Law of Cryptocurrencies Series: Development of Cryptocurrencies and Their Relationship With Law
Foreword
Cryptocurrencies are defined as technologies that aim to distribute the power of governance and regulation—currently within the purview of central authorities—to the members of society. Cryptocurrencies have a huge market value, and the volume of transactions increases every day. In today’s world, cryptocurrencies, crypto monies, and other crypto assets are used as a source of investment. Because of the regulations of governments, cryptocurrencies, and other decentralized economic assets cannot be used as tools that enable people to maintain their daily activities. It cannot be counted as the main aim behind the development of cryptocurrencies. In addition, because of these restricting regulations, neither countries nor citizens benefit from this huge economic value at its maximum level, and it causes the usage of crypto assets as a source for black economies. By regulating the usage of cryptocurrencies, countries may benefit from their economic value; the association of cryptos and the black markets may be undercut, while during economically difficult times, people may even use them for transactions, earning money. Additionally, decentralized technologies can develop faster without harming the sovereignty of the states. In brief, the regulation of cryptocurrencies is beneficial for both countries and individuals in these aspects. This series is going to enlighten its readers about which legal remedies exist and how to tackle this emerging space from the perspective of symbiotic regulation aimed at enhancing our daily lives through these emerging technologies.
This series is divided into seven chapters, with each providing a distinct discursive element on the legal environments of cryptocurrencies.
Law of Cryptocurrencies Series: Regulations about Cryptocurrencies in Asia: China, Russia and Others
Law of Cryptocurrencies Series: Regulations about Cryptocurrencies in Europe: United Kingdom, France, Germany, and Others
Law of Cryptocurrencies Series: Regulations about Cryptocurrencies in African Countries
Law of Cryptocurrencies Series: Regulations about Cryptocurrencies in Europe: United Kingdom, France, Germany, and Others
The emerging role of cryptocurrencies within society and the global economy of the 21st century cannot be denied. Indeed, a generation of fin-tech startups and financial technologies have not only increased the competitiveness in international and European markets but have simultaneously uncovered new challenges (Faria, 2021). Cryptocurrency businesses struggle with two main problems in Europe: the high risk of financing terrorism and the centralized regulations of states (Wronka, 2022). Indeed, European countries have strict rules about anti-money laundering issues and other cybercrimes because they are deemed extremely harmful activities. Thus, the licensing procedure for cryptocurrency exchange platforms has become highly important (Gikay, 2018). Another reason for these regulations may be the decreasing confidence of European society in traditional legal currencies such as the Euro or Pound Sterling (Cvetkova, 2018). In fact, today, inflation is on the rise in Europe, a trend people want to buck by investing in cryptocurrencies as a means of protecting their budget "away" from prevailing economic situations. As a result, legitimating the use of cryptocurrencies is both a challenging and potentially lucrative task for European states and private establishments, such as banks, alike (Wronka, 2022). To shed light on the legal management of harm and the potential these emerging economic tools represent, the below discusses this context applied to a selected number of European Union countries and the UK.
European Union
The European Union represents the framework that has made the economic and political integration of its (currently) twenty-seven member countries possible. It has three main legislative bodies: the European Parliament, the European Council, and the European Commission; they all fulfill different duties and objectives. The European Central Bank, the European Commission of Human Rights, and the Court of Justice of the European Union can be counted among other establishments that are part of this integration. One of the main economic strategies of the European Union is to generate a digital market at the union level, which is believed to significantly increase the role of Europe in the global economy (Nahorniak et al., 2016). According to some legal scholars the most valuable cryptocurrency, Bitcoin, may be a key factor in the development of this digital, single-market, strategy (Nahorniak et al., 2016).
