuring that investors, consumers, and market integrity are 

protected, according to one commentary.61

IV. Malta Digital Innovation Authority Act 

The MDIA Act established the Malta Digital Innovation Authority to develop the innovative 

technology sector in Malta. The MDIA has a variety of roles connected to this purpose, 

including to 

 

 promote government policies for the deployment of innovative technology arrangements 

within the government; 

 promote and facilitate the advancement and use of innovative technology arrangements; 

 promote education about ethical standards on the use and advancement of innovative 

technology arrangements; 

 ensure Malta’s reputation with regard to innovative technology arrangements is maintained 

and protected; 

 protect users of innovative technology arrangements; 

 harmonize both practices and standards use in innovative technology arrangements; and 

 promote legal certainty in the law applying to innovative technology arrangements.62 

 

58 Id. sched. 2 art. 2. 

59 Id. art. 7. 

60 Id. art. 6. 

61 An Overview of the Malta Digital Innovation Authority Bill, GANDO ADVOCATES (June 6, 2018), 

https://www.ganadoadvocates.com/practice-news/an-overview-of-the-malta-digital-innovation-authoritybill/, archived at https://perma.cc/G5CP-X3CW. 

62 MDIA Act art. 6.
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The MDIA is also responsible for authorizing innovative technology arrangements and 

innovative technology services providers, as discussed above. 

Practitioners have noted that the most important roles held by the MDIA are harmonizing 

practice and facilitating the adoption of standards on innovative technology arrangements and 

promoting ease of access to publicly available innovative technology arrangements, as 

[t]he pursuit of these objectives will secure the integrity of the Maltese DLT market and 

will ensure that any measures adopted in Malta will not be disconnected from DLT 

international policies and rules. This will afford both providers and consumers with more 

legal certainty especially when the operations and transactions, even though arising in or 

from Malta, include cross-border elements.63

V. Conclusion 

The Maltese government is continuing to work on the regulatory structure to ensure that Malta 

is a world leader in the development of cryptocurrencies. The VFA Act, the MDIA Act, and the 

ITAS Act are the first of their kind in the world to regulate virtual assets. Together they create a 

regulatory regime that aims to provide legal certainty for individuals and entities wishing to 

develop these assets from in, or within, Malta; maintain market integrity and transparency; and 

provide clarity for those wishing to invest in them.64 

 

63 GANDO ADVOCATES, supra note 61. 

64 VIRTUAL FINANCIAL ASSETS FRAMEWORK: FREQUENTLY ASKED QUESTIONS, supra note 5, FAQs 1-6 and 4-6. 
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Mauritius 

Hanibal Goitom 

Chief, Foreign, Comparative, 

 and International Law Division I 

SUMMARY On March 1, 2019, the Financial Services (Custodian Services (Digital Asset)) Rules, 

issued by the Mauritius Financial Services Commission (FSC) to regulate the 

licensing and operations of custodian services, took effect. The Rules treat 

custodians as financial institutions and subject them to the requirements under the 

money laundering and counter-terrorism laws. The Rules also impose various 

conditions on custodians that appear to have been designed to protect customers, 

ranging from capital reserve requirements to infrastructure security for on-site 

storage of digital assets. 

 While the regulatory system related to investment in cryptoassets appears to be in 

its infancy, Mauritius recently recognized digital assets as a possible asset-class for 

investment by sophisticated investors, expert investors, expert funds, sophisticated 

collective investment schemes, and professional collective investment schemes.

I. Approach to Assets Created Through Blockchain 

Based on the authority accorded to it in 2018 through amendments to the Financial Services 

Act of 2007, the Mauritius Financial Services Commission (FSC) issued the Financial Services 

(Custodian Services (Digital Asset)) Rules 2019 (the Rules) and the Financial Services 

(Consolidated Licensing and Fees) (Amendment) Rules 2019, both of which took effect on 

March 1, 2019.1 

The Rules regulate digital asset custodians in the digital assets market; other activities appear 

to remain unregulated. The only recent source dealing with the regulation of investment in 

digital assets appears to be guidance issued by the FSC in 2018 recognizing digital assets as 

an asset-class and allowing certain investors to invest in them (see part IV, below). 

One of the principal developments with the issuance of the Rules is the adoption a broad 

definition of the term “digital assets” that appears to include different versions of blockchainbased products. The Rules state as follows: 

 

1 Financial Services (Custodian Services (Digital Asset)) Rules 2019, GOVERNMENT NOTICE (GN) No. 44 (Feb. 

28, 2019), https://www.fscmauritius.org/media/70809/44_fs-_custodian-service.pdf, archived at

https://perma.cc/S7LS-CKPD; Financial Services (Consolidated Licensing and Fees)(Amendment) Rules 

2019, GN No. 43 (Feb. 28, 2019), https://www.fscmauritius.org/media/70807/43_fs_-consolidatedlicensing-and-fees-amd-rules-2019.pdf, archived at https://perma.cc/9ZT3-UK48; Press Release, Financial 

Services Commission, FSC Issues the Financial Services (Custodian (Digital Asset)) Rules 2019 (Mar. 6, 

2019), https://www.fscmauritius.org/en/others/news/2019/fsc-issues-the-financial-services-custodianservices-digital-asset-rules-2019, archived at https://perma.cc/8LAA-D39R; FINANCIAL SERVICES 

COMMISSION, REGULATORY FRAMEWORK FOR THE CUSTODIAN SERVICES (DIGITAL ASSET) LICENSE:

CONSULTATION PAPER 6 (Nov. 5, 2018), https://www.fscmauritius.org/media/67493/consultation-papercustody-of-digital-assets_final.pdf, archived at https://perma.cc/45JH-FMC2. 
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(a) . . . any token, in electronic or binary form, which is representative of either the 

holder’s access rights to a service or ownership of an asset; 

(b) includes a digital representation of value which – 

(i) is used as a medium of exchange, unit of account, or store of value but which 

is not a legal tender, even if it is denominated in legal tender; 

(ii) represents assets such as debt or equity; or 

(iii) provides access to a blockchain-based application, service or product; 

(c) excludes – 

(i) any transaction in which a business, as part of an affinity or reward 

programme, grants value which cannot be exchanged for legal tender, bank 

credit or any digital asset; or 

(ii) a digital representation of value issued for use within an online 

gaming platform.2

A. Financial Regulation and Consumer Protection 

Many of the provisions under the Rules could be read as protections afforded to customers of 

custodian service providers (see part II, below). The Rules impose specific directives 

regarding how custodians must treat customers and protect their assets. For instance the 

“Communications with Clients” clause of the Rules states as follows: 

1) A custodian shall have in place such procedures as may be required to ensure that 

– 

(a) each client is provided with an original of the signed agreement regarding the 

custody of digital asset within 30 days from the date on which the agreement 

is signed; and 

(b) each client is promptly informed of any action which is likely to impact on any 

provisions of the agreement and on digital asset being held in custody. 

2) In the event that such disclosures are being made to a client through an internetbased service, a custodian shall have in place a multi-factor authentication system 

in line with best industry practices.3

The Rules also impose various restrictions regarding key and seed generation and storage as 

well as access of staff of a licensed custodian to keys, seeds, and other relevant information.4 

A key is “cryptographic key which is used by cryptographic algorithm to transfer plain text 

into encrypted form or vice versa.”5 A seed is “an alphanumeric phrase generated through 

the process of entropy.”6 Entropy is “unpredictability or randomness within the source code 

which is used to generate a cryptographic seed which ensures that a seed cannot be 

simply recreated.”7

Significantly, the Rules include provisions on uninterrupted access for clients in certain 

circumstances and the segregation of client assets: 

 

2 Financial Services (Custodian Services (Digital Asset)) Rules 2019, § 2. 

3 Id. § 18. 

4 Id. §§ 19-21. 

5 Id. § 2. 

6 Id. 

7 Id. 
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23. Uninterrupted Access 

A custodian shall, subject to the custody agreement, provide its clients with uninterrupted access 

to their respective digital asset under its custody if – 

(a) it is no longer able to abide by the custody agreement; or 

(b) it ceases to operate; or 

(c) it is requested to transfer the digital asset in accordance with the instructions of the 

client or such other mutually agreeable arrangements. 

24. Segregation of client assets 

(1) A custodian shall have adequate procedures to ensure that digital asset belonging to 

different clients are not pooled or not kept together at a single address or in a 

common wallet. 

(2) A custodian shall ensure that an address or wallet is assigned to a single client and that the 

digital asset belonging to that client is kept in the assigned address or wallet.8

B. Anti-Money Laundering Law 

It appears that the country’s Financial Intelligence and Anti-Money Laundering Act and the 

Prevention of the Terrorism Act apply to custodians, which are considered financial 

institutions. In a 2018 consultation paper the FSC noted that, 

10.1 [a]s part of its application document pack, the applicant will be required to 

submit a detailed report containing an in-depth assessment of the potential 

money laundering and terrorist financing (“ML/TF”) risks posed by its 

operations as well as the measures, systems, controls and protocols which will 

be established in relation to those ML/TF risks. Once licensed, prior to starting 

its operations, the licensee will be required to have those ML/TF systems and 

controls in place.

10.2. For the sake of clarity, the FSC wishes to point out that the Custodian Services 

(Digital Asset) Licence will be issued under section 14 of the [Financial Services 

Act] and as such the holder of this licence, while being a licensee of the FSC, 

will simultaneously be considered as a “financial institution” under the 

[Financial Terrorism and Antti-Money Laundering Act]. 

10.3 Consequently, the holder of the Custodian Services (Digital Asset) Licence will 

be required to ensure strict adherence to the appropriate laws regulations and 

codes relating to [Anti-Money Laundering and Counter-Terrorist Financing]

in Mauritius including the FSC Code on the Prevention of Money Laundering 

and Terrorist Financing, the FIAMLA and regulations made thereunder. 

10.4. As part of its systems and controls to prevent ML/TF, the applicant must have 

in place procedures to conduct CDD and KYC as well as to ascertain the source 

of funds/wealth of potential clients prior to on-boarding.9

 

8 Id. 

9 FINANCIAL SERVICES COMMISSION, supra note 1, at 10; Financial Intelligence and Anti-Money Laundering 

Act 6 of 2002 (June 10, 2002), available on the Bank of Mauritius website, at

https://www.bom.mu/sites/default/files/the_financial_intelligence_and_antimoney_laundering_act_2002.pdf, archived at https://perma.cc/9PDD-FVQU; Prevention of Terrorism Act 

2 of 2002 (Feb. 2, 2002), available on the Financial Services Commission website, at

https://www.fscmauritius.org/media/1106/the-prevention-of-terrorism-act-2002.pdf, archived at 

https://perma.cc/RBV2-RAG2. 
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The Financial Services Act requires that a licensee “keep and maintain internal records of the 

identity of each of his customers.”10 The Act also notes that “guidelines issued by the 

Commission under any relevant Act or under section 18(1) of the Financial Intelligence and 

Anti-Money Laundering Act 2002 may specify the nature of customer identification 

documentation to be kept and maintained.”11 It further requires that the records kept “shall 

include account files and business correspondence” and shall be kept for at least seven years.12

The FSC 2012 guidance, the Code on the Prevention of Money Laundering and Terrorist 

Financing, provides more detailed requirements on the prevention of money laundering and 

terrorism financing.13

C. Taxation 

No information was located regarding the taxation of digital assets in Mauritius. 

II. Custodianship of Cryptocurrencies by Financial Institutions 

The Rules primarily deal with custodianship. Under the Rules, custody means “the 

safekeeping of digital assets being held or transacted” and a custodian is “an entity entrusted 

with the custody of digital asset.”14 

Opening a custody service requires the acquisition of a license under the Financial Services 

Act. 15 Anyone who operates a custodial service without a license commits a crime, on 

conviction, punishable by a fine of up to MUR1 million (about US$28,816) or custodial 

sentence not exceeding eight years.16 Among others, the Act requires that applicants for 

license provide 

(a) a business plan or feasibility study outlining the proposed business activity of 

the applicant; 

(b) particulars and information relating to customer due diligence verification of 

promoters, beneficial owners, controllers and proposed directors in such form as 

may be specified in FSC Rules . . .17

The Rules require that the “objects of a custodian . . . shall be limited to the safekeeping of 

digital assets and operations arising directly from it.”18

 

10 Financial Services Act of 14 of 2007, § 29 (as at Oct. 1, 2018), https://www.fscmauritius.org/media/ 

70726/financial-services-act-2007-nov-2018.pdf, archived at https://perma.cc/HU4P-WE3S. 

11 Id. 

12 Id. 

13 FINANCIAL SERVICES COMMISSION, CODE ON THE PREVENTION OF MONEY LAUNDERING AND TERRORIST 

FINANCING (Mar. 2012; updated May 25, 2017), https://www.fscmauritius.org/media/1157/fsc-aml-cftcode-31-may-17.pdf, archived at https://perma.cc/5HJW-A3RR. 

14 Financial Services (Custodian Services (Digital Asset)) Rules 2019, § 2. 

15 Id. § 5. 

16 Financial Services Act 2007, § 14. 

17 Id. § 16. 

18 Financial Services (Custodian Services (Digital Asset)) Rules 2019, § 4. 
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The Rules also require that a custodian (an entity entrusted with the custody of digital assets) 

“shall at all times, have . . . an office in Mauritius from which it shall perform its core 

functions.” 19 These are “functions relating to operational and governance protocols, 

safekeeping of digital assets and transaction management.”20 Operational and governance 

protocols include “fraud prevention in relation to the custody of digital assets.”21 Additional 

rules include a 

 requirement to maintain a sound governance structure with sufficient oversight and 

internal controls; 

 requirement to properly vet staff involved in the performance of core functions; 

 requirement to prepare for disaster recovery and put in place a system for continuity 

of operations; 

 requirement that a custodian maintain a capital reserve equal to 35 million Mauritius 

Rupees (MUR) (about US1.01 Million) or an amount representing six months’ operational 

expense, whichever is higher; 

 requirement that a custodian develop and maintain a risk management program, 

including strategies for assessing and mitigating operational risks; 

 requirement that a custodian shall not outsource any of its core functions without prior 

approval of the FSC; 

 requirement on security infrastructure for on-site storage of digital assets; 

 requirement for developing storage strategy for digital assets; 

 requirement regarding procedures for security breaches; 

 requirement that custodians adopt multi-signature authorization so that “no single 

person is able to initiate and complete” a digital asset transaction; and 

 requirement for putting in place systems and procedures for detecting and reviewing 

suspicious or fraudulent transactions.22

III. Regulation of Cryptocurrencies as Financial Securities 

It does not appear that digital assets are categorized as financial securities in Mauritius.23

IV. Treatment of Cryptoassets Not Considered Securities 

Other than the warnings and guidance that the government has issued, it does not appear 

digital assets are currently regulated. In 2017, the Bank of Mauritius issued a notice warning 

 

19 Id. §§ 2 & 6. 

20 Id. § 2. 

21 Id. 

22 Id. §§ 7-16, 25-27, 30 & 33. 

23 FINANCIAL SERVICES COMMISSION, supra note 1, at 5; Securities Act 22 of 2005, § 2 (updated through 2018), 

available at https://www.fscmauritius.org/media/67412/securities-act-2005.pdf, archived at

https://perma.cc/FK5G-PMXS. 
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the public about the risks of investing in “’OneCoin’, a purported cryptocurrency.”24 In 

addition, in September 2018, the FSC issued a guidance note with the following three 

main points: 

 Cryptocurrencies are not legal tender in Mauritius; 

 Investments in digital assets and cryptocurrencies are unprotected by “any statutory 

compensation arrangements”; and 

 Mauritius “recognises that Digital Assets including Cryptocurrencies may constitute an 

asset-class for investment” by “sophisticated investors”25, “expert investors”26, “expert 

funds” 27 , “specialized collective investment schemes” 28 and “professional collective 

investment schemes.”29

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

The Rules do not appear to make distinctions between different forms of cryptocurrencies. 

This is evident in the seemingly sweeping definition of the term “digital assets” that the Rules 

have adopted (see part I, above). In addition, the Rules require that custodians adopt “digital 

asset agnostic systems and procedure,” stating that 

[t[he systems and procedures of a custodian shall be digital asset-agnostic and shall 

ensure the same level of regulatory compliance relating to the safekeeping, transaction 

management and custody operations of every digital asset type, irrespective of wallet 

functionality protocol.30

 

24 Public Notice, BANK OF MAURITIUS (Aug. 9, 2017), https://www.bom.mu/sites/default/files/public_ 

notice_cryptocurrencies_09.08.2017.pdf, archived at https://perma.cc/6V38-YCDB. 

25 A sophisticated investor is “(a) the Government of Mauritius; (b) a statutory authority or an agency 

established by an enactment for a public purpose; (c) a company, all the shares in which are owned by the 

Government of Mauritius or a body specified in paragraph (b); (d) the government of a foreign country, or 

an agency of such government; (e) a bank; (f) a CIS manager; (g) an insurer; (h) an investment adviser; (i) 

an investment dealer; or (j) a person declared by the Commission to be a sophisticated investor.” Securities 

Act 2005, § 2. 

26 An expert investor is “an investor who makes an initial investment, for his own account, of no less than 

US$ 100 000 ... a sophisticated investor as defined in the [Securities] Act or any similarly defined investor 

in any other securities legislation.” Securities (Collective Investment Scheme and Closed-End Funds) 

Regulations 2008, § 78(a) (as at Oct. 5, 2013), https://www.fscmauritius.org/media/2169/securities__ 

collective_investment_schemes_and_closed-end_funds__regulations_2008.pdf, archived at

https://perma.cc/PQF4-47QU. 

27 This means “a fund which is only available to expert investors.” Id. § 2. 

28 This is “one that invests in real estate, derivatives, commodities or any other product authorised by the 

Commission.” Id. § 77. 

29 Fintech Series Guidance Note, Recognition of Digital Assets as an Asset-class for Investment by Sophisticated and 

Expert Investors, FINANCIAL SERVICES COMMISSION (Sept. 17, 2018), https://www.fscmauritius.org/media/ 

55003/guidance-note-on-the-recognition-of-digital-assets.pdf, archived at https://perma.cc/C44W-BBUM; 

Professional Collective Investment Schemes are those “offering their shares ...solely to sophisticated 

investors ... as private placements.” Securities (Collective Investment Scheme and Closed-End Funds) 

Regulations 2008, § 75. 

30 Financial Services (Custodian Services (Digital Asset)) Rules 2019, § 29. 
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The term digital asset agnostic is defined as “the ability of the system and procedures of the 

custodian to operate properly irrespective of the type of digital assets kept in custody.”31

 

31 Id. § 2. 
The Law Library of Congress 192 

Mexico 

Gustavo Guerra 

Senior Foreign Law Specialist

SUMMARY Mexican law defines virtual assets as representations of value electronically registered 

and utilized by the public as a means of payment for all types of legal transactions, 

which may only be transferred electronically. Virtual assets may not, under any 

circumstance, be considered Mexico’s legal currency. Financial companies that carry 

out transactions with virtual assets must disclose to their clients the risks applicable to 

these assets. Financial technology institutions are prohibited from selling, ceding, 

transferring, loaning, using as collateral, or otherwise affecting the use or enjoyment of 

virtual assets under their custody and control without a pertinent order from the 

respective client. Services involving virtual assets is an activity classified as vulnerable 

to money laundering. Thus, providers of such services must report to the Mexican 

government relevant transactions that reach or exceed a specific threshold. 

I. Approach to Assets Created through Blockchain 

Mexico’s Law to Regulate Financial Technology Institutions (Fintech Law) includes a chapter on 

operations with “virtual assets.”1 This chapter defines virtual assets as representations of value 

electronically registered and utilized by the public as a means of payment for all types of legal 

transactions, which may only be transferred electronically.2 It also provides that virtual assets 

may not, under any circumstance, be considered to be Mexico’s legal currency.3 

A. Financial Regulation 

Mexico’s central bank, Banco de México (Banxico), has broad powers under the Fintech Law to 

regulate virtual assets, including 

• specifying virtual assets that financial companies are allowed to operate with in the country, 

defining their particular characteristics, and establishing the conditions and restrictions 

applicable to transactions with such assets; 

• authorizing financial companies to perform transactions with virtual assets; and 

• imposing fines due to unauthorized transactions using virtual assets.4

 

1 Ley para Regular las Instituciones de Tecnología Financiera [Law to Regulate Financial Technology 

Companies] arts. 30–34, DIARIO OFICIAL DE LA FEDERACIÓN [D.O.F.], Mar. 9, 2018, available as originally enacted 

on the website of Mexico’s House of Representatives at http://www.diputados.gob.mx/LeyesBiblio/ 

pdf/LRITF_ 090318.pdf, archived at https://perma.cc/SB6N-RQY7. 

2 Id. art. 30. 

3 Id. 

4 Id. arts. 30–32, 88, 104(I). 
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B. Consumer Protection 

Financial companies that carry out transactions with virtual assets must disclose to their clients 

the risks applicable to these assets.5 At a minimum, these companies must inform their clients, 

in a clear and accessible manner on their respective websites or through the means that they 

utilize to provide services, that 

• a virtual asset is not a legal currency and is not backed by the federal government or Mexico’s 

central bank; 

• once executed, transactions with virtual assets may be irreversible; 

• the value of virtual assets is volatile; and 

• technological, cybernetic, and fraud risks are inherent in virtual assets.6

C. Anti-Money Laundering Law

Providing services involving virtual assets is an activity classified as vulnerable to money 

laundering.7 Thus, providers of such services must report to the Mexican government relevant 

transactions that reach or exceed a particular amount (equivalent to approximately US$2,849 as 

of March 2019).8 Furthermore, providers of such services have a number of pertinent 

duties, including 

• identifying their clients and verifying their identity through official identification documents, 

a copy of which must be kept by the provider; 

• asking the client for information on his/her occupation if a business relationship is 

established; and 

• keeping records pertaining to transactions and clients.9

D. Taxation 

The chapter of the Fintech Law that governs virtual assets does not include rules on the taxation 

of these assets.10 Pertinent rules as provided by other relevant statutes could not be located. Legal 

 

5 Id. art. 34. 

6 Id. 

7 Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita [Federal 

Law for the Prevention and Identification of Transactions with Resources of Illicit Origin] art. 17(XVI), Nota de 

vigencia, D.O.F., Oct. 17, 2012, available as amended at http://www.diputados.gob.mx/LeyesBiblio/pdf/ 

LFPIORPI_090318.pdf, archived at https://perma.cc/4UVN-GM98. 

8 Id. 

9 Id. arts. 17, 18. 

10 Ley para Regular las Instituciones de Tecnología Financiera arts. 30-34. 
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experts have pointed out that the Mexican government has not yet enacted taxation rules for 

virtual assets.11 

II. Custodianship of Cryptocurrencies by Financial Institutions

The chapter of the Fintech Law that governs virtual assets defines “custody and control” of such 

assets as the possession of signatures, passwords, or authorizations necessary to execute 

transactions with them.12 This chapter does not appear to include a rule indicating a specific type 

of cryptocurrency subject to custody by financial technology institutions.13 Notably, these entities 

are prohibited from selling, ceding, transferring, loaning, using as collateral, or otherwise 

affecting the use or enjoyment of virtual assets that they have under their custody and control 

without a pertinent order from a respective client.14 

III. Regulation of Cryptocurrencies as Financial Securities 

The chapter of the Fintech Law that governs operations with virtual assets does not include a rule 

subjecting specific types of cryptocurrency to the national regulatory regime for 

financial securities.15

IV. Treatment of Cryptoassets Not Considered Securities 

As noted above, Mexico’s Fintech Law provides that virtual assets are representations of value 

electronically registered and utilized by the public as a means of payment for all types of legal 

transactions, which may only be transferred electronically and may not, under any circumstance, 

be considered to be Mexico’s legal currency. (See discussion, Part I, above.) 

V. Distinctions in Legal Treatment of Different Categories of Cryptocurrencies 

The Fintech Law does not appear to distinguish between different categories of 

cryptocurrencies.16 In March 2019, Banxico issued a regulation providing guidelines on virtual 

assets, including requirements applicable to relevant operations and authorizations to perform 

 

11 Juan Carlos Tejado & Miguel Guerra, Mexico, Taxation, in BLOCKCHAIN AND CRYPTOCURRENCY REGULATION 

2019 (Global Legal Insights, Jan. 2019), https://www.globallegalinsights.com/practice-areas/blockchain-lawsand-regulations/mexico, archived at https://perma.cc/4YG6-9X24. 

12 Ley para Regular las Instituciones de Tecnología Financiera art. 32. 

13 Id. arts. 30-34. 

14 Id. art. 33. 

15 Id. arts. 30-34. 

16 Id. 
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transactions with such assets.17 This regulation does not include rules on specific types of 

cryptocurrencies.18 Instead, it provides rules applicable to virtual assets in general.19 

 

17 Circular 4/2019 dirigida a las Instituciones de Crédito e Instituciones de Tecnología Financiera relativa a las 

Disposiciones de carácter general aplicables a las Instituciones de Crédito e Instituciones de Tecnología 

Financiera en las Operaciones que realicen con Activos Virtuales [Regulation 4/2019 pertaining to Operations 

with Virtual Assets Performed by Financial Institutions], D.O.F., Mar. 8, 2019, available on the website of 

Mexico’s Federal Official Gazette, at https://dof.gob.mx/nota_detalle.php?codigo=5552303&fecha= 

08/03/2019, archived at https://perma.cc/7AW7-9K64. 

18 Id. 

19 Id. 
The Law Library of Congress 196 

New Zealand 

Kelly Buchanan 

Foreign Law Specialist

SUMMARY New Zealand currently does not have specific legislation related to cryptocurrencies. 

Guidance provided by the Financial Markets Authority states that various activities 

related to cryptocurrencies could be considered financial services, which are subject to 

the “fair dealing” requirements in the Financial Markets Conduct Act 2013. Other laws 

may also be applicable if the entity involved is based in New Zealand and services are 

offered to retail clients. In addition, if the tokens offered to retail investors in New 

Zealand are considered financial products under the Act (including securities, 

derivatives, or interests in managed investment schemes), further licensing, 

governance, and disclosure requirements would apply. Whether a token is a particular 

type of financial product will depend on its individual characteristics. 

 Where no financial product or financial service is involved, communications related to 

offers of cryptocurrencies are subject to the fair dealing requirements in the Fair Trading 

Act 1986. 

 Cryptocurrency exchanges appear to be considered “money changers” that are subject 

to the Anti-Money Laundering and Counter-Terrorism Financing Act 2009. 

 Cryptocurrency is treated as property for purposes of income tax legislation. Where a 

person acquires cryptocurrency for the purpose of disposal, the proceeds from selling 

it are taxable. 

I. Approach to Assets Created Through Blockchain 

A report on the regulation of cryptocurrencies in New Zealand, published in September 2018 

with the support of the New Zealand Law Foundation, stated that 

New Zealand has not, at the time of writing, passed specific legislation regulating 

cryptocurrencies. The lack of specific regulation, however, does not mean that 

cryptocurrencies are not subject to regulation. Regulators have applied existing laws to 

cryptocurrencies, albeit the lateness of official guidance about how the regulators would 

view them within existing legal frameworks has caused some confusion and uncertainty.1

Relevant laws that may be applied to activities involving cryptoassets include the Financial 

Markets Conduct Act 20132 and other laws related to financial regulation and investor protection 

 

1 ALEXANDRA SIMS ET AL., REGULATING CRYPTOCURRENCIES IN NEW ZEALAND 79 (Sept. 2018), available at

https://www.interest.co.nz/sites/default/files/embedded_images/Sims et al ILAPP Cryptocurrencies 

Findings Final Report Sep2018.pdf, archived at https://perma.cc/KA8H-7JRZ. 

