Future of Cryptocurrency?

Money has been introduced by convention as a kind of substitute for a need or demand. Countries have their own currencies called Fiat currencies. This means most coin and paper currencies that are used globally are fiat money. This includes the dollar, the pound, and the euro. Sending fiat currencies around the world is difficult. Cryptocurrencies can be sent worldwide easily as they work without borders. Cryptocurrencies have the power to change our lives forever.

What is Cryptocurrency Acceptance Globally?

Cryptocurrency acceptance is still not clear as it’s a new kind of money and traditionally many countries believe in the centralized currency. The legal status of crypto is different from country to country. The main theme behind crypto is to establish a global currency so all countries can trade in one currency for international transfers even though they have their own centralized currency for local payments. Till now only two countries, El Salvador and the Central African Republic have adopted Bitcoin as their official currency. In 2021, El Salvador become the first country in the world to adopt bitcoin as an official currency followed by the Central African Republic which has to join the Bitcoin club with El Salvador in April 2022.

The future of Crypto is trying to get global recognition and therefore it is vital to understand its acceptance globally and how different regions view it as a currency.

What is a cryptocurrency, and how crypto was born and operated, please also read: https://accountingblogger.com/what-is-cryptocurrency-bitcoin/

What is Cryptocurrency? | Bitcoin | Digital Money | H. Atif

How is Cryptocurrency treated in regions?

It was reported that The U.S., China, and Canada had the largest number of citizens among ultra-rich crypto investors in 2022.

USA

The US has a patchwork of state-by-state regulations and there are different laws for cryptocurrency in different states many states are still yet to take a stance on cryptocurrencies but having said that it is a country where cryptocurrency is legal and is subject to tax laws in many of states of the United States.

Canada

Canada has a cryptocurrency-friendly stance and Crypto trading is legal in Canada and can be used to buy, sell, and pay for goods and services, provided the other side accepts. However, due to the risks involved, the Canadian government has established rules and regulations to protect investors. The Canada Revenue Agency (CRA) considers the U.S. Bitcoin as a commodity for income tax purposes.

There are taxes on cryptocurrency when you sell, trade, or gift it or use it to buy goods or services and it will fall under:

• Business income,
• Capital gains, and
• Goods and Services.

It is also required to keep records of your purchases and sales dealing with cryptocurrency.

The European Union

The European Union is an economic union of 27 countries including Austria, Belgium, Bulgaria, Croatia, the Republic of Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

In 2020, the European Commission finalized a plan for legislation to regulate virtual assets and The Markets in Crypto-Assets (MiCA) draft Regulation was released by the European Commission in September 2020. The purpose of establishing MiCA was to provide a unified licensing regime for the EU, with no need for any national implementing laws. It will also regulate the trading of crypto assets to serve its population of 450 million.

After the finalization of MiCA regulation, it will need approval by the European Parliament and the European Council and it is expected that MiCA regulations will come into effect by 2024.

Australia

Australian Tax dept considers Bitcoin as a financial asset and if you trade, you have to pay tax and all holders are required to keep records of all transactions for tax purposes.

Dubai

The government wants to foster innovation and market growth, but they are also cautious about the potential misuse of crypto for sanctions evasion, fraud, terror financing, and money laundering. The Virtual Assets Law also establishes the Dubai Virtual Assets Regulatory Authority (VARA), as the primary virtual assets regulator in Dubai. VARA aims to promote Dubai’s position as a regional and international destination in the virtual assets sector.

India

Cryptocurrencies as a payment medium in India are not regulated by any central authority and one can conclude that cryptocurrency is illegal, but there is no certain ban but first time in 2021 The Cryptocurrency Bill was introduced in the Lok Sabha by the government to regulate the crypto market in India.

Further, in the recent Union Budget 2022, the government of India announced a 30% tax on gains from cryptocurrencies and a 1% tax deduction at source. Cryptocurrency investors are required to report the profits and losses as a part of their income.

 Other Countries Where Bitcoin Is Legal or Ban

Many countries allow Bitcoin to be used in transactions and have developed forms of regulation including Denmark, France, Germany, Iceland, Japan, and many more.

There are around nine countries that have banned cryptocurrency completely.

 Pakistan

Pakistan State Bank has issued directions that General Public is advised that Virtual Currencies/Coins/Tokens (like Bitcoin, Litecoin, etc.) are neither recognized as Legal Tender nor has SBP authorized nor licensed any individual or entity for the issuance, sale, or purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.

In the same circular, Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/ Payment Service Providers (PSPs) have been advised not to facilitate their customers/account holders to transact in Virtual Currencies/ Initial Coin Offerings (ICOs) /Tokens through circular  03 of 2018.

What Is a Cryptocurrency Exchange?

A cryptocurrency exchange is an online marketplace where users can trade cryptocurrency.

There are many countries that installed ATMs for bitcoin including the United States, Canada, Spain, Australia, El Salvador, and Switzerland.

Final Thoughts

Many experts believe that it is unlikely that cryptocurrency will challenge the US Dollar’s status as the world’s reserve currency in the future.

Based on experience by El Salvador where a survey published in March by the Chamber of Commerce and Industry of El Salvador found that 86% of businesses have never made a sale in bitcoin means its acceptance is still not global as it’s still a new kind of money. That’s why it is important for all investors to study carefully and only invest what they’re prepared to lose and it’s highly recommended to continue conventional investments for long-term wealth building.

Many experts have the opinion the future of cryptocurrency and its associated technology appears bright, judging by the growth and adoption that has been seen since 2008. On the other hand, many investors still see it as a mode of investment like stock market shares.

Recommended Reading:  https://accountingblogger.com/how-to-invest-in-commodities/

Disclaimer

This blog does not constitute investment advice and its author’s opinion based on the information available.

Humayun Atif | CMA, CPA, CA (FIN), MS-IT, CA Articles from Big 4, Certified Forensic Accountant (USA), Six Sigma & Oracle Certified.

Atif is passionate about Business, Tech, and the written word. He is also a published author of the book ‘IFRS Made Easy’. Atif has worked with some of Canada and Dubai’s largest brands. He is a tax and IFRS coach and the founder of accountingblogger.com