Legal Crypto Compliance and Taxation Outlook of Asia

2. Introduction Asia • The dramatic increase of retail and institutional investor interest in the crypto markets has resulted in an unavoidable need to reposition the current financial regulatory platforms to integrate regulation of digital asset markets. Since the existing Bitcoin surge is above $10,000 per bitcoin, it quite obvious that crypto markets have become easily accessible and significant to the public for supervisions to not intrude.  • Currently, crypto markets are facing many crucial operational challenges, resulting in undermined investor confidence. Most recently, many significantly serious cybersecurity breaches, hackers infiltrating crypto markets and exchanges, have been widely reported on. Millions of dollars’ of virtual currency have also been stolen in recent years. Moreover, many crypto exchanges are reported to be involved in voracious and unreliable practices, insider abuses, and market manipulations.  • According to recent research conducted by TIE, 75% of crypto exchanges are reporting doubtful volumes. Hong Kong and Singapore have introduced new licensing compliance with a requirement to acquire approval from regulatory before trading is permitted. The assessment covers an evaluation of an exchange monitoring system – which further includes market supervision for the identification of market abuse behavior, along with KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Combating the Financing of Terrorism).

3. Introduction Asia • In Hong Kong, the Securities and Future Commission classifies ICOs as security, subject to the securities laws of the country. Cryptocurrency assets are treated no differently than any other regulated security assets. In Singapore, the Monetary Authority of Singapore (MAS) has issued several guidelines. These guidelines explain the ICO resembles capital market products’ regulation under the Securities and Future Act. Crypto platforms are subjected to a licensing acquiring regime and are limited to serve only accredited investors.  • Similarly, other regions like China, South Korea, Taiwan, and the Philippines have issued different regulatory laws and guidelines for crypto exchanges and platforms. Some of them are comprehensively discussed in the following section

4. China • All the activities concerning Cryptocurrency have received a little amount of tolerance from the government of China. ICOs were banned in China in September 2017. Exchange platforms trading cryptocurrencies were not allowed to continue with the ICOs. Many exchange platforms decided to relocate to jurisdictions that are permitting cryptocurrencies than China.  • In China, it is legitimate to hold Bitcoins and other types of cryptocurrencies. Moreover, buying and selling are also legal in China. Here, the government also supports the applications and development of blockchain technology. They have also made it quite clear that this technology must service the actual economy of China. • In September 2017, government agencies of China issued the Notice related to the Prevention of Token offering and financing risks. The notice banned ICOs and ordered that any firm or individual who had previously conducted or completed an ICO for making arrangements including the return of token assets to the investors to guide investor rights. • According to the Article-6 of PRC Criminal Law in China, if any illegal activities or consequences of such activities happen to occur in China, the crime is deemed to have occurred in China’s territory.   China

5. Policies For Exchange • The issued by Government agencies of China ordered that any fundraising and traditional platforms must not provide exchange services between tokens, fiat currency, and virtual currencies. They are also not allowed to buy or sell tokens and virtual currencies, or buy or sell virtual currencies as a CCP (the central counterparty) or provide information intermediary or price determination services for virtual currencies or tokens.  • As a result of this notice, many crypto exchanges shut down their platforms in China. Moreover, they made some significant adjustments to their business models. However, these improved business models are not completely safe from the criminal law perspective of China. Exchanges also continued their exchange business via platforms that were registered in foreign jurisdictions and were more biased to exchange business than China. 

6. Policies For Exchange • According to the law of China, no individual willing to invest in white label crypto exchangesoftware is allowed to use the internet to check the information that violates Chinese laws and regulations. Therefore, Chinese investors cannot buy or trade cryptocurrencies on overseas exchanges.  • Trading Ban – Yes • Banking Ban – yes • Best Place for License – No • Tax Haven Region – No

7. Japan • Japan’s Financial Services Agency (FSA) has set up a few guidelines to divide ICOs and denote investment limits to guard investors, having initially permitted its crypto market to operate on a self-regulatory basis. In 2018, a cybersecurity breach stole around $530 million of Coincheck – one of the biggest crypto exchanges of Japan. As a result, Japan’s Financial Services Agency has tightened regulations on crypto exchanges. This agency also introduced new screening requirements, along with a new licensing obligation.  • Trading Ban – No • Banking Ban – No • Best Place for License – Yes  • Tax Haven Region – No Japan