2 Financial Markets Conduct Act 2013, http://legislation.govt.nz/act/public/2013/0069/latest/whole.html, 

archived at https://perma.cc/9ZN6-83FX. 
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(including the Financial Service Providers (Registration and Dispute Resolution) Act 2008,3

Financial Markets Supervisors Act 2011,4 Financial Advisors Act 2008,5 and Financial Markets 

Authority Act 20116); the Fair Trading Act 1986, which contains consumer protection provisions 

in relation to nonfinancial products and services;7 the Anti-Money Laundering and CounterTerrorism Financing Act 2009;8 and the Income Tax Act 2007.9

A. Financial Regulation and Consumer Protection 

The FMA published online guidance on cryptocurrencies and initial coin offerings (ICOs) in 

October 2017. On announcing the guidance, the FMA stated that it “wants to facilitate responsible 

innovation, and ensure that the regulatory regime remains relevant and agile. This is supported 

by the Financial Markets Conduct Act 2013, as one of its purposes is ‘to promote innovation and 

flexibility in financial markets’.”10 

The FMA guidance states that if an entity provides a “financial service” related to 

cryptocurrencies, it must comply with the “fair dealing” requirements in the Financial Markets 

Conduct Act 2013 (FMC Act).11 In addition, if the entity is based in New Zealand it must be 

registered on the Financial Service Providers Register and, if services are offered to retail clients, 

it is also required to comply with the Financial Service Providers (Registration and Dispute 

Resolution) Act 2008.12 

 

3 Financial Service Providers (Registration and Dispute Resolution) Act 2008, 

http://legislation.govt.nz/act/public/2008/0097/latest/whole.html, archived at https://perma.cc/SD3SNZEQ. 

4 Financial Markets Supervisors Act 2011, 

http://www.legislation.govt.nz/act/public/2011/0010/latest/whole.html, archived at 

https://perma.cc/S3US-YH78. 

5 Financial Advisors Act 2008, http://www.legislation.govt.nz/act/public/2008/0091/latest/whole.html, 

archived at https://perma.cc/VHW2-LLGM. 

6 Financial Markets Authority Act 2011, 

http://www.legislation.govt.nz/act/public/2011/0005/latest/whole.html, archived at 

https://perma.cc/3UGC-RG4D. 

7 Fair Trading Act 1986, http://www.legislation.govt.nz/act/public/1986/0121/latest/whole.html, archived at 

https://perma.cc/9GCD-S2DZ.

8 Anti-Money Laundering and Counter-Terrorism Financing Act 2009, 

http://www.legislation.govt.nz/act/public/2009/0035/latest/whole.html, archived at 

https://perma.cc/3W3F-W53X. 

9 Income Tax Act 2007, http://www.legislation.govt.nz/act/public/2007/0097/457.0/whole.html, archived at

https://perma.cc/9PYX-VQAD. 

10 Press Release, FMA, FMA Commentary on ICOs and Cryptocurrencies (Oct. 25, 2017), 

https://www.fma.govt.nz/news-and-resources/media-releases/fma-commentary-on-icos-andcryptocurrencies/, archived at https://perma.cc/54DR-VNAN. 

11 Cryptocurrency Services, FMA, https://www.fma.govt.nz/compliance/cryptocurrencies/cryptocurrencyservices/ (last updated Feb. 5, 2019), archived at https://perma.cc/Y3RM-ZRDN. 

12 Id. 
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Key activities considered financial services under the legislation include “exchanges, wallets, 

deposits, broking and ICOs.”13 The guidance provides as follows: 

 “Exchanges issuing their own cryptocurrency to facilitate trading fall within the financial 

service category of ‘issuing and managing means of payment’.” 

 “Exchanges allowing cryptocurrency trading fall within the financial service category of 

‘operating a value transfer service’.” 

 If the trading involves cryptocurrencies or tokens that are “financial products” under the FMC 

Act, the exchange may be operating a financial product market, and such markets are 

required to be licensed unless an exemption applies.14

 Where a wallet provider stores cryptocurrency on behalf of others and facilitates exchanges 

between cryptocurrencies or between money and cryptocurrencies, the services fall within 

the category of “operating a value transfer service.” 

 If a wallet holds money for depositors, it may be offering debt securities, which are financial 

products under the FMC Act. 

 A broker that arranges cryptocurrency transactions is also operating a value transfer service. 

If the cryptocurrencies or tokens involved in the transactions are financial products, a broker 

may have obligations under the Financial Advisors Act 2008.15

In terms of ICOs, the guidance states that, 

[w]hile each ICO must be looked at on an individual basis, most ICOs involve the financial 

service of ‘operating a value transfer service’. ICOs may also involve the financial service 

of ‘issuing and managing a means of payment’ – where the tokens can be used to obtain 

products or services that are otherwise acquired using legal tender (such as NZ dollars), 

for example. Often this applies when the ICO offers a ‘utility’ or ‘application’ token. 

Additional guidance is provided on ICOs, including whether a token could be considered a debt 

security, equity security, interest in a “managed investment scheme,” or derivative, all of which 

are financial products under the FMC Act.16 The FMA states that “[w]hen a financial product is 

offered to retail investors in New Zealand this is called a ‘regulated offer’ and attracts more 

substantial compliance obligations (compared to other types of offers).”17 The obligations include 

licensing, governance, and disclosure requirements. Where tokens are offered to wholesale 

 

13 Id. 

14 See generally Market Operators, FMA, https://www.fma.govt.nz/compliance/role/market-operators/ (last 

visited Mar. 18, 2019), archived at https://perma.cc/CZ32-K8ZZ. 

15 Cryptocurrency Services, supra note 11. 

16 Initial Coin Offers, FMA, https://www.fma.govt.nz/compliance/cryptocurrencies/initial-coin-offers/ (last 

updated Feb. 11, 2019), archived at https://perma.cc/88U5-J2ZY. 

17 Id. 
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investors, or investors based outside New Zealand, this would not be a “regulated offer,” but the 

fair -dealing provisions in the FMC Act would still apply.18 

The guidance further states that, 

[e]ven if you are not providing a financial service or financial product, ‘fair dealing’ 

requirements still apply to white papers and other communications about your ICO under 

the Fair Trading Act 1986.19

The FMA provides additional guidance on fair dealing and ICOs on its website.20 The Commerce 

Commission is responsible for enforcing the Fair Trading Act 1986. General consumer protection 

laws also apply, “including laws preventing fraudulent and other criminal conduct—like 

obtaining money by deception.”21

In addition, the FMA “can designate tokens issued as part of an ICO to be a particular financial 

product if, based on their economic substance, this is necessary to promote fair and efficient 

financial markets in New Zealand or any of the other purposes of the FMC Act.”22 Such 

designations are “only made after consultation with industry and do not apply retrospectively.”23

In its 2017–18 Annual Report, the FMA stated as follows: 

We also consider sales and advice practices in the context of technology and its associated 

risks. As awareness of cryptocurrencies and initial coin offerings entered the mainstream 

late in 2017, we published commentary for industry about our view and expectations. We 

expect potential cryptocurrency issuers to consider whether their currency or token may 

be a financial product under New Zealand law, and the legal obligations associated with 

that. They should also be aware of their obligations as a provider of financial services. Our 

main message is to approach us early for guidance, as we are always seeking opportunities 

to promote innovation and flexibility in our financial markets.24

The FMA’s guidance to consumers regarding ways to invest warns of the various risks associated 

with cryptocurrencies.25 

 

18 Id. 

19 Id. 

20 Fair Dealing and Initial Coin Offers, FMA, https://www.fma.govt.nz/compliance/cryptocurrencies/fairdealing-and-initial-coin-offers/ (last updated Feb. 11, 2019), archived at https://perma.cc/R4XD-6RJL. 

21 Id. 

22 Initial Coin Offers, supra note 16. 

23 Id. 

24 FMA, ANNUAL REPORT 2017/18, at 21–22 (Sept. 2018), https://www.fma.govt.nz/assets/Uploads/181025-

FMA-Annual-Report-2017-18-full.pdf, archived at https://perma.cc/C8TL-X83Q. 

25 Cryptocurrencies, FMA, https://www.fma.govt.nz/investors/ways-to-invest/cryptocurrencies/ (last 

updated Mar. 14, 2019), archived at https://perma.cc/5R5G-DJ7K. 
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B. Anti-Money Laundering Law 

The FMA guidance on the regulation of cryptocurrencies and ICOs states generally that “[a]ntimoney laundering obligations may also apply.”26 Neither the legislation nor guidance from the 

FMA and other government agencies on New Zealand’s anti-money laundering and counterfinancing of terrorism (AML/CFT) laws refer specifically to cryptocurrency exchanges.27

However, several exchanges are listed as being Department of Internal Affairs (DIA) AML/CFT 

reporting entities.28 

The DIA supervises several types of reporting entities, including casinos, non-deposit-taking 

lenders, money changers, and entities not supervised by other agencies. The FMA supervises, for 

example, issuers of securities, derivatives issuers and dealers, fund managers, and brokers and 

custodians. The Reserve Bank supervises banks, life insurers, and non-bank deposit takers.29 

The DIA appears to consider cryptocurrency exchanges to be money changers under the 

AML/DFT system.30

The report referred to above recommends that 

New Zealand-based cryptocurrency exchanges should be encouraged, and clear and 

detailed guidance provided as to their anti-money laundering/counter-the funding of 

terrorism (AML/CFT) obligations by both the Department of Internal Affairs (DIA) and 

the Financial Markets Authority (FMA). That is, follow Australia’s example.31

C. Taxation 

The Inland Revenue Department (IRD) states that “[c]ryptocurrency is treated as property for tax 

purposes. There are no special tax rules for cryptocurrencies—ordinary tax rules apply.”32

Further guidance on the tax treatment of cryptocurrency includes the following: 

 

26 Cryptocurrency Services, supra note 11; Initial Coin Offers, supra note 16. 

27 See AML/CFT, FMA, https://www.fma.govt.nz/compliance/amlcft/ (last updated Feb. 22, 2019), archived at 

https://perma.cc/4AKR-55VP; Anti-Money Laundering and Countering Financing of Terrorism, DEPARTMENT OF 

INTERNAL AFFAIRS (DIA), https://www.dia.govt.nz/Services-Anti-Money-Laundering-Index (last visited Mar. 

18, 2019), archived at https://perma.cc/E7LN-8KJC. 

28 DIA, DIA AML/CFT Phase 1 Reporting Entities as at 30 November 2018, 

https://www.dia.govt.nz/diawebsite.nsf/Files/AMLCFT_Reporting-Entities_30-November2018/$file/AMLCFT_Reporting-Entities_30-November-2018-Updated.pdf, archived at https://perma.cc/PTK3-

7SA7. 

29 AML/CFT: Who Needs to Comply, FMA, https://www.fma.govt.nz/compliance/amlcft/who-needs-tocomply/ (last updated Feb. 26, 2019), archived at https://perma.cc/FNE4-MFDW. 

30 See SIMS ET AL., supra note 1, at 81. 

31 Id. at 6 & 127. 

32 Cryptocurrency and Tax, INLAND REVENUE DEPARTMENT (IRD),

https://www.ird.govt.nz/campaigns/2018/cryptocurrency-tax.html (last visited Mar. 18, 2019), archived at

https://perma.cc/CNE5-XXUR. 
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 Businesses that accept cryptocurrency as payment for goods and services must pay income 

tax based on the value of the cryptocurrency in New Zealand dollars at the time it is received, 

with the transaction treated as a barter transaction.33

 Where a person acquires cryptocurrency for the purpose of disposal, the proceeds from 

selling it are taxable. Any disposal that creates a realized gain or loss needs to be recorded at 

the time it occurs. 

 The tax implications of an ICO “will depend on the unique features of the cryptocurrency 

being issued and how it’s distributed.” People can seek binding tax rulings to gain certainty 

about tax requirements. 

 Cryptocurrency mining is considered to be an activity aimed at making a profit, and tax is 

payable on receipts from mining.34

II. Custodianship of Cryptocurrencies by Financial Institutions 

No specific provisions or guidance exist requiring the custodianship of cryptocurrencies by 

financial institutions. It appears that storage providers that facilitate exchanges between 

cryptocurrencies and money are considered to be providing a financial service that is regulated 

under the FMC Act. These are also regulated under the AML/CFT system. 

III. Regulation of Cryptocurrencies as Financial Securities 

A. Debt Securities

The FMA guidance on ICOs states that 

[a] token is a debt security if investors have a right to be repaid money or paid interest on 

money lent to, deposited with, or owed by a person, company, or unincorporated entity 

making a token offer. For example, a token linked to the value of a dollar or commodity 

could be a debt security if: 

 investors can purchase a token with money; 

 investors holding the token have the right to redeem that token for money; and 

 an investor holding the token is not the beneficial owner of funds from which 

redemption proceeds are paid.35

In order to make a regulated offer of a debt security, an ICO issuer must register a product 

disclosure statement, appoint a licensed supervisor, meet fair dealing requirements, and meet 

financial reporting obligations. 

 

33 Questions & Answers: Cryptocurrency and Tax, IRD, https://www.ird.govt.nz/income-taxindividual/cryptocurrency-qa.html (last visited Mar. 18, 2019), archived at https://perma.cc/N442-TWYV. 

34 Id.

35 Initial Coin Offers, supra note 16. 
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The guidance further examines whether an asset-backed token could be a debt security, 

stating that, 

[w]hile each ICO must be looked at on an individual basis, asset backed tokens that give 

investors a right to redeem the token in exchange for the asset are not considered debt 

securities (unless the asset is cash). This is because the token does not give an investor the 

right to be repaid ‘money’.36

An offer of such a token would still constitute a financial service, and as such the fair dealing 

provisions in the FMC Act would apply.37

B. Equity Securities 

The FMA states that 

[a] token is an equity security if investors buy, or have the option to buy, for example, a 

share in a New Zealand incorporated company or any body corporate incorporated 

outside New Zealand. A token that provides an option to buy a share is an offer of both 

the token and the equity share.38

Issuance of such a token by an ICO would be considered a regulated offer under the FMC Act. 

C. Managed Investment Products 

The FMA guidance states as follows: 

A token is a managed investment product (an interest in a ‘managed investment scheme’) 

if investors: 

 contribute money or cryptocurrency to receive interests (tokens) in a scheme (a 

structure or project that allows investors to pool their money) 

 have a ‘right to receive a financial benefit’ (as defined in the FMC Act) from the 

scheme—such as money, rights to a share in profits, cryptocurrency, additional 

tokens, or changes in the tokens’ value and these benefits are principally produced 

by someone else, and 

 do not have day-to-day control over the project or business (even if they have the 

right to be consulted or to give directions).39

In order to make a regulated offer of managed investment products, the manager of a managed 

investment scheme must be licensed, and the relevant entity must also register a product 

disclosure statement, appoint a licensed supervisor, have a trust deed that sets out investor rights 

 

36 Id. 

37 Id. 

38 Id. 

39 Id. 
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and the supervisor’s role, meet fair dealing requirements, and meet financial 

reporting obligations.40

The guidance further examines the question of whether utility tokens are managed investment 

products, stating that, 

[w]hile each ICO must be looked at on an individual basis, utility tokens are not considered 

managed investment products simply because they can be traded on a cryptocurrency 

exchange or other secondary market. This is because any profits an investor receives by 

trading those utility tokens on a cryptocurrency exchange are not ‘rights to receive a 

financial benefit’ under a managed investment scheme.41

Similar to asset-backed tokens, where an ICO offers utility tokens this would typically be 

considered to constitute a financial service. 

D. Derivatives 

The FMA states that “[a] token may be a derivative if, under the terms of the token, the issuer or 

holder may be required to pay an amount or provide something else in the future, and the amount 

to be paid or the value of the token is derived from the value or amount of something else, such 

as a commodity or asset.”42 The issuer of such a token must be licensed, and the entity must 

register a product disclosure statement, meet fair dealing requirements, and meet financial 

reporting obligations. 

IV. Treatment of Cryptoassets Not Considered Securities 

The FMA guidance states that 

[w]hile each ICO must be looked at on an individual basis, most ICOs involve the financial 

service of ‘operating a value transfer service’. 

ICOs may also involve the financial service of ‘issuing and managing a means of payment’ 

– where the tokens can be used to obtain products or services that are otherwise acquired 

using legal tender (such as NZ dollars), for example. 

Often this applies when the ICO offers a ‘utility’ or ‘application’ token. 

If your ICO provides financial services you must: 

 comply with the fair dealing provisions in Part 2 of the FMC Act. These prohibit 

you from engaging in misleading conduct or making false, deceptive or 

unsubstantiated statements. 

 

40 Id. 

41 Id. 

42 Id.
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In addition, if you are based in New Zealand, you must be registered on the Financial 

Service Providers Register (FSPR), and pay the applicable fees and levies, for each category 

of financial service you are in the business of providing. You must also belong to a dispute 

resolution scheme if you offer financial services to retail clients. 

Anti-money laundering obligations may also apply.43

As noted above, where an ICO does not involve a financial product or a financial service, “‘fair 

dealing’ requirements still apply to white papers and other communications about [the] ICO 

under the Fair Trading Act 1986.”44

As also stated above, tokens can be designated to be a particular financial product under the FMC 

Act where this is, for example, “necessary to promote fair and efficient markets in New 

Zealand.”45

The FMA guidance on the fair dealing requirements applicable to ICOs states as follows: 

[i]f your ICO is providing a financial product or financial service, all promotional material 

– including your white paper, website and on social media posts – must comply with the 

fair dealing provisions in Part 2 of the FMC Act. The provisions prohibit you from 

engaging in misleading conduct and making false, deceptive or unsubstantiated 

statements about the financial product or service, irrespective of the type of investor you 

are offering to, or where they are located. 

. . . 

Even if your ICO is not providing a financial service or financial product, ‘fair dealing’ 

requirements still apply to white papers and other communications about your ICO under 

the Fair Trading Act 1986. This prohibits misleading and deceptive conduct, and applies 

to the trading of assets, commodities and other goods and services.46

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As indicated above, the categorization of a particular token will be based on an assessment of its 

characteristics. Utility tokens and asset-backed tokens may not be considered financial products, 

but an offer of such tokens could still be a regulated financial service. There do not appear to be 

any specific restrictions on the sale of, or investments in, a particular type of cryptocurrency. 

 

43 Id.

44 Id.

45 Id.

46 Fair Dealing and Initial Coin Offers, supra note 20. 
The Law Library of Congress 205 

Norway 

Elin Hofverberg 

Foreign Law Specialist

SUMMARY Norway requires everyone who offers a marketplace for cryptocurrencies or a wallet to 

register with the Norwegian Financial Supervisory Authority. It has implemented the 

European Union’s Fifth Anti-Money Laundering Directive, and in its implementing 

legislation specifically provides that anti-money laundering requirements also apply in 

relation to cryptocurrency transactions. 

 Norway taxes cryptoassets depending on their nature either as capital property income, 

other income (mined income), or business income (mined income on a larger scale). The 

sale of cryptocurrencies is not subject to value-added tax. 

I. Approach to Assets Created through Blockchain 

A. Duty to Register and Applicability of Anti-Money Laundering Law 

The Norwegian Financial Supervisory Authority has issued guidance on the regulation of digital 

currency services, including cryptocurrencies and cryptowallets.1 The guidance pertains 

specifically to the registration requirements associated with the amended Money Laundering Act. 

As the result of a 2018 amendment to the Money Laundering Act, the use and issuance of 

cryptocurrencies are now subject to the Act.2 The Act also gave the Norwegian Finance 

Department the authority to issue regulations pertaining to money laundering and virtual 

currencies.3 In 2018, the Department issued the Regulation on Money Laundering where 

cryptocurrencies (defined as virtual currencies) are specifically mentioned.4 The Regulation 

states that 

(1) Providers of exchange services between virtual currencies and official currencies have 

a duty to report in accordance with the Money Laundering Act. The same applies also to 

storage services for virtual currencies. 

 

1 Virtuelle valutatjenester, FINANSTILSYNET (Jan. 31, 2019), https://www.finanstilsynet.no/konsesjon/virtuellevalutatjenester/, archived at https://perma.cc/R4EA-EXP2 (all translations by the author).

2 LOV OM TILTAK MOT HVITVASKING OG TERRORFINANSIERING (HVITVASKINGSLOVEN) [ACT ON MEASURES AGAINST 

MONEY LAUNDERING AND FINANCING OF TERRORISM] (LOV-2018-06-01-23), https://lovdata.no/dokument/ 

NL/lov/2018-06-01-23, archived at https://perma.cc/QK4N-CS77. 

3 Kap. 1 § 4 (5) HVITVASKINGSLOVEN.

4 § 1-3 Forskrift om tiltak mot hvitvasking og terrorfinansiering (hvitvaskingsforskriften) [Regulation on 

Measures on Money Laundering and Financing of Terrorism (Money Laundering Regulation)], 

https://lovdata.no/dokument/SF/forskrift/2018-09-14-1324, archived at https://perma.cc/8EJA-FZ22. 
Regulatory Approaches to Cryptoassets: Norway 

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(2) A virtual currency is the digital expression of a value that is not issued by a central bank 

or a public agency, is not necessarily connected to an official currency, and does not have 

legal status as currency or money, but which is accepted as a means of payment and can 

be transferred, stored, or traded electronically. 

(3) A storage service for virtual currencies is the storage of private cryptographic keys on 

behalf of customers, used to transfer, store, or trade in virtual currencies. 

(4) The Financial Supervisory Authority enforces the requirement that the exchange and 

storage services mentioned in the first paragraph are done in accordance with the Money 

Laundering Act. Exchange providers and storage services as mentioned in the first 

paragraph must be registered with the Financial Supervisory Authority. The following 

information on the providers must be registered: 

a) Name 

b) Organization form [i.e. LLC etc.] and organization number 

c) Business address 

d) Information on services provided 

e) Name, address and birth number or D-number for: 

1. The day-to-day leader or persons of equivalent position 

2. Board members or persons of equivalent position 

3. Other contact persons5

Also, prior to the amendment taking effect it had been determined by the courts that 

cryptocurrencies were subject to money laundering provisions.6 In an Oslo District Court case 

from 2017, a Norwegian bank terminated a relationship with a customer who solely used his 

account to buy and sell bitcoins.7 The Bank argued that it was required to terminate the 

relationship under the money laundering and terrorism financing rules because of the many 

cryptocurrency transactions, out of fear that he was laundering money.8 The court found that, 

indeed, the Money Laundering Act required this action and that the bank had therefore acted 

properly when it terminated the relationship with the customer.9 

 

5 Id. 

6 Oslo Tingsret [Oslo District Court], Case No. 17-173396TVI-OTIR/01 (Dec. 5, 2017), https://bitmynt.no/ 

20171205%20rettens%20kjennelse.pdf, archived at https://perma.cc/R648-PRTE. 

7 Id. 

8 Id. 

9 Id.; § 10 LOV OM TILTAK MOT HVITVASKING OG TERRORFINANSIERING MV (HVITVASKLOVEN) [ACT ON MEASURES 

AGAINST MONEY LAUNDERING AND TERROR FINANCING (MONEY LAUNDERING ACT)] (LOV-2009-03-06-11), as in 

force 2017, https://lovdata.no/pro/#document/NLO/lov/2009-03-06-11 (subscription required). 
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B. Taxation 

1. Capital Property Income 

The Norwegian Tax Authority has issued a statement that income derived from the sale of 

cryptocurrencies such as bitcoins will be treated as capital property, at least for tax purposes.10

Capital property legislation allows deductions for losses and taxes gains.11 Although travel 

currencies are exempted from the capital gains tax, cryptocurrencies such as bitcoins are not, 

because cryptocurrencies are not recognized as travel currencies.12 

All Norwegian residents are required to report taxable income (including from capital gains such 

as those from cryptocurrencies) in accordance with the Norwegian Income Tax Act.13 Such 

income derived from cryptocurrencies should be filed as “other income.”14

2. Income from Mining 

Income from actively mining cryptocurrencies by the owner him or herself is likely to be 

considered other income.15 The mining of cryptocurrencies on a larger scale, on the other hand, 

may be considered business income.16 

3. Value-Added Tax 

Sales of cryptocurrencies are exempt from Norwegian value-added tax (VAT). In a 2013 statement 

the Norwegian Tax Authority determined that the sale of bitcoins by a commercial actor was 

subject to a 25% VAT as the trade in bitcoins on a website is an electronic service subject to VAT 

 

10 Bruk av bitcoins – skatte- og avgiftsmessige konsekvenser [Use of Bitcoins – Tax Effects], SKATTEETATEN (Nov. 11, 

2013), https://www.skatteetaten.no/rettskilder/type/uttalelser/prinsipputtalelser/bruk-av-bitcoins--skatte--

og-avgiftsmessige-konsekvenser/, archived at https://perma.cc/5223-NKR4; see also Elin Hofverberg, Norway: 

Bitcoins Are Capital Property, Not Currency, Says Norwegian Tax Authority, GLOBAL LEGAL MONITOR (Dec. 11, 

2013), http://www.loc.gov/law/foreign-news/article/norway-bitcoins-are-capital-property-not-currency-saysnorwegian-tax-authority/, archived at https://perma.cc/QVF6-BBFQ.

11 §§ 5-1, 5-20, 6-1 LOV OM SKATT AV FORMUE OG INNTEKT (SKATTELOVEN) [ACT ON TAXATION OF INCOME (TAX ACT)]

( LOV-1999-03-26-14), https://lovdata.no/dokument/NL/lov/1999-03-26-14, archived at https://perma.cc/ 

S8Y6-8RPR. 

12 SKATTEETATEN, supra note 10. 

13 § 2-1 SKATTELOVEN. 

14 As per income tax guidelines at 3.1.12 Annen inntekt [Other Income], SKATTEETATEN, https://www.skatt 

eetaten.no/person/skatt/skattemelding/finn-post/3/1/12/ (last visited Apr. 6, 2018), archived at 

https://perma.cc/96P3-QXNK. 

15 Mining av virtuell valuta, SKATTEETATEN, https://www.skatteetaten.no/person/skatt/hjelp-til-riktigskatt/aksjer-og-verdipapirer/om/virtuell-valuta/mining/ (last visited Apr. 16, 2019), archived at

https://perma.cc/S54D-FUNA. 

16 Id. For guidance on what qualifies as naeringsdrivande (business income) see Er jeg næringsdrivende?,

SKATTEETATEN, https://www.skatteetaten.no/bedrift-og-organisasjon/starte-og-drive/er-jeg-narings 

drivende/ (last visited Apr. 16, 2019), archived at https://perma.cc/8H4M-PP7U. 
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and not a VAT-exempt financial service.17 However, in 2015 the Court of Justice of the European 

Union ruled that cryptocurrencies are exempt from VAT.18 This caused Norway to start a process 

whereby the Finance Department was asked to determine how bitcoins and other 

cryptocurrencies should be treated in relation to VAT.19 Final guidance was issued in 2017, 

establishing that the sale of cryptocurrencies is exempt from VAT.20 

II. Custodianship of Cryptocurrencies by Financial Institutions 

Norway requires that any organization that offers storage of cryptocurrencies, such as 

cryptowallets, first register with the Norwegian Financial Supervisory Authority.21 It is also 

subject to the money laundering provision, and thus must keep a record of its sales.22 No other 

specific legislation has been enacted surrounding these products. 

III. Regulation of Cryptocurrencies as Financial Securities 

The first Norwegian company to make an initial coin offering (ICO) reportedly did so in 2017.23

The Financial Supervisory Authority has not commented on this ICO. 

 

IV. Treatment of Cryptoassets Not Considered Securities 

The Financial Supervisory Authority has made no statements on what laws may apply to 

cryptoassets that are not considered securities. 

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As seen above, different laws and regulations will apply to different types of cryptoassets, based 

on their use. 

 

17 SKATTEETATEN, supra note 10; see also Hofverberg, supra note 10. 

18 Case C264/14, Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718, http://curia.europa.eu/juris/ 

document/document.jsf?docid=170305&doclang=EN, archived at https://perma.cc/LU2G-U6VD. 

19 Skriftlig spørsmål fra Sveinung Rotevatn (V) til finansministeren [Written Question from Sveinung Rotevatn 

(V) to the Minister of Finance], Dokument nr. 15:1436 (2015-2016) (Aug. 10, 2016), https://www.stortinget. 

no/no/Saker-og-publikasjoner/Sporsmal/Skriftlige-sporsmal-og-svar/Skriftlig-sporsmal/?qid=66127, 

archived at https://perma.cc/SBC3-9M7Q. 

20 Letter from the Finance Department to the Norwegian Tax Authority, Merverdiavgift – unntaket for 

finansielle tjenester [VAT Fees – Exemption for Financial Services] (Feb. 6, 2017), https://www.regjeringen. 

no/no/dokumenter/merverdiavgift---unntaket-for-finansielle-tjenester/id2538129/, archived at 

https://perma.cc/8GV3-TU4Q. 