It continues to be a necessity that emerging cryptocurrency regulations are embedded within the existing Single Euro Area Payment (SEPA) regulations. Otherwise, the fungibility of cryptocurrency assets with regards to their conversion into the Euro currency may be undermined (Gikay, 2018). In effect, the European Central Bank (ECB) has already introduced an initial framework, covering both cryptocurrencies, specifically, and decentralized technologies, more generally. Also, back in October of 2012, an ECB report already covered emerging virtual currencies—then still defined as a type of unregulated digital monetary unit—and determined their distinctiveness from other electronic monies to be their unique bidirectional flow character (Nestertsova-Sobakar et al., 2019). The ECB is accepted as the most influential financial institution on the economy of Europe, so its definition is important for financial markets. In 2014, a first introduction to the public on the increase of criminal activities and cybercrimes, sourced through Bitcoin usage, was made by the European Police (Europol)—titled "Organized Crime Threats Assessment on the Internet (IOCTA)". This report was both a warning and a prospective overview of the future negative potential that a deregulated digital asset market may bring. These initial forays into the legal aspects of crypto-emergence were also followed up by both, the European Parliament and the European Council discussing the potential for money laundering and terrorism financing, both of which are multi-domain threats beyond the digital economy itself (Nestertsova-Sobakar et al., 2019). In addition to these points, the European Commission defines cryptocurrencies as a digital representation of a value that is not issued by a central bank or public authority (Frick, 2019).
Thus, Anti-Money Laundering Directives of the European Union may also need to adjust and be specifically adapted to facilitate the broader application of decentralized monetary units and enshrine their concept legally. In the Fourth Anti-Money Laundering Directive of the European Union, there were no regulations that targeted the combat of criminal activities. Yet, the Fifth Anti-Money Laundering Directive gave broad attention: Article 47 of this directive claimes that all member states of the European Union must ensure cryptocurrency exchange services are controlled by the responsible authorities (Frick, 2019). More recently, in September 2020, a draft regulation of the European Parliament and European Council on crypto asset markets was officially published. The regulation, called Market in Crypto Assets (MiCA), was a pioneer as it recognized the necessity of licensing and authorization requirements for crypto asset platforms in Europe (Lins and Praicheux, 2021). The Financial Action Task Force (FATF) is also an important piece of legislation which was established by the European Union. "The taxation of cryptocurrencies" is another legal issue that authorities must solve. Currently, there is no union-based taxation regulation for decentralized monetary units, and only respective national regulations are applied to them (Nahorniak et al., 2016). Despite this, the Court of Justice of the European Union (CJEU) has created a precedent for its constituent member states about the taxation of cryptocurrencies. In its relevant decision, the CJEU highlights the expansion of the scope of the value-added tax (VAT) as also applicable to cryptos (Nahorniak et al., 2016).
The General Data Protection Regulation (GDPR) is another piece of legislation that may be part of the wider codification process of cryptocurrencies. Since requirements set forth by the GDPR prohibit the processing of data without authorization through explicit consent, several difficulties for blockchain-based solutions may appear: Compliance, easily achieved within a central authority framework, is virtually impossible in blockchain-based systems where tracking of participants is not an "in-built" or otherwise desireable feature. In addition, the shared responsibility principle of the GDPR may be equally limited if applied without applicable modifications (Guggenmos et al., 2020).
As is evident, on the European Union level, increasing attention and codification have created a basic framework that addresses some of the concerns, functionality, and opportunity exhibited by cryptocurrencies and other decentralized technologies. However, the EU is not a single, unitary country. As such, and more importantly, domestic regulations of members of the European Union must be analyzed as well—addressed in the following, country-focused paragraphs.
France
In spite of its developed economy and political stature, it cannot be said that France is leading any development with regard to decentralized technologies in Europe and beyond. Yet, the first regulatory action in the country against a liberal cryptocurrency market has already been taken by the Bank of France in the form of issued warnings and the implementation of customer identity verification rules for virtual currency platforms (Cvetkova, 2018). Only in 2017 did the French parliament start to work on new reports about blockchain-based technologies and cryptocurrencies, although these have resulted in the Law on Business Growth and Transformation (PACTE) being ratified in the country in May 2019 (Barsan, 2019). In addition to the PACTE Law, the French Financial Code was amended in November 2019, and further regulations about digital service providers and digital assets were added to the code. A Blockchain Act was another step by the French authorities towards greater interaction with and regulation of these new crypto technologies (Lins and Praicheux, 2021). The French Tax Authority instated an ad hoc regime on the taxation of cryptocurrencies, mirroring the EU's MiCA regulation as the de facto precedent. According to MiCA, cryptocurrency service providers should be authorized and registered under national law (Lins and Praicheux, 2021). For individuals, 30% of flat tax and capital gain tax are going to be applied. However, this regulation of tax authority was cancelled by the State Council (Conseil d’Etat). Today, French citizens are obliged to pay the flat-rate tax of 36,2% only. For cryptocurrency businesses, France decided to apply the broader decision of the CJEU and, thus, subjected these establishments to the applicable VAT (Barsan, 2019).
