As discussed in earlier parts, 2017 has been the breakthrough year for cryptocurrencies, with the cryptocurrency market growing in leaps and bounds both in terms of trading volume as well as perceived value across the globe. Thus, crypto-trading can no longer be considered just a “passing trend”, and the movement is spearheaded by Bitcoin as well as Ethereum’s increased value and popularity. The trend continues into 2018, with many other cryptocurrencies and altcoins sharing the limelight on the global stage.
For a trader, or investor, probably the most user-friendly and efficient way to acquire cryptocurrencies is by using a cryptocurrency exchange. Cryptocurrency exchanges have also grown in number to cater to a growing user-base of crypto-trading worldwide. However, the legal stance towards Bitcoin and cryptocurrencies can vary heavily from one nation to another, with some building up blockchain friendly frameworks for cryptocurrency integration, while others consider it illegal. Thus, it is absolutely crucial to take the legal status into account while choosing a particular cryptocurrency exchange.
Legality of Bitcoin and Cryptocurrency Exchanges in Different Nations
As mentioned before, almost all countries have their own legal framework while handling digital assets and cryptocurrencies. Traders and industry experts always warn traders not to select cryptocurrencies that operate in obscure parts of the world. The news has been full of instances where elaborate frauds disguised as cryptocurrency exchanges have duped unsuspecting traders and compromised their funds. In most cases, these exchanges fall outside the jurisdiction of the U.S. or Euro economic zones where regulations and consumer protection levels are weak. To further understand this, we will now discuss the legal stance of cryptocurrencies in major nations.
Source: Thomson Reuters
Countries Falling Under EU Jurisdiction: From 2018, the EU has still no specific laws in place that apply to Bitcoin and other cryptocurrencies, and thus are not recognized as a legitimate “currency”. On the other hand, the EU has stated that Bitcoin-to-fiat or crypto-to-fiat trading cannot be taxed and any type of VAT or GST is not applicable. This causes a level of ambiguity in the legal status of Bitcoin and cryptocurrency exchanges.
Bitcoin and Cryptocurrency Exchange Friendly Nations Under EU Zone
Bitcoin and Cryptocurrency Exchange Friendly Countries (Rest of the World)
|United Arab Emirates||Australia|
List of Countries Where Bitcoin and Cryptocurrency Exchanges are Illegal, or Heavily Regulated
|Algeria||Declared Illegal from 2017|
|Bolivia||Declared Illegal from 2014|
|Ecuador||Declared Illegal from 2017|
|Bangladesh||Declared Illegal from 2014|
|Nepal||Declared Illegal from 2017|
|Canada||Banking Ban in Place|
|Jordan||Banking Ban in Place|
|Iran||Banking Ban in Place|
|India||Banking Ban in Place|
|Thailand||Banking Ban in Place|
|Indonesia||Illegal as Payment|
|Vietnam||Illegal as Payment|
Choosing Cryptocurrency Exchanges by Nation
Given the level of growth experienced by the cryptocurrency Trading market, governments and other big stakeholders around the world are starting to take notice due to the unprecedented amount of investment received. For a trader while selecting a particular exchange, it is necessary to have a complete picture of the legal framework in place for handling digital assets and tokens. Exchanges by countries can be classified using two important criteria, namely,
- Number of exchanges based on Legal location: Referring to the registered nation of exchanges
- Highest Trading Volume of Exchanges Based on Physical location: Refers to the combined volume of cryptocurrency trading in each country.