21 FINANSTILSYNET, supra note 1. 

22 § 1-3 Forskrift om tiltak mot hvitvasking og terrorfinansiering (hvitvaskingsforskriften) 

23 Ashour Iesho, Norwegian Company Launches First ICO for Asset-Backed Token, BITCOINIST (2017), https://bit 

coinist.com/norwegian-company-launches-first-ico-for-asset-backed-token/, archived at 

https://perma.cc/BK63-7WU9. 
The Law Library of Congress 209 

Philippines 

Gustavo Guerra 

Senior Foreign Law Specialist

I. Approach to Assets Created Through Blockchain

A. Financial Regulation 

Bangko Sentral ng Pilipinas (BSP, the Philippines Central Bank) has issued guidelines concerning 

virtual currencies (VCs).1 Specifically, the BSP Guidelines provide that because VCs are not 

backed by a central bank or a particular commodity and are not guaranteed by any country, they 

are not legal tender.2 However, because they are used as a conduit to provide certain financial 

services, such as remittances and payment transactions, entities that provide such services using 

VCs must register with the BSP and adopt adequate measures to mitigate and manage risks 

associated with such currencies.3 VCs are defined by the BSP Guidelines as “any type of digital 

unit that is used as a medium of exchange or a form of digitally stored value created by agreement 

within the community of VC users.”4

B. Management of Technology Risk 

The BSP Guidelines indicate that the following cybersecurity measures must be taken by virtual 

currency exchanges: 

Depending on the complexity of VC operations and business models adopted, a VC 

exchange shall put in place adequate risk management and security control mechanisms 

to address, manage and mitigate technology risks associated with VCs. For VC exchanges 

providing wallet services for holding, storing and transferring VCs, an effective 

cybersecurity program encompassing storage and transaction security requirements as 

well as sound key management practices must be established to ensure the integrity and 

security of VC transactions and wallets. For those with simple VC operations, installation 

of up-to-date anti-malware solutions, conduct of periodic back-ups and constant 

awareness of the emerging risks and other cyberattacks involving VCs may suffice.5

C. Anti-Money Laundering Law 

The BSP Guidelines provide that virtual currency exchanges are considered similar to transfer 

and remittance exchanges and thus are covered by pertinent anti-money laundering (AML) legal 

 

1 Bangko Sentral ng Pilipinas, Guidelines for Virtual Currency (VC) Exchanges, Circular No. 944 (Feb. 6, 2017), 

http://www.bsp.gov.ph/downloads/regulations/attachments/2017/c944.pdf, archived at https://perma.cc/ 

Z9ZR-BYZV. 

2 Id. 

3 Id. 

4 Id. 

5 Id. 
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and regulatory rules.6 Accordingly, a Philippine AML regulation provides that, in order to 

mitigate and manage risks, entities that provide services with virtual assets must register with 

Philippine authorities, obtain from them appropriate licenses, and have systems aimed at 

“monitoring and ensuring compliance with the relevant preventive measures.”7

D. Taxation 

Legislation specifically addressing the taxation of virtual currencies could not be located. 

II. Custodianship of Cryptocurrencies by Financial Institutions 

Detailed rules addressing the custodianship of cryptocurrencies by financial institutions could 

not be located. However, a Philippine AML regulation provides that “safekeeping and/or 

administration of virtual assets or instruments enabling control over virtual assets” is an activity 

that may be performed by providers of services related to virtual assets.8

III. Regulation of Cryptocurrencies as Financial Securities 

The Philippine Securities and Exchange Commission is developing rules pertaining to the 

registration of initial coin offerings,9 which will include pertinent rules on the topic of the 

regulation of cryptocurrencies as financial securities. 

IV. Treatment of Cryptoassets Not Considered Securities

As noted above, the BSP Guidelines indicate that entities that provide certain financial services 

using virtual currencies must register with the BSP and adopt adequate measures to mitigate and 

manage risks associated with such currencies. 

V. Distinctions in Treatment of Different Categories of Cryptocurrencies

The BSP Guidelines on virtual currencies provide that no particular cryptocurrency is to be 

endorsed by the Philippine Central Bank.10

 

6 Id. 

7 Anti-Money Laundering Council, 2018 Implementing Rules and Regulations of Republic Act No. 9160, as 

amended, Rule 19-5.2, http://www.amlc.gov.ph/images/PDFs/FINAL%202018%20IRRv1.pdf, archived at

https://perma.cc/SH7Y-A93F. 

8 Id. Rule 2-1(jjjjj). 

9 Press Release, Philippines SEC, SEC Releases Proposed Rules on Initial Coin Offerings (Aug. 2, 2018), 

http://www.sec.gov.ph/wp-content/uploads/2015/10/2018PressRelease_Draft-ICO-Rules-August-02-2018-

1.pdf, archived at https://perma.cc/A3BQ-SZ8H. 

10 Bangko Sentral ng Pilipinas, Guidelines for Virtual Currency (VC) Exchanges, Circular No. 944 (Feb. 6, 2017), 

http://www.bsp.gov.ph/downloads/regulations/attachments/2017/c944.pdf, archived at

https://perma.cc/Z9ZR-BYZV. 
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Singapore 

Laney Zhang 

Foreign Law Specialist

SUMMARY The Monetary Authority of Singapore (MAS) clarified in 2017 that the offer or issue of 

digital tokens in Singapore would be regulated by the MAS if the digital tokens fall 

within the definition of “securities.” The offer of digital tokens that constitute securities 

must comply with the requirements under the securities laws, including that the offer 

must be made in or accompanied by a prospectus. The relevant MAS Notice on 

Prevention of Money Laundering and Countering the Financing of Terrorism 

(AML/CFT) is applicable if a person is deemed an intermediary conducting regulated 

activities in relation to digital tokens that constitute securities. 

 The Payment Services Act, which was passed on January 14, 2019, expands the MAS’s 

regulatory scope to include digital payment token services. Any service dealing in or 

facilitating the exchange of digital payment tokens falls within the ambit of providing 

a digital payment token service. To be entitled to carry on a digital payment token 

service, the service provider must hold a standard payment institution license or a 

major payment institution license. The appropriate AML/CFT requirements will be 

imposed on relevant licensees through notices issued by the MAS. 

I. Approach to Assets Created Through Blockchain 

A. Digital Token Offerings 

In the wake of an increase in the number of initial coin offerings (ICOs) in Singapore as a means 

of raising funds, the Monetary Authority of Singapore (MAS), the city state’s central bank and 

financial regulator, issued a statement clarifying its regulatory position on digital tokens on 

August 1, 2017. According to the statement, the offer or issue of digital tokens in Singapore will 

be regulated by the MAS if the digital tokens fall within the definition of “securities” regulated 

under the securities laws.1 

The MAS provides guidance on the application of the securities laws administered by the MAS 

in relation to offers or issues of digital tokens in a document titled A Guide to Digital Token 

Offerings, which was last updated on November 30, 2018 (MAS Guide).2 

 

1 Press Release, Monetary Authority of Singapore (MAS), MAS Clarifies Regulatory Position on the Offer of 

Digital Tokens in Singapore (Aug. 1, 2017), http://www.mas.gov.sg/News-and-Publications/MediaReleases/2017/MAS-clarifies-regulatory-position-on-the-offer-of-digital-tokens-in-Singapore.aspx, archived at

https://perma.cc/D8V5-3NST. 

2 MAS, A GUIDE TO DIGITAL TOKEN OFFERINGS (MAS Guide) (updated Nov. 30, 2018), 

http://www.mas.gov.sg/~/media/MAS/Regulations and Financial Stability/Regulations Guidance and 

Licensing/Securities Futures and Fund Management/Regulations Guidance and Licensing/Guidelines/A 

Guide to Digital Token Offerings last updated on 30 Nov 2018.pdf, archived at https://perma.cc/9KGD-JUG7. 
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B. Payment Services Act 

The MAS has recognized that technology, in particular FinTech, or Financial Technology, is 

transforming the world of payments, while new payment methods also give rise to new risks. It 

therefore reviewed its regulatory framework applicable to payment systems and payment service 

providers, and proposed a new regulatory framework, the Payment Services Bill.3 

On November 21, 2017, the MAS issued a consultation paper on the proposed Payment Services 

Bill.4 On January 14, 2019, the Bill had its second reading in Parliament and was passed into law.5

The Payment Services Act and its subsidiary legislation, which would contain substantive license 

application forms, processes, and procedures, are expected to take effect in the later part of 2019.6 

Under the new regulatory framework, “digital payment token services” would come under the 

supervision of the MAS. According to a speech made by the Minister for Education on behalf of 

the Minister in charge of the MAS during the second reading of the Bill, “digital payment token 

services” are “commonly understood as cryptocurrency dealing or exchange services.”7 The 

Minister stated that the MAS would become one of the first few financial services regulators in 

the world to introduce a regulatory framework for digital payment token services.8

C. Anti-Money Laundering Law 

According to the MAS Guide, the relevant MAS Notice on Prevention of Money Laundering and 

Countering the Financing of Terrorism (AML/CFT) is applicable if a person is deemed an 

intermediary conducting regulated activities in relation to digital tokens that 

constitute securities.9 

 

3 MAS, “Payment Services Bill” - Second Reading Speech by Mr Ong Ye Kung, Minister For Education, On 

Behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister-In-Charge of The Monetary 

Authority of Singapore (Jan. 14, 2019) (Second Reading Speech), http://www.mas.gov.sg/News-andPublications/Speeches-and-Monetary-Policy-Statements/Speeches/2019/Payment-Services-Bill.aspx, archived 

at https://perma.cc/9B25-U4H4. 

4 Press Release, MAS, MAS Launches Second Consultation on New Regulatory Framework for Payments (Nov. 

21, 2017), http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/MAS-Launches-SecondConsultation-on-New-Regulatory-Framework-for-Payments.aspx, archived at https://perma.cc/W5RF-D5GP. 

5 Payment Services Act 2019, No. 2 of 2019 (Jan. 14, 2019, assented to by the President Feb. 11, 2019), 

https://sso.agc.gov.sg/Acts-Supp/2-

2019/Published/20190220?DocDate=20190220&ViewType=Pdf&_=20190221030955, archived at

https://perma.cc/PLP4-WCZ7. 

6 Li Chuan Hsu et al., The Payment Services Act and How it Affects FinTech in Singapore, JDSUPRA (Mar. 26, 2019), 

https://www.jdsupra.com/legalnews/the-payment-services-act-and-how-it-71949/, archived at

https://perma.cc/VJY8-KQDB. 

7 Second Reading Speech, supra note 3. 

8 Id.

9 MAS Guide, supra note 2, para. 3.1. 
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The MAS Guide sets out the following AML/CFT requirements applicable to such persons 

broadly, who must: 

3.2.1 take appropriate steps to identify, assess and understand their money laundering and 

terrorism financing (ML/TF) risks; 

3.2.2 develop and implement policies, procedures and controls – including those in relation 

to the conduct of customer due diligence and transaction monitoring, screening, reporting 

suspicious transactions and record keeping – in accordance with the relevant MAS Notices, 

to enable them to effectively manage and mitigate the risks that have been identified; 

3.2.3 perform enhanced measures where higher ML/TF risks are identified, to effectively 

manage and mitigate those higher risks; and 

3.2.4 monitor the implementation of those policies, procedures and controls, and enhance 

them if necessary.10

In respect of payment services regulation, the MAS has recognized that digital payment token 

services “carry significant money laundering and terrorism financing risks or ML/TF risks due 

to the anonymous and borderless nature of the transactions they enable.”11 When the new 

Payment Services Act takes effect, all providers of digital payment token dealing or exchange 

services in Singapore must meet AML/CFT requirements. According to the MAS, the appropriate 

AML/CFT requirements will be imposed on relevant licensees through notices issued under the 

MAS Act. The MAS will also provide guidance to the industry.12

II. Regulation of Cryptocurrencies as Financial Securities 

A. Digital Tokens Considered Securities 

 

According to the MAS Guide, offers or issues of digital tokens must comply with the Securities 

and Futures Act (Cap. 289) (SFA) and the Financial Advisers Act (Cap. 110) (FAA),13 if the digital 

tokens are capital markets products under the SFA.14 

Capital markets products include not only securities, but also units in a collective investment 

scheme (CIS), derivatives contracts, and spot foreign exchange contracts for purposes of 

leveraged foreign exchange trading.15 To determine whether a digital token constitutes a type of 

capital markets product under the SFA, the MAS will examine the structure and characteristics 

of the digital token, including the rights attached to it.16

 

10 Id. para. 3.2. 

11 Second Reading Speech, supra note 3. 

12 Id.

13 MAS Guide, supra note 2, para. 1.3. 

14 Id. para. 2.1. 

15 Id.

16 Id. para. 2.2. 
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The offer of digital tokens that constitute securities, securities-based derivatives contracts, or units 

in a CIS must comply with the requirements under the SFA. Such requirements include that the 

offer must be made in or accompanied by a prospectus that is prepared in accordance with the 

SFA and is registered with the MAS.17 In the case where an offer is made in relation to units in a 

CIS, the CIS is also subject to authorization or recognition requirements.18

B. Intermediaries 

The MAS identifies the following three types of intermediaries facilitating offers or issues of 

digital tokens, who may be subject to MAS supervision unless otherwise exempted: 

 Operators of platforms that make primary offers or issues of digital tokens that constitute 

capital markets products must hold a capital markets services license; 

 Financial advisors providing advice in Singapore in respect of any digital token that is an 

investment product must be authorized to do so in respect of that type of financial advisory 

service by a financial advisor’s license; 

 Persons establishing or operating trading platforms in relation to digital tokens that constitute 

securities, derivatives contracts, or units in a CIS may need to be approved by the MAS as an 

approved exchange or recognized by the MAS as a market operator under the SFA.19

III. Treatment of Cryptoassets Not Considered Securities 

A. Definition of Digital Payment Tokens 

“Digital payment tokens” under the Payment Services Act appears to be a broad category of 

digital representation of value, whether or not created through blockchain. According to the Act, 

a “digital payment token” means 

any digital representation of value (other than an excluded digital representation of value) 

that — 

(a) is expressed as a unit; 

(b) is not denominated in any currency, and is not pegged by its issuer to 

any currency; 

(c) is, or is intended to be, a medium of exchange accepted by the public, or a section 

of the public, as payment for goods or services or for the discharge of a debt; 

(d) can be transferred, stored or traded electronically; and 

(e) satisfies such other characteristics as the Authority may prescribe20

 

17 Id. para. 2.5. 

18 Id. para. 2.6. 

19 Id. paras. 2.8–2.11. 

20 Payment Services Act s 2. 
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B. Payment Services and Licenses 

Under the Payment Services Act, any entity that provides any type of payment service will need 

a license that entitles the entity to carry on a business of providing that type of payment service, 

unless otherwise exempted.21 The Payment Services Act regulates the following seven types of 

payment services: 

(a) an account issuance service; 

(b) a domestic money transfer service; 

(c) a cross‐border money transfer service; 

(d) a merchant acquisition service; 

(e) an e-money issuance service; 

(f) a digital payment token service; 

(g) a money‐changing service.22

The Payment Services Act prescribed three classes of licenses: 

 a money‐changing license; 

 a standard payment institution license; and 

 a major payment institution license.23 

For each class of license, the MAS will impose different regulatory requirements according to the 

risks posed by the scope and scale of services provided by the licensee. Money-changing licensees 

can provide only money-changing services. Standard payment institutions may provide any 

combination of payment services, including the digital payment token service, but below 

specified transaction flow or e-money float thresholds. According to the MAS, standard payment 

institutions will be regulated lightly, “and the regime mimics a ‘permanent sandbox’ 

environment to encourage innovation and enterprise.” Major payment institutions can go above 

the specified thresholds, which will be subject to more regulation because the scale of their 

operations would pose more risk.24 

C. Digital Payment Token Services 

Any service that involves dealing in or facilitating the exchange of digital payment tokens falls 

within the ambit of providing a “digital payment token service.”25

 

21 Id. s 5(1). 

22 Id. First Schedule, Part 1. 

23 Id. s 6(2). 

24 Second Reading Speech, supra note 3. 

25 Payment Services Act, First Schedule, Part 3. 
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Under the Payment Services Act, to be entitled to carry on a digital payment token service, the 

service provider must hold a standard payment institution license or a major payment institution 

license.26 A licensee providing digital payment token services must have a major payment 

institution license if 

the average, over a calendar year, of the total value of all payment transactions that are 

accepted, processed or executed by the licensee in one month exceeds — 

(A) $3 million (or its equivalent in a foreign currency), for any one of those 

payment services; or 

(B) $6 million (or its equivalent in a foreign currency), for 2 or more of those 

payment services.27

In addition, as indicated above, all providers of digital payment token dealing or exchange 

services will have to meet appropriate AML/CFT requirements that are imposed by the MAS on 

relevant licensees. 

IV. Custodianship of Cryptocurrencies by Financial Institutions 

Custodianship of cryptocurrencies does not appear to be specifically regulated. Under the 

Payment Services Act, major payment institutions must safeguard money received from 

customers in the following manners: 

(a) by an undertaking, from a safeguarding institution, to be fully liable to the 

customer for the relevant money; 

(b) by a guarantee given by a safeguarding institution for the amount of the 

relevant money; 

(c) by depositing the relevant money in a trust account maintained with a 

safeguarding institution; 

(d) in such other manner as may be prescribed.28

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

It appears that service providers that only provide or exchange Limited Purpose Digital Payment 

Tokens or Central Bank Digital Payment Tokens are exempt from the license requirement under 

the Payment Services Act. The Act sets out services that are not payment services for the purpose 

of the Act, which include: 

(k) any service of dealing in, or facilitating the exchange of, any central bank digital 

payment token, carried out by a central bank or financial institution; 

 

26 Id. s 6(4). 

27 Id. s 6(5). 

28 Id. s 23. 
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(l) any service of dealing in, or facilitating the exchange of, any limited purpose 

digital payment token.29

In terms of the rational of the exclusion of the above two categories of digital payment tokens, a 

commentary pointed out that 

[t]he “Limited Purpose Digital Payment Token” exclusion refers to payment services, 

which involve non-monetary consumer loyalty or reward points or in-game assets or 

similar digital representations of value, which cannot be returned to the issuer or sold, 

transferred or exchanged for money. On the other hand, the “Central Bank Digital 

Payment Token” exception is one where a central bank or financial institution provides 

services for dealing in or facilitating the exchange of central bank digital payment tokens. 

In the former, Parliament has considered such activities to not pose sufficient risk to 

warrant regulation under the licensing regime. In respect of the latter, the rationale was 

that such institutions would have already been sufficiently regulated.30

 

29 Id. First Schedule, Part 2. 

30 Hsu et al., supra note 6.
The Law Library of Congress 218 

South Africa 

Hanibal Goitom 

Chief, Foreign, Comparative, and 

International Law Division I

SUMMARY Cryptoassets remain largely unregulated in South Africa. This will change soon, at least 

with regard to taxation, if proposed legislation before the country’s Parliament, the 

Taxation Law Amendment Bill, is enacted. The Bill would categorize cryptoassets as 

financial instruments under the 1962 Income Tax Act and subject transactions and 

investments involving them under the Act’s “ring-fencing of asset losses clause.” It 

would also categorize the issuance, acquisition, collection, buying or selling, or transfer 

of ownership of any cryptoasset as a financial service under the 1991 Value-Added Tax 

Act, thereby making it exempt from the application of this Act. 

In addition, a consultation paper by the Crypto Assets Regulatory Working Group has 

proposed the registration and regulation of entities performing various cryptoasset 

activities, including wallet providers and custodial service providers.

I. Approach to Assets Created Through Blockchain 

South Africa’s initial statement regarding cryptoassets came in 2014. The National Treasury 

(along with the South African Reserve Bank, the Financial Services Board, the South African 

Revenue Service, and the Financial Intelligence Centre) issued a statement warning the public 

about the risks of transactions and investments in cryptoassets, at the time referred to as virtual 

currency (VC).1 Among other things, the statement noted that 

[c]urrently in South Africa there are no specific laws or regulations that address the use of 

virtual currencies. Consequently, no legal protection or recourse is afforded to users of 

virtual currencies. 

Due to their unregulated status, virtual currencies cannot be classified as legal tender as 

any merchant may refuse them as a payment instrument without being in breach of the 

law. In addition, virtual currencies cannot be regarded as a means of payment as they are 

not issued on receipt of funds. The use of virtual currencies therefore depends on the other 

participant’s willingness to accept them. 

While virtual currencies can be bought and sold on various platforms, they are not defined 

as securities in terms of the Financial Markets Act, 2012 (Act No. 19 of 2012). The regulatory 

standards that apply to the trading of securities therefore do not apply to 

virtual currencies.2

 

1 Press Release, National Treasury, User Alert: Monitoring of Virtual Currencies (Sept. 18, 2014), 

http://www.treasury.gov.za/comm_media/press/2014/2014091801 - User Alert Virtual currencies.pdf, 

archived at https://perma.cc/B3D8-NPYS. 

2 Id. 
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In December 2014, the South African Reserve Bank (SARB), the central banking institution whose 

responsibilities include formulating and implementing monetary policy, ensuring the effective 

functioning of the national payment system and issuing banknotes and coins in the country, 

published a position paper highlighting various risks associated with virtual currencies, 

including issues relating to payment systems and payment service providers, price stability, 

money-laundering and terrorism financing, consumer risk, circumvention of exchange control 

regulations, and financial stability.3 The SARB maintains that its 2014 paper remains “current 

and relevant.”4 

In 2016, South Africa established an intergovernmental Fintech Working Group (IFWG) 

consisting of representatives from the National Treasury, the SARB, the Financial Sector Conduct 

Authority (previously known as the Financial Services Board), and the Financial Intelligence 

Centre.5 The purpose of the Working Group is “to develop a common understanding among 

regulators and policymakers of financial technology (fintech) developments as well as policy and 

regulatory implications for the financial sector and economy.”6 

In 2018, a joint working group, the Crypto Assets Regulatory Working Group, consisting of the 

members of the IFWG and the South African Revenue Service (SARS) was established for the 

specific purpose of reviewing “the [country’s] position on crypto assets.”7 In January 2019, this 

group published a consultation paper for public discussion.8 While it identified multiple uses of 

cryptoassets, the Group focused on “the purchasing and selling of crypto assets . . . and . . . paying 

for goods and services using crypto assets (payments).”9 The Group’s work included unifying 

the various terms used to refer to virtual currencies around the term “crypto assets” and 

proposing the following definition for the term: 

Crypto assets are digital representations or tokens that are accessed, verified, transacted, 

and traded electronically by a community of users. Crypto assets are issued electronically 

by decentralised entities and have no legal tender status, and consequently are not 

considered as electronic money either. It therefore does not have statutory compensation 

 

3 SOUTH AFRICAN RESERVE BANK (SARB), POSITION PAPER ON VIRTUAL CURRENCIES 4.3 (Dec. 3, 

2014), https://www.golegal.co.za/wp-content/uploads/ 2018/01/Virtual-Currencies-Position-PaperFinal_02of2014.pdf, archived at https://perma.cc/A8L2-4MK6; About Us, 

SARB, https://www.resbank.co.za/AboutUs/Pages/About%20Us-Home.aspx (last visited Mar. 20, 

2018), archived at https://perma.cc/TS79-2VFE. 

4 Virtual Currencies/Crypto-Currencies, SARB, 

https://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchangeControl/FAQs/P

ages/VirtualCurrenciesCryptocurrencies.aspx (last visited Mar. 21, 2019), archived at https://perma.cc/96CSUTYD. 

5 CRYPTO ASSETS REGULATORY WORKING GROUP, CONSULTATION PAPER ON POLICY PROPOSALS FOR CRYPTO ASSETS

5 (Jan. 2019), http://www.treasury.gov.za/comm_media/press/2019/CAR WG Consultation paper on crypto 

assets_final.pdf, archived at https://perma.cc/E2M9-BRLB. 

6 Id. 

7 Id. 

8 Id. 

9 Id at 7-8. 
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arrangements. Crypto assets have the ability to be used for payments (exchange of such 

value) and for investment purposes by crypto asset users. Crypto assets have the ability to 

function as a medium of exchange, and/or unit of account and/or store of value within a 

community of crypto asset users.10

In 2018, the SARS issued a clarification on the tax status of virtual currencies.11

A. Financial Regulation and Consumer Protection 

It appears that cryptoassets remain unregulated. According to the SARB, “there are currently no 

specific laws or regulations that govern the use of VCs in [the country]. It follows, therefore, that 

currently no compliance requirements exist for local trading of VCs.”12

However, there may be restrictions with regard to the cross border or foreign exchange transfers 

for the purpose of buying crypto assets. According to the SARB, 

[n]either the Currency and Exchanges Manual for Authorised Dealers nor the Currency 

and Exchanges Manual for Authorised Dealers in foreign exchange with limited authority 

(manuals) allow for cross-border/foreign exchange transfers for the explicit purpose of 

purchasing VCs... The Financial Surveillance Department is, from an exchange control 

point of view, unable to approve any transactions of this nature. 

Currently, the only permissible avenue for purchasing VCs from abroad is through the 

utilisation of an individual’s single discretionary allowance (R1 million) and/or individual 

foreign capital allowance (R10 million with a Tax Clearance Certificate), per calendar year, 

... which a local Authorised Dealer in foreign exchange (local commercial bank) will be 

able to assist individuals with.13 

 

It appears that South Africa also imposes a restriction on repatriation of funds by non-residents 

who sell virtual currencies in South Africa. According to the SARB, 

non-residents who have introduced VCs to [South Africa] for sale locally and who want to 

transfer the sale proceeds abroad will be unable to do so in terms of exchange control 

policy due to the fact that there is no proof that foreign currency or Rand from a Nonresident Rand account has been introduced into [South Africa].14 

 

10 Id. at 9. 

11 Press Release, South Africa Revenue Services, SARS’s Stance on the Tax Treatment of Cryptocurrencies (Apr. 

6, 2018), http://www.sars.gov.za/Media/MediaReleases/Pages/6-April-2018---SARS-stance-on-the-taxtreatment-of-cryptocurrencies-.aspx, archived at https://perma.cc/2ET9-V3KX; South Africa, in Law LIBRARY OF 

CONGRESS, REGULATION OF CRYPTOCURRENCY AROUND THE WORLD 92 (June 2018), 

https://www.loc.gov/law/help/cryptocurrency/cryptocurrency-world-survey.pdf, archived at 

https://perma.cc/8Q6M-TPYW. 

12 Virtual Currencies/Crypto-Currencies, supra note 4. 

13 Id. 

14 Id. 
Regulatory Approaches to Cryptoassets: South Africa 

The Law Library of Congress 221 

B. Anti-Money Laundering Law 

It does not appear that South Africa’s anti-money laundering laws are currently applicable 

to cryptoassets.15

C. Taxation 

In addition to the above-noted statement issued by the SARS, in October 24, 2018, the South 

African Minister of Finance introduced a bill before Parliament, the Taxation Law Amendment 

Bill, which if enacted in its current form, will have taxation implications for cryptoassets.16 The 

Bill seeks to amend the 1962 Income Tax Act so that the definition of the term “financial 

instruments” would include “any cryptocurrency” for tax purposes.17 

In addition, it would amend the Income Tax Act to have the “the acquisition or disposal of any 

cryptocurrency” covered under the “Ring-Fencing of Assessed Losses of Certain Trades” clause 

of the Act.18 Although, in determining taxable income of a person, the Income Tax Act permits 

the offsetting of any balance of assessed loss against income derived by the person, this is not 

available to persons engaged in trades listed under the “Ring-Fencing of Assessed Losses of 

Certain Trades” clause of the Act unless covered by a specific exception.19 What this would mean 

for a person who invests in cryptocurrencies is that “any assessed loss incurred during that [tax 

assessment] year in carrying on [cryptocurrency] trade may not be set off against any income of 

that person derived during that year otherwise than from carrying on that 

[cryptocurrency] trade.”20 

The Bill also seeks to amend the Value-Added Tax Act of 1991 so that “the issue, acquisition, 

collection, buying or selling or transfer of ownership of any cryptocurrency” would constitute a 

financial service unless “the consideration payable in respect thereof is any fee, commission, 

 

15 CRYPTO ASSETS REGULATORY WORKING GROUP, supra note 5, at 23. 

16 Bill History: Taxation Laws Amendment Bill (B38-2018), PARLIAMENTARY MONITORING GROUP, 

https://pmg.org.za/bill/840/ (last visited Mar. 21, 2019), archived at https://perma.cc/UR95-6ACP. 