Germany
Germany is Europe's largest economy but has so far not drafted nor implemented general regulations toward cryptocurrencies, although it is rising in popularity and attention with both the private sector and government entities, such as the financial authority of the country, the Federal Financial Supervisory Authority (BaFin) [Srihind, 2021]. In the private sector, Germany is one of the leading incubators for startups in the cryptocurrency field and those working with blockchain technologies, mostly engaged in creating digital wallets or new blockchain-based applications (Srihind, 2021). Even the administration of the country believes that blockchain technology could be used to solve administrative inefficiencies far away from the usual economic markets—German asylum procedures: For the identification of individuals, this technology may be used to allocate data (Guggenmos et al., 2020). It seems that studies support these generally advantageous uses, making it more essential for the country to enact broader legislation covering both cryptocurrencies and decentralized technologies.
Well, for one BaFin, which is the responsible authority administering the start-up environment and government uptake of emerging technologies. Currently, to undertake financial activities with the help of cryptocurrencies in Germany, the permission of BaFin is required. BaFin has even legally defined cryptocurrencies, and they claimed that the economic reserves of cryptocurrency trading platforms should be defined as securities (Jünemann, 2018). In addition to BaFin, the German Ministry of Finance recognized cryptocurrencies as a means of economic settlement in 2013, but these decentralized monetary units did not receive an official statute with the same (Cvetkova, 2018). Finally, the primary act currently applied to cryptocurrency transactions in Germany is the German Securities Trading Act, which covers both transferability and negotiability of securities—which are important concepts to the "open market" ideal. Despite these regulations, the Central Bank of Germany (Deutsche Bundesbank) declared that, because of its independence from central authorities as states, applying national regulations to blockchain technology is impossible (Jünemann, 2018).
Italy
Until 2023, there were no specific regulations about cryptocurrencies in Italy. Finally, with the Budget Law of 2023, a new system of taxation toward cryptocurrencies was created and declared by the Italian authorities, becoming the first national regulation. With this law, not only the definition of crypto assets was codified, but so was the economic imperative of a 14% capital gain tax derived from any crypto asset held (Arletti & Partners, 2023). Interestingly, despite the official lack of regulation and acknowledgement, Italy has become home to a burgeoning community of NFT creators and hosts a wider market for their accessibility. Made possible primarily by Ethereum-based blockchain systems, Italian artists have attempted to benefit from a transfer of their artistic works to an NFT model. Despite this and the country's hosting of several globally influential NFT creators, the current Italian national legislation relies heavily on European legislators’ output. Accordingly, any digital wallet service providers as well as NFT platforms must collaborate with the Ministry of Economy and Finance of Italy and the national police to continue their activities on Italian soil (Zatti, 2022).
Spain
Similarly, Spain, as of now, follows the basic EU regulations—the FATF Guide on Virtual Assets and Service Providers, the Fifth Anti-Money Laundering Directive, and the Royal Decree Law of the European Union (Sanz-Bas, 2021). Especially the implementations of Bank of Spain and the National Securities Market Commission of Spain (CNMV) are close to European Union regulations. For both, currently, cryptocurrencies may not be considered a means of payment because they are not backed by a centralized authority such as the central bank (Sanz-Bas, 2021). Some new criteria are brought by the Bank of Spain about the change of virtual currencies to fiat currencies as well. For instance, until 2021, ATMs didn’t license the operation of virtual currencies but, in 2021, this situation changed. This is related to some procedures detected by Spanish authorities. (Sanz-Bas, 2021).