8. Malaysia Malaysia • In this country, the government has positioned all the token assets under securities regulation and non-compliance is sanctioned with fines and up to 10 years of imprisonment. In the year 2019, the Securities Commission Malaysia permitted three organizations to set up and operate a digital asset exchange.  • Trading Ban – No • Banking Ban – No • Best Place for License – yes, easy process for licensing in Malaysia. Exchanger have to submit his investment documentation, provide evidence of sufficient investors’ protection, confirm the exchange has the capability to conduct due diligence of its clients, their activities, and meet the conditions within the framework of the disclosure mode of information of transactions participants. • Tax Haven Region – No Malaysia

9. South Korea • South Korea is one of the World’s most famous markets for companies that are dealing with blockchain technology. In 2018, the KRW (Korean Won) was the extensively used currency for digital currency trading excluding the US dollar. And in 2017, more than 10% of Bitcoin trades across the entire world were conducted in KRW.  • However, South Korea has still struggled to employ relevant regulatory and taxation measures for trading these currencies. The authorities of South Korea have altered their regulatory posture on several occasions, and the judiciary of Korea and financial regulatory agencies stay skewed in terms of setting up a cohesive regulatory stance. • Despite the outbreak of regulatory events from distinctive agencies and the judiciary of South Korea, market participants are still expecting clear guidelines from the National Assembly in the form of a statue that will offer an inclusive regulatory outline. On 19th June 2018, the FSC stated that it would seek to place digital currency exchanges under an all-inclusive regulatory system. South Korea

10. South Korea • Under this system, digital currency exchanges will need to register with a Financial Intelligence Unit of South Korea. It is a sub-organization of the FSC that has the job of monitoring transactional flows to reduce the risks related to money laundering or other sorts of attempts to dodge capital control measures. The centralized exchange solutions would require complying with KYC and anti-money laundering laws and regulations at levels similar to banks. The planned legislation is awaited before the National Assembly. In South Korea, there are also other pending bills related to digital currency trades and taxation measures.  • Trading Ban – No • Banking Ban – No • Best Place for License – yes, since it is world’s most popular market for companies dealing in Blockchain technology • Tax Haven Region – No South Korea

11. Crypto Taxation Outlook in Asia • In the year 2019, a lot of Asian countries have issued regulations and laws on crypto taxation, as regulators were starting to understand the significance of digital assets. Many investors also taken an interest in the project based on Cryptocurrency. • In 2019, there was a major move for regulators of China – when a Chinese court officially documented Bitcoin as a virtual property in July. Though China has yet to proclaim any precise rules or regulations for crypto taxation, many have that this regulating can urge the nation’s tax authorities to make a decision on a crypto taxation policy in the future.  • The Inland Revenue Authority of Singapore (IRAS) also permitted a draft e-tax guide which recommended that cryptocurrencies that are proposed to operate as a medium of exchange are excused from the nation’s Goods and Service Tax from January 2020 and onwards. • In addition to this, the Inland Revenue Authority of Singapore also discovered the stablecoins will be exempt from GST, or the value-added tax of the country, as well.

12. Crypto Taxation Outlook in Asia • The Excise Department of Thailand has discovered that it will give its tax return practices a makeover by introducing a Blockchain-enabled tax return scheme by mid-2020. • According to a representative from the department, oil exporters will be capable of paying excise tax and requesting tax returns once the fuel has been delivered, with Blockchain technology to help the branch with evaluating tax payments with the higher levels of effectiveness.  • Nowadays, while oil exporters have definite documents for submission to waive their taxes, the superiority of examination for each case could be enhanced. • Beyond Asian countries that are exempting or trying to put taxes on cryptocurrency, some of the most important crypto tax moves in 2020 possibly the Philippines, Iran, and the United Arab Emirates amongst the others.

13. Final Thoughts • Whether you are looking for a white label crypto exchange software development company or a centralized trading platform in Asia, you must know about compliance and taxation outlook. And we hope, this article will help you acquire a better understanding of compliance and taxation outlook in Asia.

14. Thank You hello@espay.exchange espay Espay Exchange Espayexchange