17 Taxation Laws Amendment Bill § 1 [B 38 ̶ 2018], 

https://www.gov.za/sites/default/files/gcis_document/201810/taxation-laws-amendment-bill-b38-

2018.pdf, archived at https://perma.cc/6PU5-CXVL. 

18 Id. § 37. 

19 Income Tax Act No. 58 of 1962, 16 STATUTES OF THE REPUBLIC OF SOUTH AFRICA §§ 20 & 20A (updated through 

2018), https://www.gov.za/documents/income-tax-act-29-may-1962-0000, archived at

https://perma.cc/EQ7C-YM6D. 

20 Id. § 20A. 
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merchant’s discount or similar charge, excluding any discount cost”.21 As a result, such activities 

involving cryptocurrency would be exempt from value-added tax.22 

II. Custodianship of Cryptocurrencies by Financial Institutions 

While South Africa does not currently appear to have any laws regulating custodianship of 

cryptocurrencies, the Crypto Assets Regulatory Working Group, in its recently released 

Consultation Paper, proposed regulatory action that would encompass this area of activity. As a 

first phase of building the appropriate regulatory scheme, the Group proposed the registration 

of entities performing various activities including “[c]rypto asset digital wallet providers 

(custodial wallets) and a [c]rypto asset safe custody service providers (custodial services).”23

 

21 Taxation Laws Amendment Bill § 90; Value-Added Tax Act No. 89 of 1991, 30 STATUTES OF THE REPUBLIC OF 

SOUTH AFRICA § 2 (updated through 2018), a version updated through 2005 is available on the Global Industry 

News and Insight website, at https://www.golegal.co.za/wp-content/uploads/2016/12/Value-Added-TaxAct-89-of-1991.pdf, archived at https://perma.cc/9AFJ-K62Q. 

22 Value-Added Tax Act § 12; Angela Itzikowitz et al., South Africa, in BLOCKCHAIN & CRYPTOCURRENCY 

REGULATION (Global Legal Insights, 2019), https://www.globallegalinsights.com/practice-areas/blockchainlaws-and-regulations/south-africa, archived at https://perma.cc/8HDW-VZ5U

23 CRYPTO ASSETS REGULATORY WORKING GROUP, supra note 5, at 27 & 28. Cryptoasset digital wallet providers 

are “[e]ntit[ies] offering a software program with the ability to store private and public keys that are used to 

interact with various digital protocols that enable the user to send and receive crypto assets with the ability to 

monitor balances.” Id. A custodial service involves “[s]afeguarding, storing, holding or maintaining custody of 

crypto assets belonging to another party.” Id. 
The Law Library of Congress 223 

Spain 

Graciela Rodriguez-Ferrand 

Senior Foreign Law Specialist

I. Financial Regulation and Consumer Protection 

Spain’s Comisión Nacional de Valores (National Securities Commission) and the Banco de 

España (Bank of Spain) issued a joint statement regarding the use of cryptocurrencies in February 

2018, noting that cryptocurrencies are not issued, registered, authorized, or verified by any 

regulatory agency in Spain.1 Therefore, cryptocurrencies purchased or held in Spain are not 

backed by any of the guarantees or safeguards provided by regulations applicable to banking or 

investment products.2 The statement aimed to alert investors to the inherent risk of loss or fraud 

associated with these types of transactions.3

Notwithstanding this warning, it has been reported that the government is considering the 

adoption of legislation friendly towards cryptocurrencies, which would include possible tax 

breaks to attract companies in the blockchain technology sector.4 

II. Anti-Money Laundering Laws 

The 2019 Tax and Customs Control Plan, issued by the Agencia Estatal de Administración 

Tributaria (AEAT) (State Tax Administration Agency) on January, 11, 2019, adopts measures 

aimed at reinforcing the control of the use of cryptocurrencies, considering its use by organized 

crime in the deep internet and the trafficking and trade in illegal goods.5 In order to confront these 

challenges the plan states that there is a need for relevant authorities to adapt to the new methods 

used by criminal organizations, for international exchange of information and cooperation, as 

well as to provide adequate training of personnel.6 In addition, those who intervene as 

 

1 Comunicado Conjunto de la Comisión Nacional del Mercado de Valores (CNMV) y Banco de España [Joint 

Press Statement by CNMV and Banco de España on “Cryptocurrencies” and “Initial Coin Offerings” (ICOs)] 

(Feb. 8, 2018), https://www.cnmv.es/loultimo/NOTACONJUNTAriptoES%20final.pdf, archived at

https://perma.cc/K5J4-WJM4. 

2 Id. 

3 Id. 

4 España Busca Aprobar una Legislación Amistosa para las Criptomoneda [Spain Seeks to Approve Friendly Legislation 

Towards Cryptocurrencies], HARWAREATE (Feb. 18, 2018), https://hardwareate.com/espana-busca-aprobar-unalegislacion-amistosas-las-criptomonedas, archived at https://perma.cc/6VTJ-NRRV. 

5 Resolución de 11 de enero de 2019, Dirección General de la Agencia Estatal de Administración Tributaria, por 

la que se Aprueban las Directrices Generales del Plan Anual de Control Tributario y Aduanero de 2019 

[General Directorate of the State Tax Administration Agency, which Approves the General Guidelines on the 

Annual Tax and Customs Control Plan 2019], § II.4(g), BOE No. 15, Jan. 17, 2018, https://www.boe.es/boe/ 

dias/2019/01/17/pdfs/BOE-A-2019-507.pdf, archived at https://perma.cc/2ZS2-AM3J . 

6 Id. 
Regulatory Approaches to Cryptoassets: Spain 

The Law Library of Congress 224

intermediaries in transactions with cryptocurrencies and its holders will have to provide 

information on those transactions.7

III. Taxation

Profits derived from transactions with cryptocurrencies are taxable under the Law on Income Tax 

of Individuals.8 However, the Dirección General de Tributos (DGT) (General Directorate of 

Taxation) has established that transactions with bitcoins are exempt from value added tax.9

 

7 Id. § II.2.D. 

8 José Trecet, Declaración de Impuesto a la Renta: Cómo Tributan los Bitcoins en la Renta [Income Tax Reporting: How 

Are Bitcoins Taxed], BOLSAMANÍA (Mar. 1, 2018), http://www.bolsamania.com/declaracion-impuestosrenta/como-tributan-los-bitcoins-en-la-renta/, archived at https://perma.cc/G4Y7-A59M. 

9 Id.
The Law Library of Congress 225 

Sweden 

Elin Hofverberg 

Foreign Law Specialist

SUMMARY Sweden has not adopted legislation that specifically addresses cryptoassets. However, 

the European Union’s Fifth Anti-Money Laundering Directive, which Sweden must 

implement before January 10, 2020, includes provisions on cryptocurrencies. 

 The applicability of Swedish rules and legislation on cryptoassets depends on the use 

of the asset. Sweden regulates financial services, money laundering, and taxation. 

Cryptoassets may be subject to any of these provisions. 

 The sale of virtual currencies is exempt from value-added tax. Purchases of virtual 

currencies as an investment are subject to capital gains tax—i.e., profits are taxable and 

losses deductible. 

I. Approach to Assets Created Through Blockchain 

Sweden does not currently regulate cryptocurrencies or cryptoassets specifically. However, a 

number of rules and regulations may still be applicable. For instance, if the cryptoasset activity 

qualifies as an activity that must be reported to the Finance Authority (Finansinspektionen) it is 

also subject to the law on money laundering.1 Moreover, as discussed below, the European 

Union’s (EU’s) Fifth Anti-Money Laundering Directive needs to be implemented in Sweden by 

January 10, 2020, and that Directive includes provisions on virtual currencies.2 Thus, although no 

legislation pertaining to the Fifth Anti-Money Laundering Directive is currently pending in 

Parliament, Sweden will have to adopt legislation that specifically addresses cryptoassets in the 

near future. 

A. Currency 

The Swedish Central Bank has unequivocally stated that “[b]itcoins are not money.”3 The 

announcement explained that cryptocurrencies are not seen as currencies, referencing a new 

 

1 1 kap. 2 § 4p. LAG OM ÅTGÄRDER MOT PENNINGTVÄTT OCH FINANSIERING AV TERRORISM [ACT ON MEASURES 

AGAINST MONEY LAUNDERING AND TERRORISM] (Svensk Författningssamling [SFS] 2017:630), https://www.riks 

dagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag-2017630-om-atgarder-motpenningtvatt-och_sfs-2017-630, archived at https://perma.cc/7TLY-DTA7. 

2 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), 2018 O.J. (L 156) 

43, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843, archived at

https://perma.cc/JJ8H-NG29. 

3 Press Release, Sveriges Riksbank, Bitcoin är inte pengar [Bitcoins Are Not Money] (Mar. 14, 2018), 

https://www.riksbank.se/sv/press-och-publicerat/nyheter-och-pressmeddelanden/nyheter/2018/bitcoin-arinte-pengar/, archived at https://perma.cc/KXK7-PPW8. 
Regulatory Approaches to Cryptoassets: Sweden 

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financial report on cryptocurrencies written by the Central Bank of Sweden staff.4 Nevertheless 

cryptocurrencies are de facto used as means of payments. 

B. Financial Service 

The Swedish Financial Supervisory Authority (Finansinspektionen) has made the determination 

that cryptocurrencies and digital currencies are subject to its authority, as trade in these items 

(i.e., offering a site where cryptocurrencies can be bought and sold similar to an exchange) is a 

financial service (annan finansiell verksamhet) and is thus subject to mandatory 

reporting requirements.5 

In 2017, the Authority issued a report titled The Authority’s Role in Innovation, which among other 

things described its role in relation to novel concepts such as cryptocurrencies.6 The report 

described ICOs as investment products and a means of securing capital.7 The Authority has 

issued warnings against the use of ICOs, noting that they are unregulated and not subject to its 

review.8 It also referred to the European Supervisory Authority for its interpretation that ICOs 

may be regulated by the Prospectus Directive, the Markets in Financial Instruments Directive 

(MiFID), the Alternative Investment Fund Managers Directive (AIFMD), and the Fourth AntiMoney Laundering Directive.9 The Authority’s 2017 report stated that it is unaware of any 

Swedish corporation that secures funding through ICOs.10

C. Capital Asset 

The Swedish Supreme Administrative Court in December of 2018 determined that for tax 

purposes, bitcoins are capital investments, affirming a prior preliminary judgement from the 

 

4 Gabriel Söderberg, Ekonomiska kommentarer, Är Bitcoin och andra kryptotillgångar pengar? [Financial Commentary: 

Are Bitcoin and Other Cryptocurrencies Money?], SVERIGES RIKSBANK (Mar. 14, 2018), https://www.riksbank.se/ 

globalassets/media/rapporter/ekonomiska-kommentarer/svenska/2018/ar-bitcoin-och-andrakryptotillgangar-pengar, archived at https://perma.cc/PDP4-X2HU. 

5 Press Release, Finansinspektionen, Valutaväxlare och annan finansiell verksamhet [Currency Exchanges and 

Other Financial Activity] (updated Jan. 24, 2017), https://www.fi.se/sv/bank/sok-tillstand/valutavaxlareoch-annan-finansiell-verksamhet/, archived at https://perma.cc/K7DH-T2NN. 1 § LAG OM VALUTAVÄXLING 

OCH ANNAN FINANSIELL VERKSAMHET [ACT ON CURRENCY EXCHANGE AND OTHER FINANCIAL ACTIVITY] (SFS 

1996:1006), https://www.riksdagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag19961006-om-valutavaxling-och-annan_sfs-1996-1006, archived at https://perma.cc/XZJ7-MJNY. 

6 FINANSINSPEKTIONEN, MYNDIGHETENS ROLL KRING INNOVATIONER [THE AUTHORITY’S ROLE REGARDING 

INNOVATION] 12 (Dec. 1, 2018), https://www.finansinspektionen.se/contentassets/d3cd30fe473 

d4a7995f0c38209ddb7f1/myndighetens-roll-kring-innovationer.pdf, archived at https://perma.cc/Y229-M3A7. 

7 Id. 

8 Press Release, Finansinspektionen, Varning för risker med Initial Coin Offerings (ICO) [Warning of Risks 

Associated with Initial Coin Offerings] (Nov. 7, 2017), http://www.fi.se/sv/publicerat/nyheter/2017/ 

varning-for-risker-med-initial-coin-offerings/, archived at https://perma.cc/D9BS-K8C6. 

9 Id.; see also Press Release, European Securities and Market Authority, ESMA Highlights ICO Risks for 

Investors and Firms (Nov. 13, 2017), https://www.esma.europa.eu/press-news/esma-news/esma-highlightsico-risks-investors-and-firms, archived at https://perma.cc/XGT3-T3QW. 

10 FINANSINSPEKTIONEN, supra note 6, at 12. 
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Swedish Tax Council, noting that bitcoins are not shares, foreign currency, or personal property.11

It determined that it is not the opinion of the owner but the actual use of the bitcoin that 

determines whether it is a personal item or a utility coin, or whether it is a capital investment.12

The court further noted that personal items may have investment properties (i.e., increase in 

value) but this aspect of the good must not dominate.13

The Swedish Enforcement Authority also treats bitcoins as capital assets. In 2014, its 

representatives announced to Swedish media outlets that it would start to investigate and seize 

bitcoin holdings as part of collecting funds from indebted individuals.14 The first seized bitcoins 

were auctioned off online in 2017.15

D. Financial Legislation and Consumer Protection 

1. Financial Services Law 

As mentioned above, when the sale of cryptoassets is deemed to be a financial service the operator 

must register with the Financial Authority, provide the Financial Authority with pertinent 

information, and keep a record of its transactions.16 It must also take measures to prevent money 

laundering.17 If the activity is not registered in accordance with the law the Finance Authority 

may, under penalty, require that such a registration be completed; if it is not completed the 

Finance Authority may order that the activity be stopped.18

 

 

11 Högsta Förvaltningsdomstolen [Supreme Administrative Court] (HFD) 2018 ref 72, http://www.hog 

staforvaltningsdomstolen.se/Domstolar/regeringsratten/Rättsfall/HFD 2018 ref. 72.pdf, archived at

https://perma.cc/GS2N-CJPB. 

12 Id. 

13 Id. 

14 Kronofogden ska leta Bitcoins hos skuldsatta [Swedish Enforcement Authority to Look for Bitcoins from Indebted 

Individuals], SVERIGES RADIO (Oct. 6, 2014), http://sverigesradio.se/sida/artikel.aspx?programid= 

1646&artikel=5983956, archived at https://perma.cc/AR5S-V7G2; see also Elin Hofverberg, Sweden: Enforcement 

Authority to Collect Bitcoins, GLOBAL LEGAL MONITOR (Oct. 23, 2014), http://www.loc.gov/law/foreignnews/article/sweden-enforcement-authority-to-collect-bitcoins/, archived at https://perma.cc/6YVP-CLNX. 

15 Press Release, Kronofogden, Nu kan du köpa bitcoin hos Kronofogden [Now You Can Purchase Bitcoins 

from the Swedish Enforcement Authority] (Oct. 12, 2017), https://www.kronofogden.se/66713.html, archived 

at https://perma.cc/ZT5P-VWDS; see also Elin Hofverberg, Sweden: Bitcoins Seized During Asset Seizure, GLOBAL 

LEGAL MONITOR (Nov. 7, 2017), http://www.loc.gov/law/foreign-news/article/sweden-bitcoins-seizedduring-asset-seizure/, archived at https://perma.cc/8QBR-V887.

16 2 §§ LAG OM VALUTAVÄXLING OCH ANNAN FINANSIELL VERKSAMHET; Press Release, Finansinspektionen, supra

note 5. 

17 Id. 4 §. 

18 Id. 8 §. 
Regulatory Approaches to Cryptoassets: Sweden 

The Law Library of Congress 228

2. Securities Law 

Swedish securities law is found in the Act on Trade with Financial Instruments19 and the Act on 

Securities Exchange.20 

Both bitcoins and ether (generated by the Ethereum platform) are traded as exchange traded notes 

(ETNs) on the Swedish Stockholm Nasdaq Exchange (Nasdaq OMX Nordic Stockholm).21 Thus, 

the Nasdaq OMX Nordic Stockholm exchange allows for speculation in the cryptocurrencies in 

the same way as speculations in gold or oil.22 While an ETN is clearly a securities instrument, the 

law is less clear on whether cryptocurrencies themselves are financial instruments. The bitcoin 

and ether ETNs are subject to Swedish securities legislation. 

In 2017, the Nasdaq Stockholm Disciplinary Committee rendered a decision that ordered the 

bitcoin company XBT Provider AB to pay a fine of SEK 1,000,000 (approximately US$120,000) for 

failing to publish annual reports and make its prospectus available online.23

3. General Consumer Protection Law 

A statement by Minister for Financial Markets Per Bolund indicates an interpretation that general 

consumer protection laws would not apply when the good or service has been purchased with 

the use of bitcoins or another cryptocurrency.24 He further advised caution in the use of 

 

19 LAGEN OM HANDEL MED FINANSIELLA INSTRUMENT [ACT ON TRADE IN FINANCIAL INSTRUMENTS] (SFS 1991:980), 

https://www.riksdagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag-1991980-omhandel-med-finansiella_sfs-1991-980, archived at https://perma.cc/UY4S-KETC. 

20 LAGEN OM VÄRDEPAPPARSMARKNADEN [ACT ON SECURITIES EXCHANGE] (SFS 2007:528), http://www.riks 

dagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag-2007528-omvardepappersmarknaden_sfs-2007-528, archived at https://perma.cc/M3JD-VCHL. 

21 Bitcoin XBT, BitcoinTracker One XBT Provider (SE0007126024), NASDAQ OMX NORDIC, http://www.nasdaq 

omxnordic.com/etp/tracker-certificates/info?Instrument=SSE109538&name=Bitcoin Tracker One XBT 

Provider (last visited Apr. 10, 2018), archived at https://perma.cc/54JU-GZVB; Ethereum XBT, Ether Tracker One 

XBT Provider, (SE0010296574), NASDAQ OMX NORDIC, http://www.nasdaqomxnordic.com/etp/trackercertificates/info?Instrument=SSE144580&name=Ether Tracker One XBT PROVIDER (last visited Apr. 10, 2018), 

https://perma.cc/B8QZ-UJ6Q; Darryn Pollock, Ether Follows Bitcoin onto Nasdaq Stockholm, COINTELEGRAPH

(Oct. 12, 2017), https://cointelegraph.com/news/ether-follows-bitcoin-onto-nasdaq-stockholm, archived at

https://perma.cc/38X9-C8DC. 

22 Handla Bitcoins på Stockholmsbörsen med Din aktiedepå, AXIER.SE (May 18, 2017), https://www.axier.se/borsmarknad/Handla-Bitcoins-pa-Stockholmsborsen-med-Din-aktiedepa, archived at https://perma.cc/K66B5CHV. 

23 Nasdaq Stockholm Disciplinary Committee, Decision 2017:07 (July 23, 2017), http://www.nasdaqomx. 

com/digitalAssets/106/106081_decision.pdf, archived at https://perma.cc/B3U3-PS6R. 

24 Statsrådet Per Bolund (MP), Kryptovalutor på svenska marknaden, Svar på skriftlig fråga 2017/18:484 

[Cryptocurrencies on the Swedish Market, Answer to Written Question 2017/18:484] (Jan. 10, 2018), 

http://www.riksdagen.se/sv/dokument-lagar/dokument/svar-pa-skriftlig-fraga/kryptovalutor-pa-svenskamarknaden_H512484, archived at https://perma.cc/959K-AWSY. 
Regulatory Approaches to Cryptoassets: Sweden 

The Law Library of Congress 229

cryptocurrencies by citizens, as they are largely unregulated and carry risk.25 Also, the Financial 

Authority has indicated that consumer protections would not apply to ICOs.26

E. Anti-Money Laundering Law 

If subject to the Financial Authority, providers of cryptoassets will also be subject to the Swedish 

Money Laundering Act.27 The Swedish Money Laundering Act implemented the EU’s Fourth 

Anti-Money Laundering Directive.28 Sweden has yet to implement the Fifth Anti-Money 

Laundering Directive. That Directive specifically mentions virtual currencies and will require that 

EU Member States implement its provisions by January 10, 2020.29 

F. Taxation 

1. Mined Bitcoins 

In 2015 the Swedish Tax Authority published a guideline on how it would view and tax mined

bitcoins and other virtual currencies for the 2014 tax year.30 Unless specific conditions are met the 

digital currency mined is considered income from a hobby, and generally tax exempt.31 

 

25 Id. 

26 Varning för risker med Initial Coin Offerings (ICO), FINANSINSPEKTIONEN (Nov. 7, 2017), https://www.fi.se/ 

sv/publicerat/nyheter/2017/varning-for-risker-med-initial-coin-offerings/, archived at

https://perma.cc/F2U7-ERFR. 

27 LAG OM ÅTGÄRDER MOT PENNINGTVÄTT OCH FINANSIERING AV TERRORISM (SFS 2017:630), https://www. 

riksdagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag-2017630-om-atgarder-motpenningtvatt-och_sfs-2017-630, archived at https://perma.cc/GAK5-83YU. 

28 Prop. 2016/17:173 Ytterligare åtgärder mot penningtvätt och finansiering av terrorism [Additional Measures 

against Money Laundering and Financing of Terrorism], https://data.riksdagen.se/fil/AE6CB234-AD4B47DB-97D9-D2EF187C3AC0, archived at https://perma.cc/NMX6-BQ63. 

29Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), art. 4, 2018 O.J. (L 

156) 43 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843, archived at

https://perma.cc/JJ8H-NG29. For more information see the EU survey in this report . For an example of a 

country that has implemented/transposed the Fifth Anti-Money Laundering Directive see the Norway survey 

in this report. 

30 Guidelines available at Skatteverket Dnr: 131 191846-15/111 Beskattning vid mining av bitcoin och andra 

virtuella valutor m.m. [Guidelines on the Taxation of Mining of Bitcoins and Other Virtual Currencies] (Apr. 

24, 2015), https://www4.skatteverket.se/rattsligvagledning/338713.html?q=131+191846-15%2F111, archived at 

https://perma.cc/QVH3-H8AL; see also Elin Hofverberg, Sweden: Tax Authority Publishes Guidelines for Income 

Tax on Bitcoin Mining, Suggests Prohibition of Bitcoin Use in Waste and Scrap Metal Transactions, GLOBAL LEGAL 

MONITOR (May 20, 2015) http://www.loc.gov/law/foreign-news/article/sweden-tax-authority-publishesguidelines-for-income-tax-on-bitcoin-mining-suggests-prohibition-of-bitcoin-use-in-waste-and-scrap-metaltransactions/, archived at https://perma.cc/ZR8B-UP8X. 

31 Id. 
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The Law Library of Congress 230

2. Capital Property 

As mentioned above, cryptoassets that are purchased as investments are treated as capital 

property—i.e., any gain or loss upon realization of the asset is either taxable or deductible.32 

3. Value-Added Tax 

The sale of cryptocurrencies is not subject to value-added tax (VAT). In 2016, the Swedish 

Supreme Administrative Court declared that sale of bitcoins on an exchange was not subject to 

VAT in accordance with EU law, as it was considered omsättning av tjänster (supply of services 

for consideration).33 This confirms a previous Tax Authority preliminary judgment.34 The 

Swedish Skatterättsnämnd (Swedish Tax Board) issued a preliminary ruling in 2013 on VAT and 

cryptocurrencies, stating that trade in cryptocurrencies is not subject to Swedish VAT, but is 

instead subject to Financial Supervisory Authority regulations and treated as a currency. The 

decision was appealed by the Swedish Tax Authority.35 The Swedish Administrative Supreme 

Court ruled that bitcoins and similar cryptocurrencies are not subject to VAT.36 That decision was 

rendered following a preliminary judgment from the Court of Justice of the European Union 

holding that cryptocurrencies are exempt from VAT.37

II. Custodianship of Cryptocurrencies by Financial Institutions 

No specific legislative provisions governing custodianship of cryptocurrencies or other 

cryptoassets exist under Swedish law. 

 

32 HFD 2018 ref 72, http://www.hogstaforvaltningsdomstolen.se/Domstolar/regeringsratten/ 

Rättsfall/HFD 2018 ref. 72.pdf, archived at https://perma.cc/947H-LZEQ; Avyttring av bitcoin, 

Skatterättsnämnden Diarie No. 78-17/D (2018-04-18), https://skatterattsnamnden.se/publiceradeforhands 

besked/2018/avyttringavbitcoin.5.14dfc9b0163796ee3e77480d.html, archived at https://perma.cc/XJA7-SVNN. 

33 HFD 2016 ref. 6, http://www.hogstaforvaltningsdomstolen.se/Domstolar/regeringsratten/Rättsfall/HFD 

2016 ref. 6.pdf, archived at https://perma.cc/34Y4-QVRG. 

34 Skatterättsnämnden, Förhandsbesked [Preliminary Ruling], Mervärdesskatt: Handel med bitcoins [VAT: 

Trade with Bitcoins] (Oct. 14, 2013), http://skatterattsnamnden.se/skatterattsnamnden/forhands 

besked/2013/forhands besked2013/mervardesskatthandelmedbitcoins.5.46ae6b26141980f1e2d29d9.html, 

archived at https://perma.cc/AET4-3T4N. 

35 Id. 

36 Högsta förvaltningsdomstolens dom [Supreme Administrative Court’s Judgment] (SAC Judgment), Nr. 7101-

13 (Feb. 2, 2016), http://www.hogstaforvaltningsdomstolen.se/Domstolar/regeringsratten/Avg%C3%B6 

randen/2016/Februari/7101-13.pdf, archived at https://perma.cc/JU5G-KLWE; see also Elin Hofverberg,

Sweden: Supreme Administrative Court Rules Trade in Bitcoins Not Subject to VAT, GLOBAL LEGAL MONITOR (Feb. 4, 

2016), http://www.loc.gov/law/foreign-news/article/sweden-supreme-administrative-court-rules-trade-inbitcoins-not-subject-to-vat/, archived at https://perma.cc/82P2-CBBA. 

37 Case C264/14. Skatteverket v. David Hedqvist, 2015 CURIA EUROPA, ECLI:EU:C:2015:718 (Oct. 22, 2015), 

http://curia.europa.eu/juris/document/document.jsf?docid=170305&doclang=EN, archived at

https://perma.cc/LU2G-U6VD. 
Regulatory Approaches to Cryptoassets: Sweden 

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III. Regulation of Cryptocurrencies as Financial Securities 

Cryptoassets that would qualify as financial securities (compare Part I(A), above) are subject to 

the financial securities legislation.38 Specifically, the corporation issuing an ICO would be 

required to register offerings and disclose information about the corporation.39 The Financial 

Authority must also approve the corporation’s bylaws.40 According to a study by the Swedish 

Police, none of these types of filings and records are typically performed or kept.41 

IV. Treatment of Cryptoassets Not Considered Securities 

As mentioned above, cryptocurrencies or crypto-tokens for personal use are typically not 

considered securities but investment capital, and thus subject to investment capital gains tax 

(with the ability to deduct losses) upon sale.42 Because they are generally treated as capital assets 

this also means that they are subject to enforcement measures and can be seized in bankruptcy 

or in connection with illegal activity.43

Stealing cryptoassets would also be subject to criminal law. Using cryptoassets or ICOs to defraud 

someone is also subject to criminal sanctions for fraud, but is not a crime on its own, and because 

of the anonymous nature surrounding the ownership of cryptocurrencies generally cannot be 

successfully investigated by police.44 

 

38 LAG OM VÄRDEPAPPERSMARKNADEN [ACT ON SECURITIES MARKET] (SFS 2007:528), http://www.riksdagen. 

se/sv/dokument-lagar/dokument/svensk-forfattningssamling/lag-2007528-om-vardepappersmarknaden_ 

sfs-2007-528, archived at https://perma.cc/45AH-3S3Y. 