- Number of exchanges based on Legal location: As stated in a study conducted by Morgan Stanley recently, The United Kingdom has the highest number of cryptocurrency exchanges Registered, followed by Hong Kong and The United States. A graphical representation is given below:
- The United Kingdom: The United Kingdom has the largest number of cryptocurrency exchanges registered as well as being one of the top 10 most actively traded markets in the world. This is surprising given that the market for Bitcoin in British Pounds is not one of the more liquid ones. A number of UK-registered Exchanges, such as CEX, Coin floor etc. has carved up much of a reputation among trading circles in the country. Most of these firms are registered under the Financial Conduct Authority (FCA). Notable Exchanges based in the Country Include:
- Hong Kong: Next in Line in Hong Kong, a special administrative region of the People’s Republic of China, with a population of over 7 million. It has a strong and free economy with its own currency, the Hong Kong Dollar. Bitcoin, along with other cryptocurrencies are categorized as a virtual commodity instead of “currency”, which makes it exempt from existing financial regulations. Also Hong Kong’s legal status as a free port has facilitated numerous cryptocurrency exchanges to set up base. Major Hong-Kong based exchanges include:
- United States: The United States is ranked third, with many Silicon Valley based enterprises involving themselves in blockchain based projects. Even though there are an abundance of crypto-exchanges in the region, the rules regarding Financial Technology vary from state to state. The states of Montana, Texas, Kansas, South Carolina and Tennessee are regarded as the most Cryptocurrency friendly states in the nation as compared to other states. Some of the U.S. based Cryptocurrency exchanges include:
- Highest Trading Volume of Exchanges Based on Physical location: The other aspect of judging cryptocurrencies based on countries is by considering the trading volume of a particular region. In recent times, a number of high profile exchanges have relocated their bases to the Island of Malta, citing cryptocurrency friendly rules as the major reason. To get the full picture, a graphical representation is presented below, courtesy Morgan Stanley
- Malta: The SouthEast European Island nation of Malta has been attracting widespread media attention lately, due to the influx of crypto-exchanges and other related organizations into the region. Recent events, such as Binance and OKEX shifting their bases to Malta have increased its potential for being the crypto-hub of Europe. The country is regarded as one of the most favorable destinations for cryptocurrency based startups and exchanges due to the Malta Digital Innovation Authority. The MDIA has taken steps for thorough verification and certification processes for crypto-based enterprises, including exchanges. Apart from Binance and OKEx, Malta is also home to BitBay and The Rock Trading Exchange.
- Belize is another nation which is fast gaining a reputation as one of the most cryptocurrency friendly nations in the world. The regulations are mostly relaxed, with some exchanges like Coinmama contemplating relocation to Belize. With friendly KYC and AML procedural methods, Belize has attracted many exchanges in recent times. The main financial authority responsible for imposing regulations is the International Financial Services Commission of the IFSC of Belize.
Other Nations Regarded as Crypto Hubs
Apart from the above mentioned list according to separate categories, several other nations have carved up a good reputation in the cryptocurrency world, particularly for housing major cryptocurrency exchanges. Some of the major nations are mentioned below.
- Japan: Japan is regarded as one of the earliest adopters of Bitcoins and cryptocurrencies in the world. Thus, it comes as no surprise that a lot of major exchanges are either based or registered in Japan. The existing laws in place categorize certain cryptocurrencies like Bitcoin as legal tender since 2017. This is in stark contrast with other South Asian nations including South Korea and China. Although the Japanese government had a negative stance towards unverified crypto-exchanges in the past, it has recently setup a framework that has eased regulations. The Japanese Financial Services Agency has already cleared 11 Cryptocurrency exchanges to officially operate. The list includes :
- Fisco Virtual Currency Exchange (part of Fisco)
- GMO Coin (part of GMO)
- Money Partners
- SBI Virtual Currencies (part of SBI)
- Tech Bureau
- Estonia: The small European Nation of Estonia is an early pioneer of block chain based projects, as well as Crypto-exchanges. This is a major reason why many exchanges in the past like BTC.ee have relocated to the nation. Currently HitBTC and SpectroCoin are two exchanges which serve the Estonian market specifically.
- Australia: Another Country that deserves a place in this list is Australia. The country is now being referred to as the “Cryptocurrency Continent” after a string of recent regulatory relaxations made the nation very “crypto-friendly”. The Australian Government has been very direct and positive in terms of regulations towards exchanges, enforcing strict regulations such as Exchange registrations as well as Tax declarations. However, the rules in place are considerably less stringent and much more relaxed compared to other nations. The country along with neighboring New Zealand is fast becoming a crypto-exchange hub, with exchanges such as ACX, BTCMarkets, Coinspot, Independent Reserve and CryptopiaNZ.
Continent Wise Exchange Distribution by Trading Volume
Selecting cryptocurrency exchanges on the basis of countries can protect a trader from being victimized by a ponzi scheme. Despite the surge in popularity of cryptocurrency trading, however, many national Governments have strict as well as ambiguous rules in place, which makes it hard to grasp the legal nuances of it. Thus, all such factors have to be considered before a trader makes the final choice.