The issue of the taxation of cryptocurrencies has been solved by Spanish authorities as well. Personal income tax now also covers the taxation of cryptocurrencies. Indeed, the original objective of this tax, to tax property gains and income imputations, has been reapplied: since, according to the tax agency of the country, virtual currencies are potential tools of investment, they become subjects to this tax (N.B. cryptocurrency investors and their output are counted as economic activities) [Alonso, 2019]. Finally, mining Bitcoin and obtaining commissions from cryptocurrencies have also become subjects of the national VAT (Alonso, 2019).
Netherlands
The Netherlands has taken an innovation-friendly approach to regulating and supervising new technologies, such as cryptocurrencies. A primary aim of digitization for the country has been to increase and maintain sustainable competitiveness between start-ups and established companies. The government of the Netherlands tries to collaborate with existing and future private actors to implement standards across blockchain companies and digital platforms (Faria, 2021). These platforms include entire ecosystems of cryptocurrencies, and they cover various categories linked to the drafting of regulations for decentralized technologies. Progressively, many actors in the Netherlands already embed their blockchain and cryptocurrency activities within the existing EU regulatory demands (Faria, 2021). This may also play a part in why the country became the first European Union member to adapt itself to the Fifth Anti-Money Laundering Directive and its cryptocurrency regulations. Now, the Netherlands may become a useful case study for the EU and, at the same time, be a vital advertisement that new technological businesses and innovative projects are welcome on the continent (Faria, 2021).
As such, Blockchain experiments initiated by the Central Bank of the Netherlands (DNB) in 2015 included a focus on drafting new regulations for fintech startups (Faria, 2021). Through these emerging regulation studies, cryptocurrency service platforms in the Netherlands were steadily integrated with the DNB and were able to be registered as financial institutions (Notabene, 2023). In addition to the DNB, the Authority for Financial Markets of the Netherlands (AFM) supports startups in their technological investments and projects as well (Faria, 2021). Nonetheless, currently, tax services of the Netherlands do not accept cryptocurrencies as legal means of payment—a legal gap that will likely be mended soon (Cvetkova, 2018).
Belgium
Belgium is a newcomer to the regulated crypto market. Although the National Bank of Belgium already formally recognized the existence and impact of cryptos earlier, it was only in 2022 that the Belgian State Gazette declared the Virtual Currency Royal Decree (Alonso, 2019). Indeed, it not only brought about regulation but was also a first step at codifying and legalizing cryptos on the open market. Where the National Bank of Belgium, in its initial statement, was still reluctant to declare cryptos as a legal tender, the new legislation brought requirements for the registration of virtual currency service providers and their operating conditions, hence formally allowing the functioning, use, and distribution of the new technology with the registration of cryptocurrency exchange services to the database of the Belgian Financial Services and Markets Authority (FSMA) [Acker et al., 2022]. Yet, the Ministry of Justice also took strict actions on virtual currency activities: new registration conditions for these service providers were generated, and third-country service providers were banned from Belgian territory (Cvetkova, 2018; Acker et al., 2022). In addition, the obligation to pay crypto taxes to the state became a necessity for those individuals and businesses involved (Wimmer, 2023).
Portugal
For a long time, there was no specific cryptocurrency legislation in Portugal, and although it was not officially forbidden to use cryptocurrencies, Portuguese regulators were unaccepting of cryptocurrencies as legal tenders (Global Citizens Solution, 2023). A statement published by the Bank of Portugal established some of its criteria about why Bitcoin may, in its current state, not be accepted as a secure currency (Moreria et al., 2021). The Bank of Portugal is also the entity that has the authority to regulate both credit and mortgage institutions in the country—relevant to the scope of cryptos. In addition to the Bank of Portugal, the main regulator of the banking and financial sector, duties to oversee the securities of cryptocurrency-related businesses remain under the authority of the Portuguese Securities and Market Commission (CMVM). In Portugal, new cryptocurrency market players enter to the market under the authority of CMVM (Moreria et al., 2021). A relevant regulation was also finally established in 2023, which covers the taxation of crypto-related assets and their profits. The tax residents of Portugal have started to be obliged to pay taxes to Portuguese authorities from their cryptocurrency transactions (Global Citizens Solution, 2023).
