Every month, itBit scours the globe to bring you the latest in digital currency regulation and compliance news. Below, our Chief Compliance Officer, Erik Wilgenhof Plante, highlights the key regulations and legislation impacting retail and institutional digital currency investors around the world.
Digital Currency Transaction Reporting
On July 4, Argentina’s Unidad de Información Financiera (UIF) announced it was amending existing regulations to require financial institutions in Argentina to report all digital currency transactions. They must file these digital currency reports with the UIF every month.
Impact: The UIF intends to use the information to prevent bitcoin and other cryptocurrencies from being used for illegal means. The document further draws a distinction between virtual currency and electric money, the latter of which is already well regulated.
Bitcoin is a Financial Instrument
Poland’s deputy finance minister released a document July 9 confirming that bitcoin is considered a financial instrument under existing financial regulations. Wojciech Kowalczyk had been asked to clarify the legal status of bitcoin, namely whether options and futures contracts using digital currency as their base instrument can be considered as financial instruments. Kowalczyk responded in the affirmative, and confirmed that they could be made available to Polish investors in accordance with Poland’s banking services regulations.
The Catch: The Finance Ministry did maintain, however, that bitcoin is not a legally defined or universally accepted currency under the country’s regulations, since it is neither a national currency nor a foreign currency.
Digital Currency Regulations for Financial Institutions, Users
France has outlined regulations for financial institutions and users of digital currencies that will be put in place by the end of 2014. The Ministry for the Economy and Finance presented the new regulations on July 11, which require bitcoin distributors to identify and verify their users. Digital currency will also be subject to taxation; a threshold of €5,000 was proposed on the margin tax. Additionally, bitcoin exchanges that handle fiat currencies will be required to report all digital currency transactions and verify the identities of the parties involved.
What’s Next: Regulators must still further clarify the treatment of digital currencies in the national tax system, as well as determine a spending cap for digital currency transactions.
Ability to Seize Digital Currency from Criminals
On July 16, DutchNews reported that in the Netherlands, the Dutch public prosecution department has the ability to seize digital currency from criminals and put them in its own digital wallet. It can then cash in and sell the digital currencies after they’ve been confiscated.
Courts Pave the Way: This was made possible when several Dutch courts ruled that bitcoins are considered objects that may be subject to seizures during criminal investigations.
BitLicence Regulatory Framework
On July 17, the New York Department of Financial Services (NYDFS) released its proposed BitLicence regulatory framework for digital currency firms. The proposed regulations, submitted for a 45-day public comment period, include consumer protection, anti-money laundering compliance and cyber security rules.
What’s Next: After the 45-day period, the regulations may be revised based on feedback received. Digital currency firms will be required to follow these rules in order to receive a DFS BitLicense.
The Isle of Man
Existing Regulations and Digital Currencies
On July 18, the Isle of Man Financial Supervision Commission (FSC) issued a press release clarifying its application of existing regulations to digital currencies. Digital currency businesses are not subject to a conduct of business or prudential regime by the Commission unless they also carry on a regulated activity under the Financial Services Act of 2008, meaning there is no protection under the Act for consumers in the digital currency market.
Changes On The Horizon: The FSC is in the process of drafting the Designated Businesses (Registration and Oversight) Bill, which will allow it to oversee how digital currency businesses comply with the Island’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) legislation. The FSC is also planning amendments to the Proceeds of Crime Act of 2008 that would apply the AML/CFT legislation to the digital currency market.
Digital Currency Ban
On July 23, the government of Ecuador passed a bill that effectively banned bitcoin and other digital currencies.
Government Control: The bill also created an official Ecuadorian digital currency that is backed up by assets in the Central Bank of Ecuador. The government will be able to make payments with this digital currency, which will exist alongside Ecuador’s official currency.