39 Press Release, Finansinspektionen, supra note 5. 

40 Id. 3 kap. 3 §. 

41 Press Release, Polisen, Finanspolisen informerar (Sept. 2017), https://polisen.se/contentassets/0808 

e4fd9d0545ad9a9f22f638bfebbb/virtuella-valutor-i-penningtvattsrapporter, archived at https://perma.cc/PZ55-

HAEV. 

42 See Part I(C), above. 

43 Press Release, Kronofogden, Nu kan du köpa bitcoin hos Kronofogden [Now You Can Purchase Bitcoins 

from the Swedish Enforcement Authority] (Oct. 12, 2017), https://www.kronofogden.se/66713.html, archived 

at https://perma.cc/ZT5P-VWDS; see also Elin Hofverberg, Sweden: Bitcoins Seized During Asset Seizure, GLOBAL 

LEGAL MONITOR (Nov. 7, 2017), http://www.loc.gov/law/foreign-news/article/sweden-bitcoins-seizedduring-asset-seizure/, archived at https://perma.cc/8QBR-V887; Kronofogden ska leta Bitcoins hos skuldsatta

[Swedish Enforcement Authority to Look for Bitcoins from Indebted Individuals], SVERIGES RADIO (Oct. 6, 2014), 

http://sverigesradio.se/sida/artikel.aspx?programid=1646&artikel=5983956, archived at https://perma.cc/ 

AR5S-V7G2; Elin Hofverberg, Sweden: Enforcement Authority to Collect Bitcoins, GLOBAL LEGAL MONITOR (Oct. 23, 

2014), http://www.loc.gov/law/foreign-news/article/sweden-enforcement-authority-to-collect-bitcoins/, 

archived at https://perma.cc/6YVP-CLNX. 

44 See BROTTSBALK [CRIMINAL CODE] (BRB) (SFS 1962:700), https://www.riksdagen.se/sv/dokument-lagar/ 

dokument/svensk-forfattningssamling/brottsbalk-1962700_sfs-1962-700, archived at https://perma.cc/5XKB36RY; Press Release, Polisen, supra note 41. 
Regulatory Approaches to Cryptoassets: Sweden 

The Law Library of Congress 232

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As Swedish law does not specifically mention cryptoassets it also does not prohibit a certain form 

of cryptoassets. As seen above, different laws and regulations will apply to different types of 

cryptoassets, based on their use. 
The Law Library of Congress 233 

Switzerland 

Jenny Gesley 

Foreign Law Specialist

SUMMARY On December 14, 2018, the Swiss Federal Council, the Swiss government, published a 

comprehensive report titled the Legal Framework for Distributed Ledger Technology and 

Blockchain in Switzerland. It addresses the legal treatment of cryptocurrencies, 

blockchain, distributed ledger technologies, and fintech under the current legal 

framework and highlights areas that require amendments in order to provide market 

participants with legal certainty. It focuses on civil law, insolvency law, financial market 

law, banking law, and combatting money laundering and terrorist financing. The report 

acknowledges that there is a selective need for new regulation to cover open questions, 

for example the treatment of cryptocurrencies. The Federal Council has tasked the 

Federal Department of Finance and the Federal Department of Justice and Police to 

draw up a consultation draft in the first quarter of 2019 to address these open questions. 

I. Approach to Assets Created Through Blockchain 

On December 14, 2018, the Swiss Federal Council, the Swiss government, published a 

comprehensive report titled the Legal Framework for Distributed Ledger Technology and Blockchain in 

Switzerland.1 The report is based on the work of the blockchain/ICO working group that was set 

up by the Swiss State Secretariat for International Finance (Staatssekretariat für internationale 

Finanzfragen, SIF) in January 2018.2 The report also took into account the evaluation of a 

consultation carried out with the fintech and financial industry as well as the recommendations 

of the Blockchain Taskforce, a private industry initiative.3 

The Federal Council report addresses the legal treatment of cryptocurrencies, blockchain, 

distributed ledger technologies (DLT), and fintech under the current legal framework and 

highlights areas that require amendments in order to provide market participants with legal 

certainty. It focuses on civil law, insolvency law, financial market law, banking law, and 

                                                            

1 FEDERAL COUNCIL, LEGAL FRAMEWORK FOR DISTRIBUTED LEDGER TECHNOLOGY AND BLOCKCHAIN IN 

SWITZERLAND – AN OVERVIEW WITH A FOCUS ON THE FINANCIAL SECTOR (Dec. 14, 2018) (Federal Council Report 

2018), https://www.newsd.admin.ch/newsd/message/ attachments/55153.pdf, archived at 

http://perma.cc/Z4X7-7J82. 

2 Id. at 14; Press Release, Federal Council, Blockchain/ICO Working Group Established (Jan. 18, 2018), 

https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-69539.html, archived at 

http://perma.cc/YD27-TR3Q. 

3 Federal Council Report 2018, supra note 1, at 14; WORKING GROUP BLOCKCHAIN/ICO, CONSULTATION ON THE 

WORK OF THE WORKING GROUP BLOCKCHAIN/ICO (Aug. 31, 2018), https://www.newsd. 

admin.ch/newsd/message/attachments/53506.pdf, archived at http://perma.cc/36MV-VUGS; BLOCKCHAIN 

TASKFORCE, STRENGTHENING THE BLOCKCHAIN IN SWITZERLAND: THE WHITE PAPER OF THE BLOCKCHAIN 

TASKFORCE (Apr. 2018), https://blockchainfederation.ch/wp-content/ uploads/2018/10/BlockchainTaskforce-White-Paper_English-Version1.pdf, archived at http://perma.cc/3JG2-EXSW. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 234 

combatting money laundering and terrorist financing.4 The report acknowledges that there is a 

selective need for new regulation to cover open questions, for example the treatment of 

cryptocurrencies.5 The Federal Council has tasked the Federal Department of Finance (FDF) and 

the Federal Department of Justice and Police (FDJP) to draw up a consultation draft in the first 

quarter of 2019 to address these open questions.6 

Laws that can potentially apply to cryptoassets are anti-money laundering legislation, tax laws, 

financial market laws, civil law, bankruptcy law, and banking law. 

A. Anti-Money Laundering Law 

The Anti-Money Laundering Act (AMLA) generally applies to “financial intermediaries,” who 

are defined as natural and legal persons who accept or hold deposit assets for third parties or 

who assist in the investment or transfer of such assets on a professional basis.7 The Federal 

Council reiterates that cryptocurrencies are classified as virtual currencies, which are considered 

assets with regard to their tradability.8 AMLA is technology-neutral and therefore also applicable 

to cryptoassets.9 However, the Federal Council proposes to take the following steps to make the 

application of anti-money laundering legislation more explicit: 

 It will set out in further detail and explicitly adopt into law the current FINMA 

[Financial Market Supervisory Authority] practice whereby decentralised trading 

platforms with the power to dispose of third-party assets are subject to AMLA; 

 It will set out in further detail and explicitly adopt into law the applicability of Article 

2 paragraph 3 letter b AMLA to the issue of crypto-based means of payment; 

 Switzerland will in future continue its efforts in international committees to actively 

promote an internationally coordinated and effective defence mechanism to combat 

the risks of money laundering and terrorist financing by means of international 

standards.10

 

                                                            

4 Federal Council Report 2018, supra note 1, at 14. 

5 Id. at 45. 

6 Press Release, Federal Council, Federal Council Wants to Further Improve Framework Conditions for 

Blockchain/DLT (Dec. 14, 2018), https://www.admin.ch/gov/en/start/documentation/media-releases.msgid-73398.html, archived at http://perma.cc/57PW-M5V8. 

7 Geldwäschereigesetz [GwG] [Anti-Money Laundering Act] [AMLA], Oct. 10, 1997, SYSTEMATISCHE 

RECHTSSAMMLUNG [SR] [SYSTEMATIC COLLECTION OF LAWS] 955.0, art. 2, para. 1, let. a, art. 2, para. 3, 

https://www.admin.ch/opc/de/classified-compilation/19970427/201601010000/955.0.pdf, archived at

http://perma.cc/E9UX-3EBW, unofficial English translation available at https://www.admin.ch/opc/ 

en/classified-compilation/19970427/201601010000/955.0.pdf, archived at http://perma.cc/M4M6-UW5U. 

8 Federal Council Report 2018, supra note 1, at 131. 

9 Id. at 140. 

10 Id. at 142. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 235 

B. Taxation 

Cryptocurrencies may also be subject to wealth, income, and capital gains tax, as outlined in the 

Law Library’s June 2018 report entitled Regulation of Cryptocurrency in Selected Jurisdictions.11

II. Custodianship of Cryptocurrencies by Financial Institutions 

Custody services for cryptocurrencies in Switzerland are provided both by specialized companies 

offering custody services as a core activity (crypto custodians) and by other blockchain service 

providers as an ancillary service, for example crypto trading platforms and brokers.12 If the tokens 

are functionally comparable to money, these services may be offered without bank authorization, 

provided that a Swiss bank provides a guarantee in case of default.13

Furthermore, custody services might be subject to the Financial Services Act (FinSA).14 If the 

service is restricted exclusively to custody, FinSA will not apply.15 However, if the sale of tokens 

that are classified as financial instruments is only possible via an account with the provider of 

custody services, FinSA will apply. Such providers must comply with the conduct rules in articles 

7-20 of FinSA.16

III. Regulation of Cryptocurrencies as Financial Securities 

There are currently no regulations specific to initial coin offerings (ICOs), but depending on how 

the ICO is designed, financial market laws may be applicable. This is assessed on a case-by-case 

basis by the Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht, 

FINMA).17 FINMA differentiates between payment tokens (cryptocurrencies), utility tokens, and 

asset tokens. Payment tokens (cryptocurrencies) are defined as tokens that are used as a means 

of payment or as a means of money or value transfer. Utility tokens are those that provide digital 

access to an application or service by means of a blockchain-based infrastructure. Asset tokens 

                                                            

11 Switzerland, in LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY IN SELECTED JURISDICTIONS 70

(June 2018), https://www.loc.gov/law/help/cryptocurrency/regulation-of-cryptocurrency.pdf, archived at

http://perma.cc/8SYU-82AT. 

12 Federal Council Report 2018, supra note 1, at 27. 

13 Id. at 88. 

14 Bundesgesetz über die Finanzdienstleistungen [Finanzdienstleistungsgesetz] [FIDLEG] [Financial Services 

Act] [FinSA], June 15, 2018, SR 950.1, https://www.admin.ch/opc/de/federal-gazette/2018/3615.pdf, archived 

at http://perma.cc/YM7A-E839. FinSA will enter into force on 1 January 1, 2020, see Federal Council Report, 

supra note 1, at 112. 

15 Federal Council Report 2018, supra note 1, at 118. 

16 Id. 

17 FINMA, Guidelines for Enquiries Regarding the Regulatory Framework for Initial Coin Offerings (FINMA 

ICO Guidelines) 2, no. 3 (Feb. 16, 2018), https://www.finma.ch/en/~/media/finma/dokumente/ 

dokumentencenter/ myfinma/ 1bewilligung/fintech/wegleitung-ico.pdf?la=en, archived at 

http://perma.cc/PV9L-5AEK. 
Regulatory Approaches to Cryptoassets: Switzerland 

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represent assets such as a debt or an equity claim against the issuer. According to FINMA, asset 

tokens are analogous to equities, bonds, and derivatives.18 

Operators of financial market infrastructures are subject to authorization by FINMA.19 If the 

tokens received in an ICO qualify as securities, trading will require authorization. “Securities” 

are defined as “standardised certificated or uncertificated securities, derivatives and 

intermediated securities which are suitable for mass standardised trading,”20 meaning they are 

“publicly offered for sale in the same structure and denomination or are placed with more than 

20 clients, insofar as they have not been created especially for individual counterparties.”21

FINMA treats utility tokens that have an additional investment purpose or a sole investment 

purpose at the time of issue, as well as asset tokens that are standardized and suitable for mass 

standardized trading as securities.22 

The Federal Council in its report endorses FINMA’s classification of tokens issued in ICOs as 

asset, utility, or payment tokens.23 It also points out that the existing definitions for securities and 

derivatives will not be changed for blockchain- and token-based applications.24 

However, for financial market infrastructures, the Federal Council proposes an amendment to 

the Financial Market Infrastructure Act (FMIA) and the Financial Market Infrastructure 

Ordinance (FMIO), so that exceptions for blockchain and DLT may be granted in justified cases.25

With regard to crypto-trading platforms, the report states that only decentralized trading 

platforms for tokens that qualify as securities require authorization from FINMA as a financial 

market infrastructure, whereas exchange platforms and distributed peer-to-peer platforms do 

not.26 However, the operation of a financial market infrastructure is currently limited to certain 

financial market institutions.27 The Federal Council therefore proposes the creation of a new 

                                                            

18 Id. at 3, no. 3.1. 

19 Finanzmarktinfrastrukturgesetz [FinfraG] [Financial Market Infrastructure Act] [FMIA], June 19, 2015, 

SR 958.1, art. 4, https://www.admin.ch/opc/de/classified-compilation/20141779/201708010000/958.1.pdf, 

archived at http://perma.cc/5F64-2WFF, unofficial English translation available at https://www.admin.ch/ 

opc/en/classified-compilation/20141779/201708010000/958.1.pdf, archived at http://perma.cc/WT73-EMWN. 

20 Id. art. 2, let. b. 

21 Finanzmarktinfrastrukturverordnung [FinfraV] [Financial Market Infrastructure Ordinance] [FMIO], 

Nov. 25, 2015, SR 958.11, art. 2, para. 1, https://www.admin.ch/opc/de/classifiedcompilation/20152105/2017 08010000/958.11.pdf, archived at http://perma.cc/NW3S-JAGZ, unofficial English 

translation available at https://www.admin.ch/opc/en/classifiedcompilation/20152105/201708010000/958.11.pdf, archived at http://perma.cc/2423-R4HG. 

22 FINMA ICO Guidelines, supra note 17, at 4, nos. 3.2.1–3.2.3. 

23 Federal Council Report 2018, supra note 1, at 83. 

24 Id. at 96. 

25 Id. at 97. 

26 Id. at 99. 

27 Id. at 101. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 237 

authorization category for the operation of a financial market infrastructure involving cryptobased assets by amending FMIA and FMIO.28

Furthermore, the Federal Council proposes with respect to crypto funds to amend the Swiss 

Collective Investment Schemes Act (CISA)29 to permit a new fund category called “limited 

qualified investment funds” (L-QIF). The L-QIFs will require no authorization from FINMA, 

which means that they can be placed on the market faster.30 In September 2018, the FDF was 

instructed to draw up a consultation paper in that regard.31 

IV. Treatment of Cryptoassets Not Considered Securities 

A. Civil Law 

The Federal Council’s report reiterates that tokens in the form of cryptocurrencies are classified 

as intangible assets under Swiss civil law.32 Civil law differentiates between tokens that represent 

a value such as cryptocurrencies and tokens that represent a right outside of the blockchain.33 The 

report concludes that as they are neither absolute nor relative rights, the law does not provide 

any specific requirements for their transfer and there is therefore no need to amend the civil law 

provisions.34 However, the Federal Council has tasked the FDF and the FDJP to include a proposal 

for the transfer of rights by means of digital registers in their consultation draft to improve 

legal certainty.35

B. Insolvency and Bankruptcy Law 

As cryptocurrencies are considered assets, they could potentially be seized in insolvency 

proceedings by the creditor of the person entitled to them, and subsequently be realized. 

Likewise, in bankruptcy proceedings, when assets are collected, realized, and distributed to the 

creditors, a realization of cryptoassets is generally possible.36 Most of the time, cryptoassets are 

held by third-party wallet providers. If the wallet provider declares bankruptcy, it must be 

determined whether cryptoassets are included in the estate or whether they can be segregated. 

The report points out that there are currently no special provisions for the treatment of 

                                                            

28 Id. at 108. 

29 Kollektivanlagengesetz [KAG] [Collective Investment Schemes Act] [CISA], June 23, 2006, SR 951.31, 

https://www.admin.ch/opc/de/classified-compilation/ 20052154/201607010000/951.31.pdf, archived at 

http://perma.cc/9HHP-QTY6, unofficial English translation available at https://www.admin.ch/opc/en/ 

classified-compilation/20052154/201607010000/951.31.pdf, archived at http://perma.cc/8NAX-442E. 

30 Federal Council Report 2018, supra note 1, at 129. 

31 Id. 

32 Id. at 63. 

33 Id. at 64. 

34 Id. 

35 Press Release, Federal Council Wants to Further Improve Framework Conditions for Blockchain/DLT, supra

note 6. 

36 Federal Council Report 2018, supra note 1, at 65. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 238 

cryptocurrencies in bankruptcy proceedings, so that the general provisions of the Federal Act on 

Debt Enforcement and Bankruptcy Act (DEBA) apply.37 The Swiss Federal Supreme Court has 

held that segregation is only necessary when the bankruptcy estate has custody over the assets, 

meaning “exclusive actual power of disposal.”38 In addition, article 242, para. 3 of DEBA provides 

that that there is no actual power of disposal in cases of shared custody. The report differentiates 

between the following cases for cryptoassets: 

 Third-party custody: Custodian has exclusive actual power of disposal over the crypto assets. 

 No third-party custody: The private key to access the crypto assets is exclusively known to 

the client or known both to the client and the custodian, so that the client retains actual power 

of disposal. 

 Multi-signature address: Access to the crypto assets requires several keys, so that the power 

of disposal is shared between the custodian and the client.39 

The report concludes that cryptoassets are only included in the bankruptcy estate and must be 

separated if the client has no access to the private key and therefore no custody.40 However, it is 

unclear whether they can be separated on the basis of article 242 DEBA as they are not physical 

“objects” as the text of article 242 explicitly provides. In order to achieve legal certainty, the 

Federal Council therefore suggests amending the relevant legal provisions to be able to segregate 

cryptoassets.41 For that purpose, it is important how cryptoassets are allocated by the third-party 

wallet provider to determine if they are more akin to a property law claim or a contractual claim 

due to “mixing.” If the client’s credit balance is assigned to a specific blockchain and registered 

directly on the blockchain, there will be no problem in assigning the crypto assets to an individual 

client. The report compares this to a deposit in a safe deposit box or securities account with a 

bank.42 If, on the other hand, the credit balances are no longer assigned to an individual 

blockchain, the clients only have a credit balance vis-à-vis the custodian. The individual balances 

are only recorded on the custodian’s ledger. The report compares this situation to a traditional 

bank that does not keep the money that it receives from its clients separate.43 

In addition to clarifying how cryptoassets may be separated in bankruptcy proceedings, the 

report also proposes to determine whether the object of separation will be the cryptoasset itself 

or the access key. However, the report states that this question might be left unanswered if “an 

                                                            

37 Id. at 66; Bundesgesetz über Schuldbetreibung und Konkurs [SchKG] [Federal Act on Debt Enforcement and 

Bankruptcy] [DEBA], SR 281.1, https://www.admin.ch/opc/de/classified-compilation/18890002/20190101 

0000/281.1.pdf, archived at http://perma.cc/RX3E-7JPD. 

38 BUNDESGERICHT [BGER] [FEDERAL SUPREME COURT], June 1, 1984, 110 ENTSCHEIDUNGEN DES SCHWEIZERISCHEN 

BUNDESGERICHTS [BGE] [DECISIONS OF THE SWISS FEDERAL SUPREME COURT] III 87, 90, https://www.bger.ch/ext/ 

eurospider/live/de/php/clir/http/index.php?highlight_docid=atf://110-III87:de&lang=de&zoom=&type=show_document, archived at http://perma.cc/D4CV-GDW2. 

39 Federal Council Report 2018, supra note 1, at 66. 

40 Id. at 67. 

41 Id. at 68, 69. 

42 Id. at 69. 

43 Id. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 239 

additional legal provision were introduced to provide for the segregation of data to which the 

beneficiary is able to demonstrate a special entitlement.”44 A parliamentary initiative to amend 

article 242 of DEBA to include the surrender of non-physical assets was endorsed by the Legal 

Affairs Committee of the Swiss National Council on May 3, 2018.45 The Federal Council would 

extend this claim to include all data and not just assets. In conclusion, the Federal Council will 

“propose a provision setting out a right to the surrender of data in the event of insolvency, 

including a claim to the transfer of crypto assets.”46

C. Banking Law 

In addition to exempting fintech firms that accept public funds up to a total value of CHF1 million 

(approximately US$995,000) from the requirement to have a banking license (regulatory 

sandbox), since January 2019, a new fintech authorization category with simplified requirements 

has been included in the Banking Act.47 However, even though the new category is commonly 

referred to as “fintech license,” it is also available to non-fintech companies that meet the 

authorization requirements.48 

Companies that are granted the new fintech license may accept public funds of up to CHF 100 

million (about US$95.5 million) on a professional basis, but may not invest or pay interest on 

these funds.49 This includes traditional currencies as well as cryptocurrencies.50 Companies with 

that special license are subject to less restrictive requirements than banks—for example, they are 

not obligated to participate in the deposit protection regime, but must inform their clients 

accordingly.51 Furthermore, unlike banks that have minimum capital requirements of CHF 10 

million (about US$9.9 million), companies with the new fintech license must only hold 3% of the 

public funds received as capital, however, or at least CHF300,000 (about US$ 298,500).52 The 

                                                            

44 Id. at 69. 

45 Id. at 70; Parliamentary Initiative 17.410. Daten sind das höchste Gut privater Unternehmen. 

Datenherausgabe beim Konkurs von Providern regeln [Data are the Greatest Good of Private Companies. 

Regulating the Surrender of Data in the Event of Bankruptcy of Providers], https://www. 

parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20170410, archived at

http://perma.cc/V62J-FZ5Y. 

46 Federal Council Report 2018, supra note 1, at 70. 

47 Id. at 89; Press Release, Federal Council, Federal Council Adopts Implementing Provisions for Fintech 

Authorization (Nov. 30, 2018), https://www.admin.ch/gov/en/start/documentation/media-releases/mediareleases-federal-council.msg-id-73186.html, archived at http://perma.cc/72FW-A3GW; Bankengesetz [BankG] 

[Banking Act] [BankA], Nov. 8, 1934, SR 952.0, art. 1b, https:// www.admin.ch/opc/de/classifiedcompilation/19340083/201901010000/952.0.pdf, archived at http://perma.cc/XE8G-XARQ.) The Banking 

Ordinance was amended accordingly. (Bankenverordnung [BankV] [Banking Ordinance] [BankO], Apr. 30, 

2014, SR 952.02, https://www.admin.ch/opc/de/classified-compilation/20131795/201901010000/952.02.pdf, 

archived at http://perma.cc/BZP5-696P. 

48 Federal Council Report 2018, supra note 1, at 89, n.472. 

49 BankA, art. 1b. 

50 Federal Council Report 2018, supra note 1, at 89. 

51 BankO, art. 7a, para. 1(b). 

52 BankO, art. 15, para. 1 & art. 17a, para. 1. 
Regulatory Approaches to Cryptoassets: Switzerland 

The Law Library of Congress 240 

report points out that if cryptocurrencies are held in custody for clients on the blockchain and can 

be attributed to individual clients at all times, they are not considered deposits within the 

meaning of the Banking Act and no banking or fintech license is required.53

Furthermore, in light of the proposed amendment to the general insolvency law provisions, the 

Federal Council will look into a corresponding amendment of bank insolvency law provisions 

for the treatment of tokens and similar assets.54

V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

As discussed above, the treatment of different types of cryptocurrencies depends on their nature. 

                                                            

53 Federal Council Report 2018, supra note 1, at 89; FINMA, FACT SHEET: VIRTUAL CURRENCIES 2 (Jan. 1, 2019), 

https://www.finma.ch/en/~/media/finma/dokumente/dokumenten 

center/myfinma/faktenblaetter/faktenblatt-virtuelle-waehrungen.pdf?la=en, archived at

http://perma.cc/M9QR-S9AC. 

54 Federal Council Report 2018, supra note 1, at 90. 
The Law Library of Congress 241 

Taiwan 

Laney Zhang 

Foreign Law Specialist

SUMMARY In Taiwan, virtual currencies are not considered legal tender, but are virtual 

commodities. The anti-money laundering law was revised in November 2018 to bring 

virtual currency platforms within its regulatory scope. In addition, Financial 

Supervisory Commission guidance states that whether tokens involved in ICOs are 

securities will be examined on a case-by-case basis, and illegal fundraising will be 

sanctioned in accordance with financial laws.

I. Approach to Assets Created Through Blockchain 

 

A. Financial Regulation 

Financial regulators in Taiwan have issued statements warning the general public about the risks 

of investing in virtual currencies such as Bitcoin. According to a 2013 statement jointly issued by 

Taiwan’s Central Bank and the Financial Supervisory Commission (FSC), Bitcoin is not a real 

currency, but a “highly speculative virtual commodity.”1 The general public was warned about 

the specific risks associated with accepting, trading, or holding Bitcoin.2 In 2014, the FSC issued 

a notice prohibiting banks and financial institutions in Taiwan from accepting or exchanging 

Bitcoin or providing Bitcoin-related services at bank ATMs.3 

B. Anti-Money Laundering Law 

Recently, Taiwan revised its anti-money laundering law to bring virtual currency platforms 

within the scope of the law. On November 7, 2018, the Money Laundering Control Act was 

revised.4 According to the revised article 5, provisions regulating financial institutions under the 

Act also apply to virtual currency platforms and trading businesses.5 

 

1 Press Release, Central Bank & Financial Supervisory Commission (FSC), Bitcoin Is Not Real Currency; 

Accepters Please Look to the Risks (Dec. 30, 2013), http://www.cbc.gov.tw/ct.asp?xItem=43531& ctNode=302

(in Chinese), archived at https://perma.cc/4N82-R6GS. 

2 Id. 

3 Press Release, FSC, Financial Institutions Must Not Provide Bitcoin-Related Services at ATMs (Jan. 6, 2014), 

https://www.fsc.gov.tw/ch/home.jsp?id=96&parentpath=0,2&mcustomize=news_view.jsp& 

dataserno=201401060003&toolsflag=Y&dtable=News (in Chinese), archived at https://perma.cc/P7FK-YGVD.

4 Money Laundering Control Act (enacted Oct. 23, 1996, last amended Nov. 7, 2018), https://law.moj.gov. 

tw/LawClass/LawAll.aspx?pcode=G0380131 (in Chinese), archived at https://perma.cc/P364-LRHZ; English 

translation available at https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=G0380131, archived at 

https://perma.cc/F6SH-BWGZ. 

5 Id. art. 5. 
Regulatory Approaches to Cryptoassets: Taiwan 

The Law Library of Congress 242

The Money Laundering Control Act requires financial institutions to establish their own internalcontrol and audit systems to combat money laundering and the financing of terrorism in 

accordance with the money-laundering and terrorism-financing risk levels those institutions face. 

Financial institutions must prepare and periodically update their risk assessment reports on antimoney laundering and combating the financing of terrorism.6 A financial institution that fails to 

establish the internal-control and audit system or breaches the relevant rules is punishable by a 

fine of NT$500,000 to ten million (approx. US$16,180 to $323,600).7 

II. Regulation of Cryptocurrencies as Financial Securities 

In 2017, the FSC issued a new press release warning the general public about the risks of investing 

in virtual commodities such as Bitcoin. The FSC reiterated that in Taiwan, virtual currencies such 

as Bitcoin are considered highly speculative virtual commodities. The FSC further indicated that 

initial coin offerings (ICOs) involving raising and issuing securities are subject to relevant 

provisions in the Securities and Exchange Act. Whether tokens involved in ICOs are securities 

will be examined on a case-by-case basis, and illegal fundraising will be sanctioned in accordance 

with financial laws.8

 

6 Id. art. 6. 

7 Id.

8 Press Release, FSC, Financial Supervisory Commission Warns General Public Once Again about Risks of 

Investing in Virtual Commodities Such as Bitcoin (Dec. 19, 2017), https://www.fsc.gov.tw/ch/home.jsp? 

id=96&parent path=0,2&mcustomize=news_view.jsp&dataserno=201712190002&aplistdn=ou=news,ou= 

multisite,ou=chinese,ou=ap_root,o=fsc,c=tw&dtable=News (in Chinese), archived at https://perma.cc/R56QZ2KM. 
The Law Library of Congress 243 

Ukraine 

Astghik Grigoryan 

Legal Research Analyst

SUMMARY Although there is robust trade in virtual currencies in Ukraine, the government has not 

yet put in place legislation regarding cryptoassets. In 2018, the Ministry of Economic 

Development published its “Concept of State Policy in the Field of Virtual Assets” with 

the aim of developing a legal and policy framework for cryptocurrencies. If adopted, 

the Concept will be implemented in two stages. 