Summary and Comparison
Conclusively, the member states of the European Union mainly follow the regulations set forth by their supranational organs, such as the European Parliament, the European Council, and the European Central Bank. They are, though, not sufficiently supported by the respective national regulations. Indeed, among the countries mentioned in this section, the most developed and "autonomous," regulations for cryptocurrencies currently only exist in the Netherlands. While Germany and Portugal have also enacted additional legislation in their own territories, France, Spain, and Belgium are not in a sufficient position to fully regulate these decentralized monetary units as of December 2023.
United Kingdom
Under different laws and jurisdiction than our previous examples, the United Kingdom (now removed from the EU) not only dictates its national law but also allows its constituents, such as England, Wales, Scotland, Northern Ireland, and the Isle of Man, amongst others, to develop and implement their own local regulatory frameworks. This also rings true for the scope of cryptocurrency markets and their ancillary outputs. Generally, the Central Bank of the United Kingdom (BoE) has recognized the immense potential of cryptocurrencies and blockchain technology, and, as such, all crypto asset actors (companies) must be registered with the Financial Conduct Authority (FCA), responsible for the implementation of anti-money laundering legislation (Wronka, 2022). To establish a basic centralized system for these digital monetary units, the FCA has divided cryptocurrencies into two categories: utility tokens and crypto exchange tokens. While the former allows users to access goods and services, the latter may act as a tool of investment. This also aids with the issue of taxation, for which the BoE declared a capital gain tax applicable at specific rates to the respective category of crypto assets (Alonso, 2019). Meanwhile, existing corporate taxes, digital services taxes, and the value-added tax apply henceforth also to cryptocurrency exchange platforms (Rue, 2023). So much for the UK's national framework. To briefly highlight minor nuances that exist between the UK's nations, consider the below. Note that as Wales and Northern Ireland apply virtually the same legislation toward cryptos as the current UK standard, we focus on England, the Isle of Man, and Scotland.
England
England's anti-money laundering regime is regulated by the Proceeds of Crime Act (PoCA), according to which it is important to keep records of customers and their use of online financial services to prevent criminal actions, and follow's the UK's so-called Know-Your-Customer (KYC) framework. England has also implemented the Fifth Anti-Money Laundering Directive of the European Union despite its host country's exit from the union (Wronka, 2022). This directive means that companies registered in England need to license their activities regarding crypto assets. Further requirements include registering as a limited liability company to comply with the entire range of anti-money laundering legislation (Rue, 2023).
Scotland
As its southern neighbor, England, Scotland adheres to the FCA as its main authority controlling the activities of cryptocurrency companies (Law Society of Scotland, 2023). Within FCA's domain in Scotland, cryptocurrencies are considered foreign currencies, applicable for taxation and accounting records. In addition to the regulations of central administration in London, the Royal Bank of Scotland established an Expert Reference Group on Digital Assets to assist and consult with the integration of digital assets into the law of Scotland (MacPherson and Ripley, 2023).
Isle of Man
The Isle of Man currently has the most conducive environment in the UK for the operations and management of cryptos. While the Isle of Man authorities recognize cryptocurrencies as the digital representation of value in a different format, and thus, the Digital Asset Business Act requires adherence to anti-money laundering regimes as well as anti-terrorist financing laws, taxation on capital gains derived from cryptocurrencies was eliminated—a move that hopes to attract sustainable investments (Chesterfield, 2023; Freeman Law, 2023). The island, thus, differentiates itself primarily by offering more flexibility for the accumulation of productive vitality.
