In February, the Indonesian government introduced legislation legalising the trading of bitcoin as a commodity and providing a legal framework for traders to operate in. This article will discuss what the new legislation means and provide an overview of where else the use of bitcoin is legal.
With regulation No.5/2019 the Indonesian Trade Ministry Futures Exchange Supervisory Board (Bappebti) finally recognised bitcoin (BTC) and other cryptocurrencies as commodities, giving legal backing for the trading of virtual currencies. As a consequence, the country now has legal requirements that must be met for traders to be allowed to operate.
Trading has been taking place in the country and it has been possible to buy bitcoin since as early as 2014. Bappebti produced legislation making cryptocurrency a legally tradable future commodity last June, but this is the first time a regulatory framework to back trades on the stock exchange has been introduced.
The new policy gives legal certainty to BTC and other cryptocurrency exchanges in Indonesia, requiring a set of commitments be met. Cryptocurrencies must follow rules relating to money laundering, risk assessment and the financing of terrorism.
Bitcoin exchanges must also employ IT security experts and keep records of their transactions for a minimum of five years. Additionally, at least one of their servers must be within the country and they are required to have well defined organisational structures with departments including the likes of client support, audit, IT and legal.
The head of Bappebti, Indrasari Wisnu Wardhana, said that Indonesia wants to provide protection to investors in cryptocurrencies and protect them from “fraudsters”.
Despite the new regulations, however, BTC still isn’t supported as a form of payment. Head of Bank of Indonesia (BI) Payment System Policy Department Onny Widjanarko said that the bank doesn’t have oversight of commodities but wouldn’t be allowing cryptocurrency to be used in place of Indonesia Rupiah.
Indonesia joins a growing list of countries in which BTC is legal, to some degree or other, though the way it’s treated can be complicated and in many countries it still falls into something of a grey area.
The United States
The United States is broadly friendly towards cryptocurrencies, but the picture is complicated by a lack of clarity over whether they should be regulated by a federal government agency, by state-level agencies or by an independent body such as the Securities and Exchange Commission.
As of 2018, some states had been more proactive in their legislation than others. In New York, for example, the controversial BitLicense programme was introduced in 2015. It made it legal for BTC businesses to operate in the state but introduced a series of expensive requirements that led to many start-ups simply leaving the state.
In 2017, Washington state passed a bill that applies money transmitter laws to cryptocurrency exchanges. In New Hampshire BTC sellers are required to get a money transmitter license and post a $100,000 bond. California, meanwhile, tried to introduce Bill 1326 – a less oppressive approach than, say, New York, but one that was criticised for being too vague in its definitions. Progress has stalled in the face of the criticism.
Broadly, though, the US has been receptive to virtual currency. Businesses such as the Dish Network, the Microsoft Store and Subway accept payment in BTC and it’s traded on the US derivatives markets. The Treasury has defined BTC not as currency but as a money services business.
Australia straightforwardly treats BTC like any other currency and allows entities to trade, mine or buy it.
The European Union
While the EU has followed developments in BTC, it has yet to come to any official decision on legality or regulation. In the absence of any decision at the EU level, it falls to individual states to legislate for themselves.
The UK has been broadly positive towards cryptocurrencies. The Financial Conduct Authority (FCA) treats them as commodities and has said it plans to regulate them and that it will regulate BTC related derivatives. As there is no consumer protection in place, however, the FCA has been outspoken about the risks involved in cryptocurrency.
In Canada BTC is viewed as a commodity by the Canada Revenue Agency. As such, BTC transactions are viewed as barter transactions and the related income is treated as business income.
Canada treats BTC exchanges as money services businesses. As such, they are subject to anti money laundering laws. They must register with the Financial Transactions and Reports Analysis Centre of Canada, report suspicious transactions and keep certain records.
While the number of countries legalising BTC is growing, even the list of those broadly receptive to it shows that traders need to be aware of local legislation.
Disclaimer: This content does not necessarily represent the views of IWB.