I. Approach to Assets Created Through Blockchain 

Despite relatively robust virtual currency turnover in the country, Ukraine does not yet have 

legislation regulating cryptoassets. According to the Ministry of Economic Development, in 2017, 

Ukraine was among the top ten countries in the number of users of virtual currencies with the 

volume of transactions involving cryptographic goods reaching US$100 million dollars a year.1 

Since 2017, the Ukrainian government has been trying to establish a legal framework for 

cryptocurrencies and to manage associated risks.2

In the fall of 2018, the Ministry of Economic Development published its Concept of State Policy in 

the Field of Virtual Assets with the aim of developing a legal and policy framework for 

cryptocurrencies.3 According to a press release, the government aims to legally define key terms 

relating to virtual assets such as “virtual currency” (“crypto currency”), “virtual assets,” initial 

coin offering and initial token offering (“ICO / ITO”), “mining,” “smart contract,” and “token.” 

The government is also planning to amend its taxation and financial sector legislation to address 

issues related to cryptocurrency circulation and trading. 

The government plans to implement the Concept in two stages: 

 First Stage (2018-2019). The government plans to define the legal status of cryptocurrencies. 

In order to improve the regulatory framework, the government intends to conduct 

monitoring of entities engaged in cryptocurrency trade as well as trends in the development 

of the market for virtual assets and virtual currencies. 

 

1 Press Release, Ministry of Economic Development, The Ministry of Economic Development Initiates 

Legalization of Cryptology in Ukraine, (Oct. 10, 2018), http://www.me.gov.ua/News/Detail?id=2cc04fa0-

3577-49c7-a465-bd0fc3f61bed (in Ukrainian), archived at https://perma.cc/8V6R-QANW

2 See Ukraine, in LAW LIBRARY OF CONGRESS, REGULATION OF CRYPTOCURRENCY AROUND THE WORLD (June 2018), 

https://www.loc.gov/law/help/cryptocurrency/world-survey.php#ukraine, archived at

https://perma.cc/XED2-9AT3 

3 Press Release, Ministry of Economic Development, supra note 1. 
The Law Library of Congress 244 

 Second stage (2020-2021). The Concept envisages legal recognition of virtual currency 

custodians (persons providing services to protect private cryptographic keys on behalf of 

their clients for the storage and transfer of virtual currencies) by entities involved in financial 

sector monitoring. The second stage will also involve the development of a legal and 

regulatory framework for the use of virtual assets, smart contracts, and tokens, and for the 

holding of an ICO or ITO.4

The implementation of the Concept is in its initial stages, with the Ministry of Economic 

Development currently in the process of gathering comments and feedback.5 

II. Taxation 

In 2017, a draft law containing amendments to the Tax Code of Ukraine regarding the taxation of 

transactions with virtual assets in the country was introduced.6 The bill defines cryptocurrency 

as a digital asset.7 The bill proposes establishing an income tax break until December 31, 2029, for 

the income of physical and legal persons earned from transactions involving virtual assets. The 

bill also envisages a value-added tax break for the import of equipment associated 

with cryptocurrencies.8 

 

4 Id. 

5 Id.

6 On Amendments to the Tax Code of Ukraine Regarding the Taxation of Transactions with Virtual Assets in 

Ukraine, Draft Law of Ukraine of Sept. 27, 2017, No. 9083-1, http://search.ligazakon.ua/l_doc2.nsf/link1/ 

JH70B1AA.html (in Ukrainian), archived at https://perma.cc/37WB-ABXA.

7 Id. art. 14.1.1. 

8 Id. art. 8. 
The Law Library of Congress 245 

United Arab Emirates 

George Sadek 

Foreign Law Specialist 

SUMMARY The Financial Services Regulatory Authority of the Abu Dhabi Global Market considers 

that where cryptoassets have characteristics of shares, debentures, or units in collective 

investment funds, they are to be treated as securities. The Authority considers “utility 

tokens” and “non-fiat” cryptocurrencies to be commodities, and offers of such 

cryptocurrencies are not regulated by the market regulations. Documents produced by 

the Authority related to the regulation of cryptoasset activities describe requirements 

related to risk disclosure and for the protection of clients’ transactions and information. 

Law No. 20 of 2018 on Money Laundering defines laundered funds to be assets in 

whatever form, including digital currencies.

I. Treatment of Assets Created Through Blockchain 

A. Financial Regulation and Consumer Protection 

1. Abu Dhabi Global Market Legal Framework 

The Abu Dhabi Global Market (ADGM) was established pursuant to Abu Dhabi Law No. 4 of 

2013 as a financial free zone in the Emirate of Abu Dhabi (one of the nine emirates of the United 

Arab Emirates). The legislative and regulatory framework of the ADGM includes the following: 

federal legislation; Law No. 4 of 2013 issued by the Emirate of Abu Dhabi; and ADGM special 

financial regulations. The federal legislation encompasses the following legal instruments: 

Federal Law No. 8 of 2004 regulating financial activities in the United Arab Emirates; Federal 

Decree No. 15 of 2013 on the establishment of the Mariyah Island free trade zone; and Cabinet 

Resolution No. 28 of 2007 regulating fees related to financial transactions in the free trade zones. 

At the local level, Abu Dhabi Law No. 4 of 2013 regulates the administrative structure of the 

ADGM, such as the functions of the market’s board of directors. Finally, the framework includes 

the ADGM court’s regulations and procedures, arbitral and commercial regulations, and the 

Financial Services and Markets Regulations.1 

2. Financial Services and Markets Regulations 2015 

The Financial Services and Markets Regulations 2015 were issued by the Board of Directors of the 

ADGM on October 4, 2015, and have been amended a number of times. The instrument regulates 

financial services in the ADGM and contains various provisions related to “accepted” 

 

1 See ADGM Legal Framework, ABU DHABI GLOBAL MARKET (ADGM), https://www.adgm.com/doingbusiness/adgm-legal-framework/ (last visited Mar. 26, 2019), archived at https://perma.cc/8MMF-W8YX. 
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cryptoassets and the operation of cryptoasset businesses, including exchanges and providing 

custodian services, in the ADGM. 

Article 258 of the 2015 regulations, which was amended on June 25, 2018, defines ”crypto asset” 

as a “digital representation of value that can be digitally traded and functions as (1) a medium of 

exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender 

status in any jurisdiction.”2 Cryptoassets are also distinguished from “fiat currency,” which is a 

government-issued currency that is designated as legal tender in its country of issuance through 

a government decree.3 

The Financial Services Regulatory Authority (FSRA) of the ADGM has produced the following 

documents that include information on the regulation of cryptoassets: 

 The Conduct of Business Rulebook;4

 A guidance document on the regulation of cryptoasset activities in the ADGM (Cryptoasset 

Guidance);5 and 

 A guidance document on the regulation of initial coin/token offerings under the Financial 

Services and Markets Regulations 2015 (ICO Guidance).6

3. Consumer Protection 

The FSRA must grant a license to market intermediaries and operators who deal or manage 

investments in security tokens. Cryptoasset custodians are required to carry out reconciliations 

of clients’ money every week. They also must send out monthly statement of a client’s 

cryptoasset holdings.7 

The Conduct of Business Rulebook states that, “[p]rior to entering into an initial Transaction for, 

on behalf of, or with a Client, an Authorised Person Operating a Crypto Asset Business shall 

disclose in a clear, fair and not misleading manner all material risks associated with (i) its 

 

2 Financial Services and Markets Regulations 2015, art. 258 (at p. 169), 

http://adgm.complinet.com/net_file_store/new_rulebooks/f/i/Financial_Services_and_Markets_Regulation

s_FSMR_2015_Consolidated_March_11_2019.pdf, archived at https://perma.cc/32DP-FKEC. 

3 Id.; FINANCIAL SERVICES REGULATORY AUTHORITY (FSRA), ADGM, GUIDANCE – REGULATION OF CRYPTO ASSET 

ACTIVITIES IN ADGM 4 (June 25, 2018), https://www.adgm.com/media/304701/guidance-regulation-ofcrypto-asset-activities-in-adgm-25th-june-2018-2.pdf, archived at https://perma.cc/MU4D-QDBX. 

4 FSRA, ADGM, CONDUCT OF BUSINESS RULEBOOK, (COBS VER06.110319, Mar. 11, 2019), 

http://adgm.complinet.com/net_file_store/new_rulebooks/c/o/COBS_VER06.110319.pdf, archived at 

https://perma.cc/KGE4-WSLU; 

5 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3. 

6 FSRA, ADGM, GUIDANCE – REGULATION OF INITIAL COIN/TOKEN OFFERINGS AND CRYPTO ASSETS UNDER THE 

FINANCIAL SERVICES AND MARKETS REGULATIONS (June 25, 2018), 

https://www.adgm.com/media/304700/guidance-icos-and-crypto-assets_20180625_v11.pdf, archived at

https://perma.cc/JH8L-ZTRJ. 

7 CONDUCT OF BUSINESS RULEBOOK, supra note 4, para. 17.8.3(a). See also GUIDANCE – REGULATION OF CRYPTO 

ASSET ACTIVITIES IN ADGM, supra note 3, at 31. 
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products, services and activities (ii) Crypto Assets generally and (iii) the Accepted Crypto Asset 

that is the subject of the Transaction.”8

It is mandatory for cryptoasset businesses to use blockchain technology to store all information 

related to transactions done by their clients. Furthermore, they must provide such information to 

the FSRA at any time if requested.9 

To protect clients’ personal information and transactions, cryptoasset businesses must take 

appropriate technical measures to secure their clients’ data. The Conduct Business Rulebook 

indicates the following: 

An Authorised Person Operating a Crypto Asset Business must, as a minimum, have in 

place systems and controls with respect to the following: 

. . . 

(d) A security plan describing the security arrangements relating to: 

(i) the privacy of sensitive data; 

(ii) networks and systems; 

(iii) cloud based services; 

(iv) physical facilities; and 

(v) documents, and document storage.10

Cryptoasset businesses must also have a plan articulating the process of protecting client 

information and transaction data in the event of an unplanned system outage. In the event of a 

planned outage, clients must be informed ahead of time. 11 

B. Taxation 

Article 3 of Law No. 8 of 2017 on value added tax imposes a 5% tax on imported and exported 

commodities.12 This tax may apply to “utility tokens” since the FSRA considers them to be 

commodities, as discussed below.13 

 

8 CONDUCT OF BUSINESS RULEBOOK, supra note 4, para. 17.6.1. See also GUIDANCE – REGULATION OF CRYPTO ASSET 

ACTIVITIES IN ADGM, supra note 3, at 24. 

9 CONDUCT OF BUSINESS RULEBOOK, supra note 4, para. 18.7. See also GUIDANCE – REGULATION OF CRYPTO ASSET 

ACTIVITIES IN ADGM, supra note 3, at 17. 

10 CONDUCT OF BUSINESS RULEBOOK, supra note 4, para. 17.5(d). See also GUIDANCE – REGULATION OF CRYPTO 

ASSET ACTIVITIES IN ADGM, supra note 3, at 20. 

11 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 23. 

12 Law No. 8 of 2017, issued on August 23, 2017, 

https://www.mof.gov.ae/ar/lawsAndPolitics/govLaws/Documents/ 23 المضافة القيمة ضريبة بقانون مرسوم1 النشر نسخة

2017 أغسطس.pdf (in Arabic), archived at https://perma.cc/3MLL-AHHC. 

13 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 5. 
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According to the Conduct of Business Rulebook, cryptoasset businesses have an obligation to 

declare international income for tax purposes as set out in the guidance notes on the requirements 

of the Intergovernmental Agreement between the United Arab Emirates and the United States.14

C. Anti-Money Laundering Law 

Article 1 of Law No. 20 of 2018 on Money Laundering defines laundered funds as assets in 

whatever form, whether tangible or intangible, movable or immovable, including national 

currency, foreign currencies, documents or notes evidencing the ownership of those assets or 

associated rights in any form including electronic or digital forms or any interests, profits or 

income originating or earned from those assets.15 

According to the Cryptoasset Guidance, cryptoasset exchanges must report any suspicious 

activities or transactions to the official authorities. 16 Cryptoasset businesses are required to 

establish sophisticated transaction monitoring systems to detect possible money laundering 

activity. Cryptoasset businesses must adopt systems that identify any attempt to breach moneylaundering regulations. Such systems may rely on new technological solutions, including 

monitoring algorithms or artificial intelligence.17 

Cryptoasset businesses must submit to regular reviews from the FSRA. The FSRA will monitor 

the cryptoaasset wallets, as well as the origin and destination of cryptoasset funds. The Conduct 

of Business Rulebook states that 

[a]n authorised person Operating a Crypto Asset Business must, as a minimum, have in 

place systems and controls with respect to the following: 

. . . 

(c) systems and controls to mitigate the risk of misuse of Crypto Assets, setting out how 

– 

(i) the origin of Crypto Assets is determined, in case of an incoming transaction; and 

(ii) the destination of Crypto Assets is determined, in case of an outgoing transaction.18

Cryptoasset businesses must perform due diligence on their clients before opening an account. 

Accordingly, any cryptoasset wallet would be identified and linked to a specific user. If a 

transaction is detected that originates from or is sent to a “tainted” wallet, the user must be 

 

14 CONDUCT OF BUSINESS RULEBOOK, supra note 4, PARA. 17.4.1 (“International Tax Reporting Obligations”). 

15 Law No. 20 of 2018, issued on September 23, 2018, 

https://www.mof.gov.ae/ar/lawsAndPolitics/govLaws/Documents/ شـأن في 2018 لسنة 20 رقم اتحادي بقانون مرسوم

at archived ,)Arabic in (pdf.مواجھة جرائم غسل األموال ومكافحة تمويل اإلرھاب وتمويل التنظيمات غير المشروعة

https://perma.cc/LV5C-EZXR. 

16 Financial Services and Markets Regulations 2015, art. 149(2) (“Obligation to Report Transactions”). 

17 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 17. 

18 CONDUCT OF BUSINESS RULEOOK, supra note 4, para. 17.5(c) (“Origin and Destination of Crypto Asset Funds”). 

See also GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 18. 
Regulatory Approaches to Cryptoassets: United Arab Emirates 

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reported. Cryptoasset businesses must maintain a list of tainted wallet addresses and consider 

the use of third party services to help identify such addresses.19

II. Custodianship of Cryptocurrencies by Financial Institutions 

According to article 73(B)(5)(a) of the Financial Services Market Regulations 2015,“operating as a 

Crypto Asset Custodian involves – (a) safeguarding, storing, holding or maintaining custody of 

Accepted Crypto Asset belonging to another person.”20 

If a cryptoasset business will not hold the cryptoassets of clients in their custody, this must be 

fully disclosed to clients upfront. Clients must be informed that the cryptoasset business is not 

responsible for the custody and protection of clients’ cryptoassets. Where a cryptoasset business 

will be responsible for the custody of a client’s cryptoassets, the business may provide this service 

“in-house” through its own cryptoasset wallet solution. Alternatively, they may outsource this 

service to a third party.21 

III. Regulation of Cryptoassets as Financial Securities 

A. Cryptoassets as Security Tokens 

The FSRA considers cryptoassets that have the characteristics of shares, debentures, or units in 

collective investment funds to be securities. All financial activities related to those securities, such 

as operating primary or secondary markets, dealing, trading, managing investments in or 

advising on security tokens, are subject to the regulatory requirements issued by the FSRA.22

B. Operating a Cryptoasset Business 

Chapter 17B of the Financial Services and Markets Regulations 2015 regulates the activity of 

operating a cryptoasset business.23 Article 73B(1) states that “Operating a Crypto Asset Business 

is a specified kind of activity.”24 Article 73B(2) stipulates that operating a cryptoasset business 

involves undertaking one or more cryptoasset activities in or from the ADGM.25

Article 73B(3) discusses cryptoasset activities. It states that cryptoasset activities may include 

the following: 

(a) Buying, Selling or exercising any right in Accepted Crypto Asset (whether as principal 

or agent); 

 

19 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 22. 

20 Financial Services and Markets Regulations 2015, art. 73B(5)(a). 

21 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 7. 

22 Id. at 5. 

23 Financial Services and Markets Regulations 2015, ch. 17B (Operating a Cryptoasset Business). 

24 Id. art. 73B(1). 

25 Id. art. 73B(2). 
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(b) managing Accepted Crypto Asset belonging to another person; 

(c) making arrangements with a view to another person (whether as principal or agent) 

Buying, Selling or providing custody of Accepted Crypto Asset; 

(d) marketing of Accepted Crypto Assets; 

(e) advising on the merits of Buying or Selling of Accepted Crypto Assets or any rights 

conferred by such Buying or Selling; or 

(f) operating – 

(i) a Crypto Asset Exchange; or 

(ii) as a Crypto Asset Custodian26

Article 73(B)(4) provides that “operating a Crypto Asset Exchange means the trading, conversion 

or exchange of - (a) Fiat Currency or other value into Accepted Crypto Assets; (b) Accepted 

Crypto Asset into Fiat Currency or other value; or (c) one Accepted Crypto Asset into another 

Accepted Crypto Asset.”27 

Finally, article 73C cites activities that do not constitute “Operating a Crypto Asset Business.” 

Those activities include the following: 

(1) the creation or administration of Crypto Asset that are not Accepted Crypto Asset; 

(2) the development, dissemination or use of software for the purpose of creating or 

mining a Crypto Asset; 

(3) the transmission of Crypto Asset; 

(4) a loyalty points scheme denominated in Crypto Asset; or 

(5) any other activity or arrangement that is deemed by the Regulator to not constitute 

Operating a Crypto Asset Business, where necessary and appropriate in order for the 

Regulator to pursue its objectives.”28 

Article 73D states “[a] person does not operate a Crypto Asset Exchange if it operates a facility 

which is merely an order routing system where Buying and Selling interests in, or orders for, 

Accepted Crypto Asset are merely transmitted but do not interact.”29

C. Regulation of Initial Coin/Token Offerings

The ICO Guidance states that ICOs can take many forms. However, all of those forms utilize 

Distributed Ledger Technology (DLT). It states that “[i]nvestors will typically give a Crypto Asset 

to an ICO issuer in exchange for a proprietary digital medium of exchange on the DLT platform, 

being termed a “coin” or “token” (where the latter term will be used hereafter).”30 

 

26 Id. art. 73B(3). 

27 Id. art 73B(4). 

28 Id. art. 73C. 

29 Id. art. 73D. 

30 GUIDANCE – REGULATION OF INITIAL COIN/TOKEN OFFERINGS AND CRYPTO ASSETS, supra note 6, para. 3.1. 
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The Law Library of Congress 251 

The ICO Guidance further states that an emerging method of fundraising uses DLT with the 

tokens representing a “traditional” regulated issuance, such as shares, debentures, or units in a 

collective investment fund.31

According to the Guidance, whether an ICO is to be regulated under the Financial Services and 

Markets Regulations 2015 will be assessed by the FSRA on a case-by-case basis. It further states 

that “[i]f the tokens in an ICO are assessed to exhibit the characteristics of a Security, FSRA may 

deem the tokens as a Security pursuant to Section 58(2)(b)2of FSMR, hereinafter referred to as 

“Security Tokens.””32

With respect to issuances of securities, the ICO Guidance states as follows: “issuances of Securities 

(as defined in Section 258 of FSMR), whether through a DLT platform or other means, will see no 

difference in their treatment under our regulatory framework. Those issuers/market actors who 

seek to raise funds in a regulated, robust and transparent manner using new business models or 

technologies such as DLT are encouraged to engage with us as early as possible in the fundraising process.”33

In terms of offers of securities, the ICO Guidance states that 

[a] Person may make an Offer of Securities to the Public without a Prospectus where any 

one of the following is met: 

(i) an Offer is directed at Professional Clients other than natural Persons; 

(ii) fewer than 50 Persons in any 12 month period, excluding Professional Clients who are 

not natural persons; or 

(iii) where the consideration to be paid by a Person to acquire Securities is at least 

USD100,000.34 

D. Derivatives 

The ICO Guidance states that “derivatives of Crypto Assets are regulated as Commodity 

Derivatives and hence, a type of Specified Investment under the FSMR [Financial Services and 

Markets Regulations 2015]. Consequently, any market operators or market intermediaries dealing 

or managing investments in Derivatives of Crypto Assets will be subject to the appropriate 

regulations and rules applicable under FSMR.”35

IV. Treatment of Cryptoassets Not Considered Securities 

According to the Cryptoasset Guidance, cryptoassets such as non-fiat cryptocurrencies are not 

considered securities and are treated as commodities. Utility tokens are also treated as 

commodities. The FSRA states that “non-fiat currency” and “utility tokens” do not exhibit the 

 

31 Id. para. 3.2. 

32 Id. para. 3.3. 

33 Id. para. 3.4. 

34 Id. para. 3.6. 

35 Id. para. 4.5. 
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features and characteristics of a regulated investment. Spot trading and transactions in utility 

tokens are not regulated by the market regulations.36 

The ICO Guidance also addresses tokens that are not deemed to be securities. It states that, 

“[w]here tokens do not have the features and characteristics of Securities such as Shares, 

Debentures or Units in a Fund, the offer of such tokens is unlikely to be an Offer of Securities, nor 

is the trading of such tokens likely to constitute a Regulated Activity under FSMR.”37

 The Guidance further states that 

[i]n unregulated ICOs, investors do not benefit from any of the safeguards that accompany 

a regulated Offer of Securities. Reliable information regarding the issuer, and what it plans 

to do with the funds raised may be lacking. The risk of fraud and loss of capital is therefore 

significantly higher. This is particularly likely to be the case where a token issuer promises 

extremely high investment returns that are disproportionately high relative to those 

generally available in the market. We advise potential investors in unregulated ICOs to 

exercise extreme caution before committing any funds.38

 

36 GUIDANCE – REGULATION OF CRYPTO ASSET ACTIVITIES IN ADGM, supra note 3, at 5. 

37 GUIDANCE – REGULATION OF INITIAL COIN/TOKEN OFFERINGS AND CRYPTO ASSETS, supra note 6, para. 3.10. 

38 Id. para. 3.11.
The Law Library of Congress 253 

United Kingdom 

Clare Feikert-Ahalt 

Senior Foreign Law Specialist 

SUMMARY The United Kingdom has yet to introduce legislation to regulate the use of 

cryptocurrencies, choosing to adopt a wait-and-see approach. The UK’s financial 

regulators have cautioned individuals about the risks posed by purchasing 

cryptocurrencies and assets, and has proposed consulting on legislation to prohibit the 

purchase of such assets by individuals. A cryptoasset taskforce has been appointed, 

and issued its first report in late 2018. The report provided some clarity over the 

treatment of cryptoassets, and this was followed up by an advisory from HM Revenue 

& Customs over the tax treatment of cryptoassets for individuals. In January 2019 the 

Financial Conduct Authority (FCA) also issued guidance over the regulatory regime of 

cryptoassets and announced that HM Treasury is planning to issue a consultation on 

legislation that would expand its regulatory authority to cover cryptoassets. 

I. Introduction 

The United Kingdom (UK) has yet to introduce legislation to regulate the use of cryptocurrency 

and has adopted a cautious wait-and-see approach. The Bank of England stated it does not 

consider cryptocurrencies to be money as they are “too volatile to be a good store of value, they 

are not widely-accepted as means of exchange, and they are not used as a unit of account.”1 It 

has further stated that it believes the current generation of cryptoassets show little evidence of 

delivering any kind of benefits to the financial services and other sectors, but given the rapidly 

developing market this may change in the future.2 

II. Consumer Protection 

Financials services are regulated in the UK by the Financial Conduct Authority (FCA), whose 

regulations aim to “protect consumers from harm, protect and enhance the integrity of the UK’s 

financial services sector, and promote effective competition in the interest of consumers.”3 The 

FCA is currently consulting on “[g]uidance for cryptoassets in order to provide regulatory clarity 

for market participants carrying on activities in this space”4 to help firms determine whether or 

not a digital asset falls within the existing regulatory framework. In the consultation paper, the 

 

1 HM TREASURY ET AL., CRYPTOASSETS TASKFORCE: FINAL REPORT (Oct. 2018), ¶ 2.13, https://assets.publishing. 

service.gov.uk/government/uploads/system/uploads/attachment_data/file/752070/cryptoassets_taskforce_

final_report_final_web.pdf, archived at https://perma.cc/LE5W-5MZS. 

2 Id. at 2. 

3 Id. ¶ 2.23. 

4 FINANCIAL CONDUCT AUTHORITY, GUIDANCE ON CRYPTOASSETS, CONSULTATION PAPER, CP19/3 (Jan. 2019), 

¶ 1.8, https://www.fca.org.uk/publication/consultation/cp19-03.pdf, archived at https://perma.cc/E8UMWAUB. 
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FCA noted that HM Treasury will also conduct a consultation process later in 2019 to consider 

bringing legislative changes to extend the FCA’s authority to cover cryptoassets.5

The Bank of England is responsible for ensuring “the safety and soundness of firms (through the 

PRA [Prudential Regulation Authority]) and to remove or reduce systemic risks that could pose 

a threat to financial stability (through the Financial Policy Committee and the Bank’s supervision 

of Financial Market Infrastructures).”6 

III. Regulation of Cryptoassets 

Whether existing financial regulations apply to cryptocurrencies is dependent upon what the 

cryptocurrency is being used for, and must be determined on a case-by-case basis. Given the 

complexity and uncertainty surrounding these determinations, a cryptoasset taskforce was 

established in March 2018 to “consider[] the policy and regulatory implications of distributed 

ledger technology (DLT), and cryptoassets.”7 

The cryptoasset taskforce set out a table with common uses of cryptocurrency and whether or not 

the use falls within what is known as the current “regulatory perimeter.” The taskforce identified 

three different types of cryptocurrencies—exchange tokens, utility tokens, and security tokens—

and considered that cryptoassets are used in three different ways: 

1. As a means of exchange, functioning as a decentralised tool to enable the buying and 

selling of goods and services, or to facilitate regulated payment services. 

2. For investment, with firms and consumers gaining direct exposure by holding and 

trading cryptoassets, or indirect exposure by holding and trading financial 

instruments that reference cryptoassets. 

3. To support capital raising and/or the creation of decentralised networks through 

Initial Coin Offerings (ICOs). 

These purposes are not mutually independent, and the cryptocurrency may change during the 

course of its life.8

The cryptoasset taskforce determined that cryptocurrencies used as a means of exchange may fall 

within the regulatory perimeter under the Payment Services Regulations 2017 (PSR)9 if the 

cryptocurrency is considered a fiat fund, or falls within the definition of e-money as, for example, 

when it is structured in a way that the asset is “centrally issued, and accepted by third parties as 

 

5 Id. ¶ 1.27. 

6 HM TREASURY ET AL., supra note 1, ¶ 2.23. 

7 Cryptoasset Taskforce Publishes Report on UK Approach to Cryptoassets, FINANCIAL CONDUCT AUTHORITY (Oct. 29, 

2018), https://www.fca.org.uk/news/news-stories/cryptoasset-taskforce-publishes-report-uk-approachcryptoassets, archived at https://perma.cc/E8LH-AUV7. 