Scandinavian Countries
Sweden
There are no individual national regulations in Sweden that target cryptocurrencies and crypto assets, although the perception of systematic risk and the potentially degenerative effects of the economy mean that negative attitudes generally prevail (Bergsten et al., 2023). The combination of a lack of national laws and stagnant perceptions means that MiCA is thoroughly applied in Sweden. Additionally, the government encourages future regulations produced by the European Union to promote responsible innovation, development, and competition continentally and thus more transparently across borders (Bergsten et al., 2023). For cryptocurrency service providers, registration in the database of the Financial Supervisory Authority is a necessity (Klingberg et al., 2023). Finally, taxation is applied via the decision of the CJEU subjecting cryptocurrencies to the nationally valid VAT (Nestertsova-Sobakar et al., 2019).
Norway
Norway primarily applies MiCA upon the suggestion of the country's central bank (Shumba, 2023). Cryptocurrencies, though, are not accepted as legal tenders in Norway, and they are defined, rather, as assets (CoinTelegraph, 2023). Norwegian legislation, developed by the Norwegian Ministry of Finance and Norway's Financial Supervisory Authority, compels licensing requirements for various types of businesses as well as virtual currency and e-money payment services, some of which are among the largest cryptocurrency exchange platforms worldwide—see, i.e., Firi or the Norwegian Block Exchange (Nillsen et al., 2023). Plans to find and host the first Central Bank of Digital Currency are currently in the works and may lead to sophisticated future frameworks in Norway (CoinTelegraph, 2023).
Finland
The Central Bank of Finland declared that generating static and all-encompassing legislation for cryptocurrencies is impossible because of their contemporary, decentralized structure and independence from central authorities (Cvetkovic, 2018). Despite the bank's opinion, the Financial Supervisory Authority is actually the main regulating actor for the cryptocurrency sector in the country. Most of the regulations that are applied in the country are those of the European Union. Taxation is determined according to the economic value of individual cryptocurrency operations, which foresees flexible (progressive) rates being applied (Lea, 2023). In summary, in Finland, cryptocurrencies continue to not be regulated by a comprehensive code, although the way to full transactional freedom with cryptos has been paved.
Denmark
Denmark is one of the most cryptocurrency-friendly countries in the world. The financial authorities of the country do not currently regulate decentralized monetary units through detailed codes, contributing to an increase in cryptocurrency transactions throughout its territories (Christiansen, 2023). The Central Bank of Denmark continues to not accept Bitcoin as a currency and dismisses the real trade value of the cryptocurrency, but it assigns it a speculative asset. Also, notwithstanding its declaration that cryptos include high risks for investors, they also recognize that cryptos should not be considered a threat to the financial stability of the country (Cvetkova, 2018).
Generally, in its document about cryptocurrencies, the bank highlights the centrality of the EU MiCA as a benchmark for Denmark's own future legal developments in this space (Christiansen, 2023).
As a first step, the Danish government has already declared crypto companies to be required to fulfill tax obligations with regard to their specific operations (Alonso, 2019).
Summary and Comparison
Generally, while the Scandinavian Region tends to welcome fintech investments and -development they still do not have sophisticated national legal doctrines on how to deal with the emerging and flourishing cryptocurrency system. As of now, the primary legislative elements in Scandinavia are derived directly from European Union regulations and are, otherwise, rudimentarily codified rather than fully embedded into a larger, more comprehensive legal framework. Four of them apply MiCA, and there is an expectation to establish a combination of the existing EU framework with their own, unique national laws.
Finally, Denmark, Finland, Norway, and Sweden are all in the final stages of fully legalizing crypto monetary units. Once these countries publish their codes, directly applicable to cryptocurrencies, they will surely create rapid investment opportunities and demand within this space.
Others
Austria
In Austria, the government tends to support the development of cryptocurrency businesses and new decentralized fintech systems. Hence, quite recently, starting in 2022, the country also began implementing its preparations for a legal framework on cryptocurrency transactions to safeguard its position as a potential future crypto hub (Rath et al., 2023).
