A Toss of a (Bit)Coin: the Uncertain Nature of the Legal Status of Cryptocurrencies

Abstract

Regulating cryptocurrency is a difficult task for regulators. At present, there is no clear and authoritative definition of cryptocurrency, making it difficult for regulators to determine which aspects require regulation and, if so, how to control and monitor activities. Defining the legal nature of cryptocurrencies is important. At its most fundamental level the answer to these matters will determine the regulatory framework within which trading in cryptocurrencies may or may not occur. The government may simply prohibit trading in cryptocurrencies, even making such transactions illegal. Alternatively, trading may not only be legal, but facilitated by government concessions. A government may recognise cryptocurrencies as ‘currency’. It may be determined that transactions involving cryptocurrencies merely involve the sale of property, possibly akin to a financial product. This article discusses the different approaches to regulating cryptocurrency and the taxation implications in four Asian countries which account for a large proportion of cryptocurrency transactions.

Keywords: cryptocurrency, taxation, blockchain technology, fintech regulation, digital economy