Cryptocurrency Regulation in the West

discovery Jan 29, 2021

The CoinLoan team is inquisitive when it comes to cryptocurrency regulation. In 2020, we renewed the European virtual currency provider license. And we were surprised to know CoinLoan was the only regulated crypto lending platform licensed with Estonian Financial Intelligence. We are sure that our readers are also interested in the recent laws on cryptocurrency.

This blog post will shed some light upon the diverse attitudes that exist towards blockchain in some parts of the world. For your convenience, we roughly divided the world into eastern and western parts. We must warn the countries were chosen randomly with no specific parameters. This time we will travel to several parts of the Western world for educational purposes. Make sure to read the following article about the East to compare the different legislation approaches.


Сrypto is legal not in every state of America. But the situation is gradually changing as the fintech sea is striking the globe.


For instance, the Financial Crimes Enforcement Network (FinCEN) doesn’t consider cryptocurrencies to be legal but they do classify exchanges and some of our competitors as money transmitters, which are part of their jurisdiction. Money services and other businesses engaged in the cryptosphere have to register with the US FinCen as a money services business. They are required to keep records and make reports to FinCEN, including Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).

On the other hand, the Internal Revenue Service defines crypto as property for taxation purposes. One of the key US regulatory institutions, the Securities and Exchange Commission (SEC), identifies crypto as securities. In March 2018, it stated that it was looking to extend securities laws comprehensively to digital wallets and exchanges.

At the same time, in 2019 some states understand that crypto can serve as new fuel for their local economies and often promote crypto by exempting it from existing money and security laws. Currently, 70% of the US has enacted laws regarding crypto or blockchain sphere. For example, Wyoming passed a bill exempting crypto form property taxation. Arizona and Georgia were among the first states to accept cryptocurrency for tax payments. But, as is the way with crypto, the merit is users, not laws. Here is the map of the highest crypto ownership in the U.S. by Coinbase. Looks like more than 5 states have a strong opinion.

Source: Coinbase


Officially, Mexican Fintech companies should be having a hard time following the passage of the country’s Fintech Act into law on March 9, 2018. The regulatory measures were driven by Banxico, the central bank of Mexico, which has been striving to take over control of crypto-related activities and keep finance at home. This has left coin developers looking for roundabout ways to operate.

Understandably, the legislation has created an environment that isn’t conducive to the development of crypto. And yet, despite that, the crypto industry in Mexico is thriving. How is this possible? Well Mexican crypto companies are resourceful: every company and every coin is finding its own way into the market by exploiting legal loopholes and adapting to the ever-changing environment.

According to Finnovista, the largest impact organization in Latin America and Spain, the Mexican crypto ecosystem has emerged as a leader among its peers in Latin America and is well on its way to having 400 active startups. The numbers speak volumes: there’s been an 18% net growth of the market, with 98 recently created Fintech startups, constituting a gross growth of 29.3% for the year.

Here are the top 3 specialties of Fintech startups in Mexico:

  • Loans — 81 startups (20.6%)
  • Payments and Remittances — 79 startups (20.1%)
  • Business Finance Management (BFM) — 52 startups (13.2%)

The UK

The UK is one of the leaders of the fintech industry, counting more than 1,600 fintech firms and generating GBP 6.6B of annual revenue per year. They are developing so well that they can overtake the title of fintech unicorn capital of the world from San Francisco. However, the UK is not as favourable to cryptocurrency as it is to the fintech sphere.

Thankfully, the UK hasn’t banned crypto, but still it hasn’t issued any specific laws for digital money.

The Bank of England claimed that the size of the cryptocurrency market is not big enough to influence the financial stability of the United Kingdom or put their monetary system at risk. It even decided not to classify digital currencies as money because of their limited adoption within the UK’s financial system in 2014. Of course, since then, the number of use-cases has significantly increased, though BoE still doesn’t call cryptocurrency real money.

Recently, the FCA (Financial Conduct Authority) published guidance on digital currencies illustrating “a number of different elements that firms need to take into account when considering the regulated perimeter”.

* RAO - Regulated Activities Order

The FCA also provided several important clarifications and definitions. For instance, cryptocurrencies like Bitcoin and Ethereum are classified as exchange tokens. They won’t be regulated but will fall under anti-money laundering regulations.

The only thing the UK’s government has banned is investment products connected with cryptocurrencies like derivatives and Bitcoin futures. The main reason is to protect retail investors as the crypto market is highly volatile. The final rules of investment tools based on cryptocurrencies will be developed in 2021.


In Germany, selling, buying, and storing cryptos officially became legal on January 1, 2020. However, back in September 2019, most local politicians were hostile towards digital assets, proving yet another stereotype about Germans being conservative and risk-averse. What made them change their minds?

In 2019, the German government adopted a comprehensive blockchain strategy. The plan calls for the development of blockchain applications in business and public administration.

Looking deeper into the country’s legislation, we found out that Germany legalized Bitcoin back in 2013, denoting it as “private money”, as Die Welt reports. For the first time the status of crypto in Germany was discussed by the Member of Parliament Frank Schäffler, but the German Ministry of Finance did not acknowledge Bitcoin as electronic money. Everything changed in 2017 when Germany called BTC a financial instrument. It is worth noting that the new amendments to the Banking Code indicate that Bitcoins are “units of value”.

So why is Germany called a “Bitcoin tax haven”? In 2018, the country exempted Bitcoin transactions from VAT. From now on, buyers and sellers of Bitcoin have to pay a tax if the sale happens sooner than 12 months after purchase. In this case, a progressive income tax of up to 45% applies for all gains.

In 2019, Germany passed a bill that had a significant impact on cryptocurrency services and local crypto enthusiasts. The 5th EU Anti-Money Laundering Directive (AMLD 5) drastically changed licensing requirements, as well as anti-money laundering obligations for crypto service providers.

This legislation made amendments to the Anti-Money Laundering Act and the Banking Act, as well as it set new terms for providers of foreign exchange services and cryptocurrency exchange platforms. The bill went into effect on January 1, 2020, expanding the scope of responsibility for money laundering and terrorist financing (AML / CFT).

Crypto assets fall under the definition of financial instruments under the German Banking Act. Any person wishing to provide financial services related to crypto assets in Germany on a commercial and/or other scale will have to obtain permission from BaFin. During 2020, a lot of European crypto companies shut down over impending EU money-laundering rules, for instance, the crypto mining pool Simplecoin.

The Prospects of Cryptocurrency

Cryptocurrency is set to become a facet of everyday life. As people that have experienced financial instability and changing political regimes (swings from Communism to Democracy), the residents of Eastern countries are mentally more prepared for cryptocurrencies than Westerners.

The West is characterized by a higher standard of living and better banking services, as well as a higher average age of the population. East, on the other hand, is full of active young entrepreneurs who are engaged in small business and therefore are especially interested in lightning-fast financial transactions of better quality and without intermediaries.

Many governments want to tap into the benefits of blockchain. China, Georgia and Belarus, for instance, are taking full advantage of the economic perks of mining. Hopefully, that new laws and amendments will not impede the development of the global crypto industry, but rather will lead to emerging blockchain hubs.

Thanks for reading up to the end! Follow our news for the second part of the Cryptocurrency Regulation series. Next time, we will talk about several Eastern countries to help you compare the legal outlook of the two worlds.

💡First time here? Visit our home page and get to know the CoinLoan lending platform a little better.