The Ministry of Finance largely defines cryptocurrencies as the representation of a digital value and places cryptocurrencies within the purview of the Austrian Capital Market Law as well as the Austrian Banking Act (McGimpsey, 2022). According to both of these regulations, to trade and exchange (with) foreign currencies, a banking license is a prerequisite to be applied for with the Austrian authorities (Toman, 2018). Until 2022, no certain consensus existed on how to tax cryptocurrencies and their ancillary activities as well as their outputs. From mid-year 2022 on, though, the country introduced a special annual tax, which is, henceforth, applied (McGimpsey, 2022).
Switzerland
Switzerland is one of the pioneers among regulators of cryptocurrencies and the legalization of decentralized monetary units. Until 2017, the country was one of the definite hotspots for cryptocurrency operations, such as mining. And, although the rise of other countries has mitigated some of its competitive advantages, Switzerland continues to be a leading blockchain ecosystem incubator and welcomes physical and intellectual investments into cryptographic technologies at increasing rates (Frick, 2019; Merchant, 2016). It claims to be the fastest-growing crypto ecosystem in Europe (Merchant, 2016). Not surprisingly then, the Swiss Falcon Private Bank became the first bank in the world that allowed its customers to open Bitcoin accounts, and, tellingly, the acceptance of Bitcoins for the purchase of public rail tickets with the Swiss Federal Railways has also become the norm (Cvetkova, 2018). In 2017, the country even facilitated an easement on the process of paying taxes by legalizing Bitcoin as a payment option (Cvetkova, 2018).
Currently, Switzerland defines cryptocurrencies as an asset, not a security. In 2018, the Swiss Financial Markets Authority (FINMA) published a guideline on the usage of payment tokens and the need for observing mechanisms in relation to crypto usage and its functions. Recognized in this Swiss National Risk Assessment report was the identification of tokens as a complicated process, thus making them liable to have criminal origins.
Another establishment that defines cryptocurrencies is the Bank of International Settlements (BIS). They describe cryptocurrencies as a combination of three key characteristics: digital assets, private creation, and no one’s liability. BIS allows peer-to-peer exchanges under its operations and is supportive of initial coin offerings. It has, at the same time, also been vocal in its complaints about the dangers of money laundering caused by the high frequency of crypto usage in dark web spaces and marketplaces such as Silk Road (Frick, 2019).
Meanwhile, the Financial Services Act (FinSA), the Financial Institutions Act (FinIA), the Anti-Money Laundering Act (AMLA), the Financial Market Infrastructure Act (FMIA), and the Virtual Assets Service Providers Act (VASPS) are the central legislation guiding the use and existence of decentralized monetary units of the country. Their primary purpose also ensures the continued financial stability in the country while safeguarding the potential for transitions made possible by the crypto space. Additionally, these laws require licensing, acquired through FINMA, for cryptocurrency exchange platforms to continue operating. VASPS and AMLA are anti-terrorist financing and anti-fraud provisions (Kamsky, 2023). Finally, the Swiss Tax Administration is the main authority guiding the taxation of decentralized monetary units, currently subject to capital gains and income taxes (Merchant, 2016).
Conclusion
As one of the most developed economic areas of the world, Europe is rapidly advancing the legalization of cryptocurrencies. Not only has the EU managed to set the tone by filling the contemporary member-state legal voids with its own initiatives and regulatory designs and, thus, institutionalizing the emerging crypto market and industry, but it has even found implicit support and mirroring outside of its immediate membership, including its recent seceder, the United Kingdom.
Notably, though, Switzerland may own the archetypical "first-mover" advantage by also making clever use of its unique autonomy within the global system. The buy-in achieved by its public, private, and national actors seems to have played a significant part. The development there and across the continent can become a blueprint for better implementation strategies and legal recognition within Europe, with immense symbiotic growth potential for private and public constituents alike.
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Understanding the law is critical as legal developments continue to evolve rapidly. Even like nurse attorney who navigate the intersection of health care and law to protect patients' rights, lawyers across disciplines must balance innovation with regulatory compliance. The relationship between cryptocurrencies and the law involves complex issues of legality, security and ethical considerations, so it is critical for those involved to remain informed and proactive in this dynamic legal landscape.