8 HM TREASURY ET AL., supra note 1 ¶ 2.15. 

9 Payment Services Regulations 2017, SI 2017/752, http://www.legislation.gov.uk/uksi/2017/752/pdfs/uksi_ 

20170752_en.pdf, archived at https://perma.cc/6WCR-T68E. 
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a means of exchange.”10 According to the report from the taskforce, the use of cryptocurrencies 

to facilitate regulated payment services, such as an intermediary in a cross-border transaction, 

and indirect investment from financial instruments that reference cryptoassets, would be 

regulated as a money remittances under the PSR.11 Investments directly into cryptoassets only 

fall within the regulatory perimeter if the asset is a security token or the investment is made by a 

regulated investment vehicle. Capital-raising tools that include cryptoassets fall within the 

perimeter if the asset is a security token.12 

The policy paper notes that exchange tokens are intended to be used as a form of payment, and 

include bitcoins. Exchange tokens use DLT and the value exists based on the use of it as a type 

of exchange or investment; utility tokens are tokens that can be redeemed for access to a specified 

product or service; and security tokens are those that are considered to be a “specified 

investment’” in the Financial Services and Markets Act (2000) (Regulated Activities) 

Order.13 These tokens provide certain rights, including ownership, repayment of a specified 

amount of money, or a share in future profits.14 

IV. Taxation

HM Revenue & Customs recently issued its first policy paper detailing the tax treatment of 

cryptoassets acquired, held, and sold by individuals, focusing on ensuring the tax treatment of 

the profits and losses of transactions involving these types of assets are clear.15 HM Revenue & 

Customs noted that the tax treatment of these tokens are dependent upon how they are used, 

rather than on the definition of the token.16 The taskforce developed a framework to take into 

account three potentially different uses for cryptoasset:

1. As a means of exchange, functioning as a decentralised tool to enable the buying and 

selling of goods and services, or to facilitate regulated payment services. 

2. For investment, with firms and consumers gaining direct exposure by holding and 

trading cryptoassets, or indirect exposure by holding and trading financial 

instruments that reference cryptoassets. 

3. To support capital raising and/or the creation of decentralised networks through 

Initial Coin Offerings (ICOs).17 

 

10 HM TREASURY ET AL., supra note 1, Table 2.A. 

11 Id. 

12 Id. 

13 Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544, http://www.legis 

lation.gov.uk/uksi/2001/544/made, archived at https://perma.cc/QU4R-53DF. 

14 HM TREASURY ET AL., supra note 1, ¶ 2.11. 

15 HM REVENUE & CUSTOMS, CRYPTOASSETS FOR INDIVIDUALS, POLICY PAPER (Dec. 19, 2018), available at 

https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals, archived at

https://perma.cc/KJ8N-T26S. 

16 Id. 

17 HM TREASURY ET AL., supra note 1, ¶ 2.11. 
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HM Customs & Revenue does not consider that cryptoassets are currency or money. Instead, it 

defines cryptoassets as 

cryptographically secured digital representations of value or contractual rights that 

can be: 

 transferred 

 stored 

 traded electronically[.] 

While all cryptoassets use some form of Distributed Ledger Technology (DLT) not all 

applications of DLT involve cryptoassets.18

HM Revenue & Customs has yet to issue information or guidance about the taxation of 

cryptocurrency for businesses. 

V. Anti-Money Laundering 

The government is currently consulting on how it will bring cryptocurrencies within its antimoney laundering framework in accordance with the EU Fifth Anti-Money Laundering 

Directive,19 and is 

developing a robust regulatory response which will address these risks by going 

significantly beyond the requirements set out in the EU Fifth Anti-Money Laundering 

Directive (5MLD), providing one of the most comprehensive responses globally to the use 

of cryptoassets for illicit activity.20

It has requested the FCA to be responsible for ensuring anti-money laundering obligations are 

fulfilled by companies, and the FCA has taken a progressive approach, issuing appropriate 

practices for dealing with cryptoassets and the measures banks should take to address the risk of 

financial crime using these assets.21 The FCA recommended banks take a risk-based approach to 

mitigate financial crime by 

 developing staff knowledge and expertise on cryptoassets to help them 

identify the clients or activities which pose a high risk of financial crime[;] 

 

18 HM REVENUE & CUSTOMS, supra note 15. 

19 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), 2018 O.J. (L 156) 

43, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN, archived at

http://perma.cc/JV7W-64Y5; Consolidated Version of the Directive (EU) 2015/849 of the European Parliament 

and of the Council of 20 May 2015 on the Prevention of the Use of the Financial System for the Purposes of 

Money Laundering or Terrorist Financing, Amending Regulation (EU) No. 648/2012 of the European 

Parliament and of the Council, and Repealing Directive 2005/60/EC of the European Parliament and of the 

Council and Commission Directive 2006/70/EC (Anti-Money Laundering Directive, AMLD), 2015 O.J. (L 141) 

73, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02015L0849-20180709&qid= 

1552510550346&from=EN, archived at http://perma.cc/W7KN-PCPM. 

20 HM TREASURY ET AL., supra note 1, ¶ 5.6. 

21 Id. ¶ 5.9. 
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 ensuring that existing financial crime frameworks adequately reflect the 

crypto related activities which the firm is involved in, and that they are 

capable of keeping pace with fast-moving developments[;] 

 engaging with clients to understand the nature of their businesses and the 

risks they pose[;] 

 carrying out due diligence on key individuals in the client business including 

consideration of any adverse intelligence[;] 

 in relation to clients offering forms of crypto-exchange services, assessing the 

adequacy of those clients’ own due diligence arrangements; [and], 

 for clients which are involved in ICOs, considering the issuance’s investorbase, organisers, the functionality of tokens (including intended use) and 

the jurisdiction.22

The government has stated that it will take a broader approach to money laundering and 

introduce legislation that surpasses the requirements of the Fifth Anti-Money Laundering 

Directive, including covering 

 exchange services between different cryptoassets, to prevent anonymous ‘layering’ of 

funds to mask their origin 

 platforms that facilitate peer-to-peer exchange of cryptoassets, which could enable 

anonymous transfers of funds between individuals 

 cryptoasset ATMs, which could be used anonymously to purchase cryptoassets 

 non-custodian wallet providers that function similarly to custodian wallet providers, 

which may otherwise facilitate the anonymous storage and transfer of cryptoassets. 

Consultation on this area will include considering issues of technological feasibility.23

VI. Future of Cryptocurrency Regulation 

As noted above, a cryptoasset taskforce was formed in March 2018 and issued a report in October 

2018 on its findings.24 The taskforce took a particular interest in the future use and development 

of DLT technology. It stated that DLT “has the potential to deliver significant benefits in financial 

services and other sectors in the future”25 and that development of this technology will be 

supported by the UK financial authorities. The taskforce also stated that 

the most immediate priorities for the authorities are to mitigate the risks to consumers and 

market integrity, and prevent the use of cryptoassets for illicit activity. The authorities will 

also guard against threats to financial stability that could emerge in the future, and 

encourage responsible development of legitimate DLT and cryptoasset-related activity in 

the UK.26 

 

22 Letter from FCA to CEOs on Cryptoassets and Financial Crime (June 11, 2018), https://www.fca.org.uk/ 

publication/correspondence/dear-ceo-letter-cryptoassets-financial-crime.pdf, archived at https://perma.cc/ 

7FLZ-VEM5. 

23 HM TREASURY ET AL., supra note 1, ¶ 5.7. 

24 Id. 

25 Id. at 2. 

26 Id. at 3. 
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The approach that the taskforce has taken 

 maintains the UK’s international reputation as a safe and transparent place to do 

business in financial services[;] 

 ensures high regulatory standards in financial markets[;] 

 protects consumers[;] 

 guards against threats to financial stability that could emerge in the future[; and] 

 allows those innovators in the financial sector that play by the rules to thrive[.]27

The cryptoasset taskforce proposed that it would consult further on introduction of a prohibition 

on selling “all derivatives referencing exchange tokens such as Bitcoin, including CFDs, futures, 

options and transferable securities”28 to retail consumers due to the concerns of consumer 

protection and market integrity. 

VII. Conclusion

The government has taken a number of steps29 to encourage the development of financial 

technology, including 

 launching a Digital Strategy30 and the cryptoasset taskforce; 

 creating an Innovation Hub and Regulatory Sandbox to encourage and support innovation 

by the FCA and enable developers to test products and services in a real 

market environment;31 

 investing £10 million (approximately US$13.2 million) in DLT projects; 

 calling for information and publishing reports on cryptocurrency32 and DLT technology;33

 

27 Id. ¶ 1.6. 

28 Id. ¶ 5.17. 

29 For a list of ongoing activities taken by the government, see id. Table 5.A. 

30 Department for Media, Culture and Sport, Policy Paper: UK Digital Strategy (Mar. 1, 2017), https://www. 

gov.uk/government/publications/uk-digital-strategy/uk-digital-strategy, archived at

https://perma.cc/XSX2-CPW8. 

31 HM TREASURY ET AL., supra note 1, at 4. 

32 HM TREASURY, ‘DIGITAL CURRENCIES: RESPONSE TO THE CALL FOR INFORMATION’ (Mar. 2015), https://assets. 

publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/414040/digital_curr

encies_response_to_call_for_information_final_changes.pdf, archived at https://perma.cc/G5DK-5K3N; 

HOUSE OF COMMONS TREASURY COMMITTEE, CRYPTO-ASSETS: TWENTY-SECOND REPORT OF SESSION 2017-19, HC 910 

(2018), https://publications.parliament.uk/pa/cm201719/cmselect/cmtreasy/910/910.pdf, archived at

https://perma.cc/5UFD-UKP3. 

33 GOVERNMENT OFFICE FOR SCIENCE, DISTRIBUTED LEDGER TECHNOLOGY: BEYOND BLOCK CHAIN (2016), available at

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/49297

2/gs-16-1-distributed-ledger-technology.pdf, archived at https://perma.cc/6Z8W-PB5N. 
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 considering the use of DLT for the FCA’s supervisory duties;34 and 

 establishing a FinTech hub to consider the policy implications of financial technology. 

The recent reports and consultation papers demonstrates the UK’s intention to provide a 

regulatory environment to protect consumers and the UK’s reputation as a financial center, and 

to ensure that robust measures are in place against money laundering. 

 

34 HM TREASURY ET AL., supra note 1, at 4. 
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Uzbekistan 

Astghik Grigoryan 

Legal Research Analyst

SUMMARY A July 2018 presidential resolution on measures for the development of the digital 

economy legalized the utilization of cryptoassets and blockchain technologies in 

Uzbekistan. The National Agency for Project Management was authorized to 

implement the introduction of cryptocurrencies and blockchain technologies, as well as 

to further develop national legislation. 

A subsequent decree on the creation of crypto exchanges provides the legal framework 

for the licensing and certification of exchange operators. 

I. Approach to Assets Created Through Blockchain 

The Resolution of the President on Measures for the Development of the Digital Economy (Digital 

Economy Resolution), made in July 2018, legalized the utilization of cryptoassets and blockchain 

technologies in Uzbekistan.1 One of the priority measures in the Resolution was the introduction 

and development of activities in the area of cryptoassets, including the issuance, trade, and 

exchange in cryptoassets. The Resolution assigned the National Agency for Project Management 

as the responsible body for the implementation of the introduction of cryptocurrencies, 

development of legislation, and coordination between various government bodies. 

The Resolution provided for the introduction of blockchain technologies in, inter alia, clearing 

operations, letters of credit, and project finance, as well as in corporate governance beginning 

from January 1, 2021.2 A subsequent Presidential Resolution on the Creation of Crypto Exchanges 

(Crypto Exchanges Resolution), promulgated in September 2018, defined cryptoasset as “a set of 

entries in the blockchain, which has a value and an owner.”3 A crypto exchange is defined as an 

organization that provides a platform for trading and exchanging of cryptoassets.4

 

1 Postanovleniye Presidenta Respubliki Uzbekistan o Merakh Po Razvitiyu Tsifrovoi Ekonomiki v Respublike 

Uzbekistan [Resolution of the President of Uzbekistan on Measures for the Development of the Digital 

Economy] (Digital Economy Resolution), July 3, 2018, http://www.lex.uz/ru/pdfs/3806048 (in Russian), 

archived at https://perma.cc/6UWZ-39XG.

2 Id. § 3.

3 Postanovleniye Presidenta o Merax po Organizatsii Kripto-Birzh V Respublike Uzbekistan [Resolution of the 

President of Uzbekistan on Measures for Creation of Crypto Exchanges in the Republic of Uzbekistan] (Crypto 

Exchanges Resolution), Sept. 2 2018, http://lex.uz/ru/docs/3891610 (in Russian), archived at

https://perma.cc/H84M-A2XS. 

4 Id. § 2. 
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The Digital Economy Resolution tasked the National Agency for Project Management with 

developing supplemental legislation in the area of cryptoassets and blockchain technologies.5

II. Financial Regulation and Consumer Protection 

According to the Digital Economy Resolution, foreign exchange regulations do not apply to 

foreign exchange transactions that involve licensed operations in cryptoassets.6 The Resolution 

provides for the licensing of activities related to cryptoassets beginning from October 1, 2018. The 

National Agency for Project Management is the body authorized to license operators of 

cryptoasset businesses.7 Foreign legal entities can only obtain a license to operate cryptoasset 

exchanges if they open subsidiaries or other enterprises in the territory of the Republic 

of Uzbekistan.8 

The Crypto Exchanges Resolution contains the following requirements for licensing 

cryptoasset operations: 

a) availability as of the date of application of a statutory authorized fund in the amount 

of at least thirty thousand minimum monthly wages [approx. US$390,000] in cash, of 

which twenty thousand [approx. US$260,000] is reserved in a separate account in a 

commercial bank of the Republic of Uzbekistan; 

b) the presence of a functioning electronic system of crypto-exchange trading, hosted on 

servers located in the territory of the Republic of Uzbekistan, and complying with the 

requirements stipulated in the Regulations on the procedure for licensing activities of 

crypto-exchanges; 

c) availability of the rules of crypto-exchange trade, which must include: 

 the procedure for admission of participants to the crypto-exchange trading; 

 measures aimed at ensuring compliance with the anti-money laundering and 

terrorism financing legislation; 

 procedures for admission to circulation and removal from circulation of 

crypto assets; 

 the procedure for the implementation and registration of operations with 

crypto assets; 

 the order of mutual settlements of participants of crypto-exchange trade at the 

conclusion of transactions; 

 the amount of payment for using the services of the crypto-exchange and the 

procedure for determining it; 

 measures to prevent the manipulation of prices on a crypto exchange and the 

misuse of confidential information; 

 ban on the use of crypto assets for illegal purposes. 

 

5 Digital Economy Resolution, § 7. 

6 Id. § 2. 

7 Id. § 4.

8 Crypto Exchanges Resolution, § 2.
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d) implementation of quotations for crypto assets based on the ratio of supply and 

demand for them; 

e) storage for five years of information on operations with crypto-assets of clients as well 

as information concerning their identification data and materials on customer 

relations, including business correspondence.9

According to the Crypto Exchanges Resolution, crypto exchanges have the right to 

 receive and set the value of payments (including in crypto-assets) for 

rendered services; 

 organize exchange transactions with residents and non-residents of the Republic of 

Uzbekistan aimed at the acquisition and (or) alienation of crypto assets for national 

and foreign currency, as well as the exchange of crypto-assets for other crypto-assets.10

The Crypto Exchanges Resolution states that legislation on securities, stock exchanges, and 

exchange activities does not apply to cryptoassets and crypto exchanges.11

III. Anti-Money Laundering Law 

The Cryptoasset Exchanges Resolution states that the National Agency for Project Management 

as well as the head of President’s Administration will assume surveillance functions to make sure 

that the activities of cryptoasset exchanges are in compliance with anti-money laundering and 

terrorism finance prevention legislation.12 In addition, the Resolution states that the availability 

of safeguards related to compliance with such legislation is one of the preconditions for the 

licensing of cryptoasset exchanges.13

IV. Taxation 

According to the Digital Economy Resolution, the transactions of both physical and legal persons 

involving cryptoassets are not subject to taxation.14

 

9 Id. § 3. 

10 Id. § 4.

11 Id. § 2. 

12 Id. § 7.

13 Id. § 3.

14 Digital Economy Resolution, § 2.
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Venezuela 

Graciela Rodriguez-Ferrand 

Senior Foreign Law Specialist 

I. Approach to Assets Created through Blockchain 

A. Regulation 

The Decreto Constituyente sobre Cripotactivos y la Criptomoneda Soberana Petro (DCCCSP) 

(Constitutional Decree on Cryptoassets and the Sovereign Cryptocurrency Petro) issued on April 

9, 2018, establishes the legal base for the creation, circulation, use, and exchange of cryptoassets 

in Venezuela by both individuals and legal entities, public and private, including both 

Venezuelan residents and nonresidents.1 

Additionally, the DCCCSP creates the petro, the Venezuelan sovereign cryptocurrency, 

developed and issued by the Bolivarian Republic of Venezuela and backed by several 

commodities, such as minerals and hydrocarbon reserves.2 The petro, created as an alternative 

to the traditional financial system, is a novel financial mechanism that operates through 

blockchain transactions.3

On January 30, 2019, the Decreto Constituyente sobre el Sistema Integral de Cripotactivos 

(DCSIC) (Constitutional Decree on the Integral System of Cryptoassets) enacted a comprehensive 

cryptoasset structure, establishing a legal framework for all cryptocurrencies in Venezuela.4 It 

provides that the Superintendencia Nacional de Criptoactivos y Actividades Conexas 

(SUNACRIP) (National Superintendency of Cryptoactivities and Related Activities) will be the 

authority in charge of regulating the creation, issuance, organization, operation, and use of 

cryptoassets.5 SUNACRIPT will also regulate the operation of cryptoasset exchange agencies.6

The DCSIC applies to goods, services, assets, or activities related to the creation, issuance, 

organization, operation, and use of the national cryptoasset (petro) and other cryptoassets within 

the national territory, as well as the purchase, sale, use, distribution, and exchange of any product 

 

1 Decreto Constituyente sobre Criptoactivos y la Criptomoneda Soberana Petro [DCCCSP] [Constitutional 

Decree on Cryptocurrency and the Sovereign Cryptocurrency Petro] art. 1, GACETA OFICIAL DE LA REPÚBLICA 

BOLIVARIANA DE VENEZUELA] [G.O.], Apr. 9, 2018, http://www.badellgrau.com/upl/go_extraordinaria_ 

6370_(2).pdf, archived at https://perma.cc/T4JK-NPKP. 

2 Id. art. 5. 

3 Id. 

4 Decreto Constituyente sobre el Sistema Integral de Cripotactivos [Constitutional Decree on the Integral 

System of Cryptoassets] art. 8, G.O., Jan. 30, 2019, https://www.sunacrip.gob.ve/files/gaceta-oficial41.575.pdf , archived at https://perma.cc/M3A9-E6PE 

5 Id. arts. 7-8. 

6 Id. art. 8. 
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or service derived from them and other related activities.7 It includes rules for the purchase, sale, 

use, distribution, and exchange of cryptocurrencies and related products.8 It also mandates a 

registration system and detailed audit and inspection procedures for those operating with 

cryptoassets.9 Penalties for noncompliance with the law potentially include confiscation of 

mining equipment, suspension of licenses and permits, fines, or prison sentences.10 It also 

establishes an administrative procedure to determine violations of the law.11

B. Consumer Protection 

Those who transact with/in cryptoassets with falsified data resulting in damages to its users and 

clients are punishable by imprisonment for three to five years and a fine.12

C. Anti-Money Laundering Law 

No specific money laundering regulations have been issued. However, the DCSIC penalizes those 

who use or provide equipment or programs related to the Integral Cryptoassets System in order 

to perpetrate acts of terrorism or money laundering, among other offenses.13 

D. Taxation 

No specific rules on the taxation of cryptocurrencies have been issued.14

II. Custodianship of Cryptocurrencies 

The DCCCSP created the Tesorería de Criptoactivos (Crypto Assets Treasury), which is in charge 

of the custody, collection, and distribution of cryptoassets according to the instructions issued by 

the President of Venezuela.15

 

7 Id. art. 3. 

8 Id. 

9 Id. arts. 29-33. 

10 Id. arts. 37, 42-51. 

11 Id. arts. 42-63. 

12 Id. art. 50. 

13 Id. art. 46. 

14 GLOBAL LEGAL INSIGHTS, BLOCK CHAIN AND CRYPTOCURRENCY REGULATION 2019: VENEZUELA, sec. 6, 

“Taxation,” https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/ 

venezuela, archived at https://perma.cc/Y95A-K9BC. 

15 DCCCSP art. 7. 
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European Union 

Jenny Gesley 

Foreign Law Specialist

SUMMARY The European Union (EU) is currently reviewing existing EU financial legislation, how 

those rules apply to cryptoassets and initial coin offerings (ICOs), and whether EU-level 

action is necessary. The European Banking Authority (EBA) and the European 

Securities and Markets Authority (ESMA) issued their respective reports on the 

suitability of the EU regulatory framework in January 2019. ESMA supported the 

introduction of EU-wide rules for cryptoassets to ensure investor protection and have 

a level playing field, as most cryptoassets do not qualify as financial instruments under 

EU financial law. EBA concluded that most cryptoasset-related activities are not 

covered by EU financial services regulation and that Member States apply divergent 

approaches, which poses risks to consumers. It therefore recommended to the European 

Commission the performance of a comprehensive cost-benefit analysis to determine 

what, if any, action is required at the EU level at this stage. 

 With regard to anti-money laundering legislation, the EU amended its Anti-Money 

Laundering Directive (AMLD) in July 2018 and brought custodian wallet providers and 

virtual-currency exchange platforms within the scope of the AMLD. In their reports 

EBA and ESMA recommended also bringing crypto-to-crypto exchanges and providers 

of financial services for ICOs within the scope of the AMLD, taking into account the 

recommendations of the Financial Action Task Force (FATF). 

I. Approach to Assets Created through Blockchain 

The European Union (EU) is currently reviewing existing EU financial legislation and how those 

rules apply to cryptoassets and initial coin offerings (ICOs). The European Commission is 

carrying out this work together with the European Supervisory Authorities (ESAs), meaning the 

European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and 

the European Insurance and Occupational Pensions Authority (EIOPA). In its 2018 FinTech 

Action Plan, it tasked the ESAs to assess the suitability of the EU regulatory framework with 

regard to ICOs and cryptoassets.1 EBA and ESMA issued their respective reports in January 2019.2

The Commission is also monitoring developments together with international partners such as 

 

1 Communication from the Commission to the European Parliament, the Council, the European Central Bank, the 

European Economic and Social Committee and the Committee of the Regions. FinTech Action Plan: For a More 

Competitive and Innovative European Financial Sector, COM (2018) 109 final (Mar. 8, 2018), at 7, https://eurlex.europa.eu/resource.html?uri=cellar:6793c578-22e6-11e8-ac73-01aa75ed71a1.0001.02/DOC_1&format=PDF, 

archived at https://perma.cc/F7NP-YPCP.

2 EBA, REPORT WITH ADVICE FOR THE EUROPEAN COMMISSION ON CRYPTO-ASSETS (Jan. 9, 2019) (EBA REPORT), 

https://eba.europa.eu/documents/10180/2545547/EBA+Report+on+crypto+assets.pdf, archived at 

http://perma.cc/8NRJ-ANXR; ESMA, ADVICE. INITIAL COIN OFFERINGS AND CRYPTO-ASSETS (Jan. 9, 2019)

(ESMA REPORT), https://www.esma.europa.eu/file/49978/download?token=56LqdNMN, archived at

http://perma.cc/2GRY-J8BG. 
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the Financial Stability Board (FSB) and G20 as well as the European Central Bank (ECB) to 

determine if regulatory action at the EU level is necessary.3

Several laws are relevant to the regulatory treatment of cryptoassets and other assets created 

through blockchain, in particular the Market in Financial Instruments Directive (MiFID 2),4 the 

Second Electronic Money Directive (EMD2),5 the Second Payment Services Directive (PSD2),6 and 

the EU Anti-Money Laundering Directive (AMLD).7

A. Financial Regulation and Consumer Protection 

ESMA’s mission is to enhance investor protection and promote stable and effective financial 

markets.8 It is authorized to provide opinions to the Union institutions on all issues related to its 

area of competence.9

 

3 Cryptocurrencies, EUROPEAN COMMISSION, BANKING AND FINANCE NEWSLETTER (Apr. 27, 2018), https://ec. 

europa.eu/newsroom/fisma/item-detail.cfm?item_id=624021&utm_source=fisma_newsroom&utm_medium= 

Website&utm_campaign=fisma&utm_content=Cryptocurrencies&lang=en, archived at http://perma.cc/ 

W8RW-ERWV. 

4 Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on Markets in Financial 

Instruments and Amending Directive 2002/92/EC and Directive 2011/61/EU (recast) (MiFID 2), art. 4, para. 1, 

no. (15), 2014 O.J. (L 173) 349, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014 

L0065&from=EN, archived at http://perma.cc/8QGS-X6SM.

5 Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the Taking 

Up, Pursuit and Prudential Supervision of the Business of Electronic Money Institutions Amending Directives 

2005/60/EC and 2006/48/EC and Repealing Directive 2000/46/EC (Second Electronic Money Directive, 

EMD2), 2009 O.J. (L 267) 7, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009 

L0110&from=EN, archived at http://perma.cc/5Z9Q-RZTK. 

6 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on Payment 

Services in the Internal Market, Amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and 

Regulation (EU) No 1093/2010, and Repealing Directive 2007/64/EC (Second Payment Services Directive, 

PSD2), 2015 O.J. (L 337) 35, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015 

L2366&from=EN, archived at http://perma.cc/K52R-KG4C. 

7 Consolidated Version of the Directive (EU) 2015/849 of the European Parliament and of the Council of 20 

May 2015 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, Amending Regulation (EU) No. 648/2012 of the European Parliament and of the Council, 

and Repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission 

Directive 2006/70/EC (Anti-Money Laundering Directive, AMLD), 2015 O.J. (L 141) 73, https://eur-lex. 

europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02015L0849-20180709&qid=1552510550346&from=EN, 

archived at http://perma.cc/W7KN-PCPM. 

8 Consolidated Version of Regulation (EU) No. 1095/2010 of the European Parliament and of the Council of 24 

November 2010 Establishing a European Supervisory Authority (European Securities and Markets Authority), 

Amending Decision No. 716/2009/EC and Repealing Commission Decision 2009/77/EC (ESMA Regulation), 

art. 1, para. 5, art. 8, 2010 O.J. (L 331) 84, https://www.esma.europa.eu/sites/default/files/library/2015/ 

11/1095-2010_esma_regulation_amended.pdf, archived at http://perma.cc/2GFP-ZCMF. 

9 ESMA Regulation, supra note 8, art. 34. 
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It achieves these objectives through four activities: 

 assessing risks to investors, markets and financial stability; 

 completing a single rulebook for EU financial markets; 

 promoting supervisory convergence; and 

 directly supervising specific financial entities.10

ESMA in its report reviewed the applicability of EU financial securities laws to cryptoassets, in 

particular whether they qualify as financial instruments under MiFID 2.11 It supports the 

introduction of EU-wide rules for cryptoassets to ensure investor protection and have a level 

playing field. ESMA’s Chair, Steven Maijoor, summarized the findings of ESMA’s report 

as follows: 

Our survey of NCAs [National Competent Authorities] highlighted that some cryptoassets may qualify as MiFID financial instruments, in which case the full set of EU financial 

rules would apply. However, because the existing rules were not designed with these 

instruments in mind, NCAs face challenges in interpreting the existing requirements and 

certain requirements are not adapted to the specific characteristics of crypto-assets. 

Meanwhile, a number of crypto-assets fall outside the current financial regulatory 

framework. This poses substantial risks to investors who have limited or no protection 

when investing in those crypto-assets. 

In order to have a level playing field and to ensure adequate investor protection across the 

EU, we consider that the gaps and issues identified would best be addressed at the 

European level.12

EBA “works to ensure effective and consistent prudential regulation and supervision across the 

European banking sector. Its overall objectives are to maintain financial stability in the EU and to 

safeguard the integrity, efficiency and orderly functioning of the banking sector.”13 In addition, 

it is tasked with consumer protection in relation to financial products and services offered by 

 

10 Id. art. 8; Press Release, ESMA, Crypto-Assets Need Common EU-Wide Approach to Ensure Investor 

Protection (Jan. 9, 2019), at 2, https://www.esma.europa.eu/file/49980/download?token=_GEsHR5L, archived 

at http://perma.cc/648L-6FB6. 

11 ESMA REPORT, supra note 2, at 18, nos. 76, 77. 

12 Crypto-Assets Need Common EU-Wide Approach to Ensure Investor Protection, ESMA (Jan. 9, 2019), 

https://www.esma.europa.eu/press-news/esma-news/crypto-assets-need-common-eu-wide-approachensure-investor-protection, archived at http://perma.cc/SYW5-BVT7. 

13 About Us, EBA, https://eba.europa.eu/about-us;jsessionid=75D0A8C75C63907C8EFC856A802664C1 (last 

visited Apr. 2, 2019), archived at http://perma.cc/M37G-RSVU; Consolidated Version of Regulation (EU) No. 

1093/2010 of the European Parliament and of the Council of 24 November 2010 Establishing a European 

Supervisory Authority (European Banking Authority), Amending Decision No. 716/2009/EC and Repealing 

Commission Decision 2009/78/EC (EBA Regulation), 2010 O.J. (L 331) 12, https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:02010R1093-20160112&qid=1552588821407&from=EN, archived at

http://perma.cc/3U3S-ESRS. 
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payment institutions, e-money issuers, and mortgage credit providers.14 Like ESMA, it is 

authorized to provide opinions to the Union institutions in its area of competence.15

The EBA opinion reviewed the applicability of financial services regulation to cryptoassets, in 

particular the applicability of the Second Electronic Money Directive (EMD2)16 and the Second 

Payment Services Directive (PSD2),17 and issues arising in relation to cryptoasset custodian wallet 

provision; the risks of money laundering and terrorism financing arising from virtual assets; and 

the extent to which institutions engage in activities involving cryptoassets.18 It concluded that 

current cryptoasset-related activity in the EU in this area is relatively limited and therefore not a 

threat to financial stability.19 However, as most cryptoasset-related activities are not covered by 

EU legislation in this area and Member States apply divergent approaches, risks exist for 

consumers. It therefore recommended to the European Commission the performance of 

a comprehensive cost/benefit analysis to determine what, if any, action is required at the 

EU level at this stage to address these issues, specifically with regard to the opportunities 

and risks presented by crypto-asset activities and new technologies that may entail the use 

of crypto-assets. The EBA also advises the European Commission to have regard to the 

latest recommendations and any further standards or guidance issued by the Financial 

Action Task Force (FATF) and to take steps where possible to promote consistency in the 

accounting treatment of crypto-assets.20

B. Anti-Money Laundering Law 

On July 9, 2018, the amendment of the EU Anti-Money Laundering Directive (5th AMLD) entered 

into force.21 Member States must transpose the new rules into national law by January 10, 2020.22

The AMLD obligates credit institutions, financial institutions, and certain other entities to fulfill 

customer due diligence requirements when they conduct business transactions and have in place 

 

14 EBA, THE EUROPEAN BANKING AUTHORITY AT A GLANCE 3 (2016), https://eba.europa.eu/documents/10180/ 

1401372/EBA+AT+A+GLANCE.pdf/e8686db2-6390-4c52-ad06-bc8d24b7aeb5, archived at

http://perma.cc/D8HE-GUDH. 

15 EBA Regulation, supra note 13, art. 34. 

16 EMD2, supra note 5. 

17 PSD2, supra note 6. 

18 EBA, supra note 2, at 6, no. 4. 

19 Id. at 4. 

20 Id. The FATF is an inter-governmental body that “set[s] standards and promote[s] effective implementation 

of legal, regulatory and operational measures for combating money laundering, terrorist financing and other 

related threats to the integrity of the international financial system.” FATF, WHO WE ARE, http://www.fatfgafi.org/about/whoweare/ (last visited Apr. 15, 2019), archived at https://perma.cc/3EJ6-RC4C. 

21 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive 

(EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or 

Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), 2018 O.J. (L 156) 

43, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN, archived at

http://perma.cc/JV7W-64Y5; Consolidated Version of the AMLD, supra note 7. 

22 5th AMLD, art. 4, para. 1. 
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policies and procedures to detect, prevent, and report money laundering and terrorist financing.23

The amendment, among other things, extended the customer due diligence requirements to 

custodian wallet providers and virtual-currency exchange platforms that exchange virtual 

currencies for fiat currencies and vice versa.24

The amendment defines “virtual currencies” as “a digital representation of value that is not 

issued or guaranteed by a central bank or a public authority, is not necessarily attached to a 

legally established currency and does not possess a legal status of currency or money, but is 

accepted by natural or legal persons as a means of exchange and which can be transferred, stored 

and traded electronically.”25 A “custodian wallet provider” is defined as “an entity that provides 

services to safeguard private cryptographic keys on behalf of its customers, to hold, store and 

transfer virtual currencies.”26 

Both EBA and ESMA support bringing crypto-to-crypto exchanges and providers of financial 

services for ICOs within the scope of the AMLD, taking into account the recommendations of the 

Financial Action Task Force (FATF).27

C. Taxation 

In general, collecting taxes falls within the competences of the individual EU Member States. 

However, the EU has some limited competences to harmonize Member States’ rules if 

harmonization is necessary to ensure the establishment and the functioning of the internal market 

and to avoid distortion of competition. An example would be the harmonization of Member 

States’ rules in the area of indirect taxation,28 such as value-added tax (VAT).29 On October 22, 

2015, the European Court of Justice (ECJ) held in its Hedqvist decision that transactions to 

exchange a traditional currency for bitcoin or other virtual currencies and vice versa constitute 

the supply of services for consideration, which are generally subject to VAT, but fall under the 

 

23 AMLD, arts. 2, 8. 

24 Id. art. 2, para. 1(3)(g), art. 2, para. 1(3)(h). For an overview of the other amendments, see Jenny Gesley, 

European Union: 5th Anti-Money Laundering Directive Enters into Force, GLOBAL LEGAL MONITOR (July 16, 2018), 

http://www.loc.gov/law/foreign-news/article/european-union-5th-anti-money-laundering-directive-entersinto-force/, archived at http://perma.cc/98W8-TJQV. 

25 AMLD, art. 3, para. 18. 

26 Id. art. 3, para. 19. 

27 ESMA REPORT, supra note 2, at 36, no. 169; EBA, supra note 2, at 21, nos. 48 & 49. 

28 Consolidated Version of the Treaty on the Functioning of the European Union (TFEU), art. 113, 2016 O.J. 

(C 202) 1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12016E/TXT&from=EN, 

archived at http://perma.cc/7755-NL2S. 

29 Council Directive 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax, 2006 O.J. 

(L 347) 1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32006L0112&from=EN, 

archived at http://perma.cc/8UU8-VFYM. 
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exemption from VAT.30 Buying or selling bitcoin is therefore exempt from VAT in all EU 

Member States. 

II. Custodianship of Cryptocurrencies by Financial Institutions 

EU financial law does not contain a definition of safekeeping and record keeping of ownership 

of securities.31 There are many different entities involved. The rules at the issuer level are 

regulated in the corporate laws of the EU Member States, whereas the investor-level rules vary 

depending on which type of EU financial legislation applies.32 With regard to cryptoassets, ESMA 

in its report defines safekeeping services as “having control of private keys on behalf of clients.”33

These custodians would then have to ensure the safekeeping and segregation of client assets. 

However, ESMA points out that this requires “further consideration” as there might be other 

relevant factors, and the safekeeping of cryptoassets may take different forms.34 In addition, it 

suggests that regulators look into the issue of multiwallet providers.35 

III. Regulation of Cryptocurrencies as Financial Securities 

ESMA in its report reviewed whether cryptoassets qualify as financial instruments under 

MiFID 2. It defined “cryptoassets” as “a type of private asset that depends primarily on 

cryptography and Distributed Ledger Technology as part of their perceived or inherent value” 

and that is “neither issued nor guaranteed by a central bank.”36 ESMA uses the term to refer to 

both virtual currencies and digital tokens issued through ICOs.37 It notes that there is currently 

no legal definition of cryptoassets in EU financial securities laws.38

MiFID II defines “financial instruments” as “those instruments specified in Section C of Annex 

I.”39 Among others, these instrument include “transferable securities,” defined as “those classes 

of securities which are negotiable on the capital market, with the exception of instruments of 

payment.”40 In order to review whether cryptoassets qualify as financial instruments, in 

particular as transferable securities, ESMA surveyed the National Competent Authorities (NCAs) 

of the Member States, gave them a sample set of six cryptoassets issued in an ICO, and asked 

 

30 Id. arts. 2, 24, 135; Case C-264/14, Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718, paras. 30, 53, 

http://curia.europa.eu/juris/celex.jsf?celex=62014CJ0264&lang1=en&type=TXT&ancre, archived at 

https://perma.cc/7Q6Q-MM9V. 

31 ESMA REPORT, supra note 2, at 34, no. 162. 

32 Id.

33 Id. at 35, no. 164. 

34 Id.

35 Id. 

36 Id. at 7, no. 17. 

37 Id. 

38 Id. at 18, no. 77. 

39 MiFID II, supra note 4, art. 4, para. 1(15). 

40 Id. art. 4, para. 1(44). 
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them whether they would qualify as financial instruments under national law.41 It pointed out 

that the classification of a cryptoasset as a financial instrument falls within the competence of the 

respective NCA and varies depending on the national implementation of MiFID 2.42 A majority 

of NCAs determined that cryptoassets with attached profit rights qualify as transferable 

securities.43 No NCA labelled the sample case of a pure utility-type cryptoasset as a financial 

instrument.44 For hybrid cryptoassets, the financial instrument features mostly prevailed.45

Member States that defined the categories for financial instruments broader than in MiFID 2 and 

included instruments with an investment purpose or expectation of returns were able to capture 

more of the sample cryptoassets than the other NCAs.46 The NCAs agreed that cryptoassets 

should be subject to some type of regulation; however, at a minimum cryptoasset-related 

activities must be subject to anti-money laundering laws.47

If a cryptoasset is qualified as a financial instrument, several legal provisions will potentially 

apply to them, among them the Prospectus Directive (PD),48 the Transparency Directive (TD),49

the Market in Financial Instruments Directive framework (MiFID II),50 the Market Abuse 

 

41 ESMA REPORT, supra note 2, at 19, no. 80. 

42 Id. at 19, no. 81. 

43 Id. at 20, no. 85. 

44 Id. at 20, no. 86. 

45 Id. at 20, no. 85. 

46 Id. at 20, no. 87. 

47 Id. at 21, no. 49. 

48 Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the Prospectus 

to be Published when Securities are Offered to the Public or Admitted to Trading and Amending Directive 

2001/34/EC (Prospectus Directive), 2003 O.J. (L 345) 64, https://eur-lex.europa.eu/legal-content/EN/ 

TXT/PDF/?uri=CELEX:32003L0071&from=EN, archived at http://perma.cc/H3PZ-7PSD. 

49 Consolidated Version of Directive 2004/109/EC of the European Parliament and of the Council of 15 

December 2004 on the Harmonisation of Transparency Requirements in Relation to Information About Issuers 

Whose securities are Admitted to Trading on a Regulated Market and Amending Directive 2001/34/EC 

(Transparency Directive, TD), 2004 O.J. (L 390) 38, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/? 

uri=CELEX:02004L0109-20131126&qid=1553004898571&from=EN, archived at http://perma.cc/D7GC-WVG9. 

50 The MiFID II framework consists of MiFID 2, supra note 4; the Regulation (EU) No. 600/2014 of the European 

Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments and Amending Regulation 

(EU) No 648/2012 (MiFIR), 2014 O.J. (L 173) 84, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/? 

uri=CELEX:32014R0600&from=EN, archived at http://perma.cc/6VEV-C4X5; and their implementing acts. For 

more information on the MiFID II framework, see Catharina Schmidt, European Union: New EU Legislative 

Framework to Regulate Financial Markets Enters into Force, GLOBAL LEGAL MONITOR (Feb. 27, 2018), http://www. 

loc.gov/law/foreign-news/article/european-union-new-eu-legislative-framework-to-regulate-financialmarkets-enters-into-force/, archived at http://perma.cc/UYB8-WN4R. 
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Regulation (MAR),51 the Settlement Finality Directive (SFD),52 the Central Securities Depositories 

Regulation (CSDR),53 the Alternative Investment Fund Managers Directive (AIFMD),54 the 

Directive on Investor-Compensation Schemes,55 and the 5th AMLD.56

A. Prospectus Directive 

The Prospectus Directive (PD), which will be repealed and replaced by the Prospectus Regulation 

(PR)57 in July 2019, requires that a prospectus must be published before transferable securities are 

offered to the public or before such securities are admitted to trading on a regulated market in 

the EU. Some provisions of the PR already came into force in July 2018.58 The requirement to 

publish a prospectus for cryptoassets offered to the public in an ICO therefore only applies if they 

are qualified as transferable securities.59 Depending on the size of the offer, some cryptoassets 

might be exempt from the obligation to publish a prospectus (the threshold for which is €1 million 

(about US$1.12 million)) and only be subject to disclosure requirements.60 When a prospectus has 

 

51 Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market 

Abuse (Market Abuse Regulation) and Repealing Directive 2003/6/EC of the European Parliament and of the 

Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Market Abuse Regulation, 

MAR), 2014 O.J. (L 173) 1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:3201 

4R0596&from=EN, archived at http://perma.cc/GAJ8-3GB7. 

52 Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 Amending Directive 

98/26/EC on Settlement Finality in Payment and Securities Settlement Systems and Directive 2002/47/EC on 

Financial Collateral Arrangements as Regards Linked Systems and Credit Claims (SFD), 2009 O.J. (L 146) 37, 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0044&from=EN, archived at 

http://perma.cc/2AA2-3JQY. 

53 Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on Improving 

Securities Settlement in the European Union and on Central Securities Depositories and Amending Directives 

98/26/EC and 2014/65/EU and Regulation (EU) No. 236/2012 (CSDR), 2014 O.J. (L 257) 1, https://eur-lex. 

europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0909&from=EN, archived at 

http://perma.cc/YSG2-MS2C. 

54 Consolidated Version of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 

on Alternative Investment Fund Managers and Amending Directives 2003/41/EC and 2009/65/EC and 

Regulations (EC) No. 1060/2009 and (EU) No. 1095/2010 (AIFMD), 2011 O.J. (L 174) 1, https://eur-lex. 

europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02011L0061-20190113&qid=1553025823876& from=EN, 

archived at http://perma.cc/DN4V-WPLT. 

55 Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on InvestorCompensation Schemes, 1997 O.J. (L 84) 22, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/? 

uri=CELEX:31997L0009&from=EN, archived at http://perma.cc/UAA8-YKMG. 

56 5th AMLD, supra note 21. 

57 Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the Prospectus 

to be Published When Securities are Offered to the Public or Admitted to Trading on a Regulated Market, and 

Repealing Directive 2003/71/EC (Prospectus Regulation, PR), 2017 O.J. (L 168) 12, https://eur-lex.europa. 

eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R1129&from=EN, archived at http://perma.cc/56QMTCA9. 

58 Id. art. 49, para. 2. 

59 ESMA REPORT, supra note 2, at 23, no. 96. 

60 Id. at 23, no. 97; PR, art. 1, para. 3. 
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to be published, it must contain the necessary information to enable an investor to make an 

informed decision about the financial condition of the issuer, meaning in the case of cryptoassets 

“detailed information on the issuer’s venture, the features and rights attached to the crypto-assets 

being issued, the terms and conditions and expected timetable of the offer, the use of the proceeds 

of the offer and the specific risks related to the underlying technology.”61 However, there are no 

specific schedules for ICOs unlike for IPOs, so that existing schedules must be adapted to the 

ones that they mostly resemble.62 

B. Transparency Directive 

The Transparency Directive (TD) objective is to improve information supplied to investors about 

issuers of securities admitted to trading on a regulated market in the EU. It therefore requires the 

disclosure of periodic and ongoing information about issuers—for example, annual financial 

reports.63 Like MiFID 2, it only applies to transferable securities, meaning that issuers of 

cryptoassets that are qualified as transferable securities must comply with these 

disclosure obligations.64

C. Markets in Financial Instruments Directive Framework 

The MiFID II framework obligates companies that provide investment services or activities in 

relation to financial instruments to register as an investment firm and comply with the legal 

requirements set out in MiFID II.65 According to the ESMA report, the following cryptoassetrelated activities will most likely qualify as investment services: “placing, dealing on own 

account, operating an MTF [Multilateral Trading Facility] or OTF [Organized Trading Facility] or 

providing investment advice.”66 The report focuses on the applicability of MiFID II to cryptoasset 

trading platforms as the most common type of intermediaries. These platforms are generally 

divided into three categories: 

 those that have a central order book and/or match orders under other trading models; 

 those whose activities are similar to those of brokers/dealers; and 

 those that are used to advertise buying and selling interests.67

Category 1 platforms are qualified as multilateral systems and should therefore either operate as 

Regulated Markets (RMs) or as MTFs or OTFs.68 Category 2 platforms must adhere to the 

requirements set out in Title II of MiFID 2 for broker/dealers, whereas the third category of 

 

61 ESMA Report, supra note 2, at 23, no. 98. 

62 Id. at 23, no. 99. 

63 TD, supra note 49, art. 1, para. 1. 

64 Id. art. 2, para. 1(a); ESMA REPORT, supra note 2, at 24, no. 102. 

65 MiFID 2, supra note 4, arts. 1, 5. 

66 ESMA REPORT, supra note 2, at 24, no. 103. 

67 Id. at 24, no. 105. 

68 Id. at 25, no. 106. 
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platforms falls outside of the scope of MiFID II.69 Cryptoasset trading platforms that are covered 

by the MiFID II framework must comply with several requirements—for example, minimum 

capital requirements, organizational requirements, investor protection provisions, rules for 

transparent and nondiscriminatory access to MTFs, OTFs, and RMS, pre- and post-trade 

transparency rules, and transaction reporting and obligations to maintain records, 

among others.70 

The ESMA report identified the following gaps and issues that arise from the application of the 

MiFID II framework to cryptoassets: 

 Disintermediated access to cryptoasset trading platforms: Checks on the reputation, sufficient 

level of trading ability, competence, experience, adequate organizational arrangements, and 

resources of members or participants “may be time and resource intensive for the platforms 

in the case of individual investors, because of their large number, and many individual 

investors may not pass those tests.” 

 Pre- and post-trade transparency provisions: These rules are designed for equity and 

nonequity instruments and not all Member States will qualify cryptoassets as such, which 

would result in divergent transparency rules across Member States. 

 Transaction reporting and obligations to maintain records: The rules were designed to capture 

traditional instruments, and standards must be adapted to cryptoassets. 

 Platforms with decentralized business models: The lack of a clearly identified operator and 

the reliance on self-executing pieces of code raise specific issues. 

 Hybrid platforms: There is a need to clarify the types of investment services they 

can provide.71

D. The Market Abuse and Short-Selling Regulation 

The Market Abuse Regulation (MAR) prohibits insider dealing and the disclosure of inside 

information and market manipulation (market abuse) with regard to financial instruments that 

are traded or admitted to trading on a trading venue, MTF, or OTF.72 The MAR would apply to 

such cryptoassets, which means that several arrangements, systems, and procedures to prevent, 

detect, and report market abuse have to be put in place.73 ESMA recommends that for the next 

revision of the MAR, the EU should look into whether the price of a financial instrument could 

be influenced through manipulative trading activity in cryptoassets that do not qualify as 

financial instruments.74 Furthermore, it warns that “new actors may hold new forms of inside 

 

69 Id. at 25, no. 107; MiFIR, supra note 50, recital 8. 

70 ESMA REPORT, supra note 2, at 25-28. 

71 Id. at 28, nos. 127-131. 

72 MAR, supra note 51, arts. 1, 2. 

73 ESMA REPORT, supra note 2, at 29, no. 133. 

74 Id. at 29, no. 134. 
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information, such as miners and wallet providers, which could potentially be used to manipulate 

the trading and settlement of crypto-assets.”75

Where a position in a cryptoasset that qualifies as a financial instrument confers a financial 

advantage in the event of a decrease in the price or value of a share or sovereign debt, the Short 

Selling Regulation applies.76 However, the determination of net short positions is dependent on 

the list of financial instruments included in Annex I of the Commission Delegated Regulation 

(EU) 918/2012.77 ESMA proposes to explicitly include cryptoassets in that list.78

E. Settlement Finality Directive and Central Securities Depositories Regulation 

The Settlement Finality Directive (SFD) and the Central Securities Depositories Regulation 

(CSDR) apply to settlement activities.79 The objective of the SFD is to reduce systemic risk in 

payment, clearing, and securities settlement systems, in particular with regard to insolvency.80

The CSDR aims to “harmonize certain aspects of the settlement cycle, [implement] settlement 

discipline and provide a set of common requirements for CSDs [central securities depositories] 

operating securities settlement systems in order to enhance cross border settlement in the EU.”81

The ESMA report points out various issues when the trading platform or the DLT network for 

cryptoassets qualifies as a securities settlement system, among them 

 whether a market operator can be identified in the case of decentralized business models; 

 the role of miners under the CSDR; 

 that participants to a securities settlement system cannot be individuals as is the case for most 

cryptoasset trading platforms and DLT networks; 

 

75 Id. at 29, no. 135. 

76 Id. at 30, no. 138; Regulation (EU) No. 236/2012 of the European Parliament and of the Council of 14 March 

2012 on Short Selling and Certain Aspects of Credit Default Swaps (Short Selling Regulation), 2012 O.J. (L 86) 1, 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32012R0236&from=EN, archived at 

http://perma.cc/2R73-PNFZ. 

77 Commission Delegated Regulation (EU) No 918/2012 of 5 July 2012 Supplementing Regulation (EU) No. 

236/2012 of the European Parliament and of the Council on Short selling and Certain Aspects of Credit Default 

Swaps with Regard to Definitions, the Calculation of Net Short Positions, Covered Sovereign Credit Default 

Swaps, Notification Thresholds, Liquidity Thresholds for Suspending Restrictions, Significant Falls in the 

Value of Financial Instruments and Adverse Events, 2012 O.J. (L 274) 1, https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32012R0918&from=EN, archived at http://perma.cc/NJ4X-76KF. 

78 ESMA REPORT, supra note 2, at 30, no. 139. 

79 Id. at 30, no. 141. 

80 Id.; SFD, supra note 52. 

81 ESMA REPORT, supra note 2, at 30, no. 142; CSDR, supra note 53. 
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 potential issues in relation to settlement finality and Delivery versus Payment (DvP) in a 

DLT environment; and 

 timeline requirements set by CSDR.82

F. Alternative Investment Fund Managers Directive 

The Alternative Investment Fund Managers Directive (AIFMD) “lays down the rules for the 

authorisation, ongoing operation and transparency of the managers of alternative investment 

funds (AIFMs) which manage and/or market alternative investment funds (AIFs) in the Union.”83

Several NCAs told ESMA that some of the sample cryptoassets would qualify as collective 

investment undertakings, most likely AIFs under national law.84 However, ESMA states that 

further research needs to be conducted to determine whether the AIFMD applies to these cases.85

G. Directive on Investor-Compensation Schemes 

If an investment firm is no longer financially able to meet its obligations, investors will receive 

compensation under the Directive on Investor-Compensation Schemes.86 The Directive applies to 

all MiFID firms that deal with MiFID financial instruments. 

IV. Treatment of Cryptoassets Not Considered Securities 

EBA in its report reviewed whether EU financial services law applies to cryptoassets, in particular 

whether they qualify as “electronic money” within the Second Electronic Money Directive 

(EMD2) or as “funds” within the Second Payment Services Directive (PSD2).87 It emphasized that 

the report did not focus solely on cryptoassets that are used as a means of exchange as earlier 

reports did.88 For purposes of the report, it defined the term “cryptoasset” as 

an asset that depends primarily on cryptography and distributed ledger technology (DLT) 

or similar technology as part of its perceived or inherent value, is neither issued nor 

guaranteed by a central bank or public authority, and can be used as a means of exchange 

and/or for investment purposes and/or to access a good or service.89

 

 

82 ESMA REPORT, supra note 2, at 31, nos. 147-150. 

83 AIFMD, supra note 54, art. 1. 

84 ESMA REPORT, supra note 2, at 35, no. 166. 

85 Id. 

86 Directive on Investor-Compensation Schemes, supra note 55, art. 2. 

87 EBA REPORT, supra note 2, at 6, nos. 3, 4; EMD2, supra note 5; PSD2, supra note 6. 

88 EBA REPORT, supra note 2, at 11, no. 16. 

89 Id. at 10, no. 15. 
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A. Second Electronic Money Directive 

The Second Electronic Money Directive (EMD2) defines “electronic money” as 

electronically, including magnetically, stored monetary value as represented by a claim on 

the issuer which is issued on receipt of funds for the purpose of making payment 

transactions as defined in point 5 of Article 4 of Directive 2007/64/EC [PSD2], and which 

is accepted by a natural or legal person other than the electronic money issuer.90 

The EBA report found that, depending on their characteristics, certain cryptoassets will qualify 

as electronic money under the EMD2. The issuers of these cryptoassets would require an 

authorization as an electronic money institution, unless a limited network exception applies.91

The following was provided as an example of a proposed business model involving a cryptoasset 

that was qualified as electronic money by one or more NCAs: 

Company A wishes to create a Blockchain-based payment network. The network is open 

meaning that both merchants and consumers can participate. Company A explains that it 

intends to issue a token which is intended to be the means of payment in the network. The 

token is issued on the receipt of fiat currency and is pegged to the given currency (e.g. EUR 

1 to 1 token). The token can be redeemed at any time. The actual payment on this network 

is the underlying claim against Company A or the right to get the claim redeemed.92

B. Second Payment Services Directive 

The Second Payment Services Directive (PSD2) puts in place rules for different categories of 

payment service providers.93 It defines “funds” as “banknotes and coins, scriptural money or 

electronic money as defined in point (2) of Article 2 of Directive 2009/110/EC [EMD2].” The EBA 

report states that if cryptoassets are categorized as electronic money and are used to provide a 

payment service, PSD2 would apply.94 

C. Recommendations 

EBA advises the European Commission to carry out a cost-benefit analysis and, if necessary, to 

develop proposals for EU-level action.95 It recommends taking a holistic and balanced approach 

as well as an activities-based approach, focusing on the interconnectedness of cryptoasset 

activities with the traditional financial system and with consumers, and trying to achieve a 

coordinated international response.96

 

90 EMD2, supra note 5, art. 2, no. 2. 

91 Id. art. 3, para. 1, art. 9; EBA REPORT, supra note 2, at 14, no. 24. 

92 EBA REPORT, supra note 2, at 13. 

93 PSD2, supra note 6, art. 1, para. 1. 

94 Id. art. 4, no. 25, Annex I; EBA REPORT, supra note 2, at 14, nos. 25, 26. 

95 EBA REPORT, supra note 2, at 18, no. 40. 

96 Id. 
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V. Distinctions in Treatment of Different Categories of Cryptocurrencies 

ESMA pointed out that most cryptoassets will not qualify as financial instruments or be covered 

by EU financial services rules, and investors will therefore not benefit from investor protection 

rules.97 However, most investors will not be aware that most cryptoassets are not subject to these 

rules, especially when they are traded on the same venues. Instead of national regimes for 

cryptoassets, ESMA suggests a bespoke regime on an EU level for cryptoassets that do not qualify 

as financial instruments, as well as for pure utility-type cryptoassets and certain payment-type 

cryptoassets.98 In addition, there is a consensus among ESMA, EBA, and the NCAs that all 

activities involving cryptoassets should be subject to the AMLD.99 ESMA “advises to focus the 

regime for crypto-assets that are not financial instruments on warning buyers about the risks of 

those crypto-assets, instead of a more elaborate regime that could legitimise crypto-assets and 

bring them into a similar regulatory remit as the one for crypto-assets that are 

financial instruments.”100

EBA’s report states that “it appears that a significant portion of activities involving crypto-assets 

do not fall within the scope of current EU financial services law (but may fall within the scope of 

national laws).”101 Like ESMA, it therefore sees potential issues regarding consumer protection, a 

level playing field, and divergent national approaches.102

 

97 ESMA REPORT, supra note 2, at 39, no. 179. 

98 Id. at 40, no. 182. 

99 Id. at 40, no. 183. 

100 Id. at 40, no. 185. 

101 EBA REPORT, supra note 2, at 15, no. 28. 

102 Id.