Crypto Regulations
Cryptocurrencies, also known as altcoins, provide digital means of exchange without any physical coins or bills. The crypto market has grown rapidly in popularity since Bitcoin’s inception in 2008. However, the more ubiquitous it becomes, the need for crypto regulations increases. We discuss the history of government action, the future of crypto regulations and more.
Crypto Brokers
Here is a short overview of each broker's pros and cons
- NinjaTrader - You can get exposure to micro Bitcoin futures through the CME Group’s centralized exchange, which is highly regulated by the US CFTC. Micro contracts allow you to trade a fractional size of one Bitcoin, giving you more risk control and order flexibility.
- Plus500 US - Plus500’s Micro-Bitcoin and Micro-Ethereum futures only allow traders to scratch the surface of crypto trading with bets on the two most popular digital assets. Importantly, you cannot buy and own the cryptos with these derivative contracts - you are speculating on their price.
- Interactive Brokers - IBKR lets you purchase and hold Bitcoin, Bitcoin Cash, Ethereum, and Litecoin at competitive commission rates and without needing a crypto wallet. Additionally, there is a range of other diverse assets to explore, such as crypto indices like the NYSE Bitcoin Index, as well as futures contracts like the BAKKT Bitcoin Futures.
- eToro USA - eToro US offers 24 tradeable cryptoassets, with just a 1% buying/selling fee added to the spread. Additionally, there are 80 different coins available through the broker’s proprietary wallet service. You can also practice your crypto strategies easily by switching between live and demo mode. Crypto asset investing is highly volatile and unregulated. No consumer protection. Tax on profits may apply.
- OANDA US - Cryptocurrency trading is offered via Paxos, a separate entity from Oanda. You can speculate on the world’s biggest cryptos by market cap. Commissions are lower than many peers starting at 0.25%. Through the broker’s partnership with Paxos, clients can spot trade cryptocurrencies on the itBit exchange through the OANDA native platform.
- IQCent - IQCent offers 17 crypto pairs through its proprietary terminal, including Bitcoin, Ethereum and Litecoin. Leverage on crypto CFDs is capped at 1:10, whilst binary options payouts vary by token but remain competitive. OTC assets, for example, pay out up to 95%.
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
Tobias Robinson, Reviewer
NinjaTrader Quick Facts
| Coins | BTC |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Floating |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
| Minimum Deposit | $0 |
| Regulator | NFA, CFTC |
| Account Currencies | USD |
Pros
- Low fees are offered, with $50 day trading margins & commissions from $.09 per micro contract
- Traders can get free platform access and trade simulation capabilities in the unlimited demo
- You can get thousands of add-ons and applications from developers in 150+ countries
Cons
- There is a withdrawal fee on some funding methods
- The premium platform tools come with an extra charge
- Non forex and futures trading requires signing up with partner brokers
Plus500 US
"Plus500 US stands out as an excellent choice for beginners, offering a very user-friendly platform, low day trading margins, and access to the Futures Academy to enhance trading skills. Its powerful tools and reliable service helped it scoop second place in DayTrading.com's annual 'Best US Broker' award."
Michael MacKenzie, Reviewer
Plus500 US Quick Facts
| Bonus Offer | Welcome Deposit Bonus up to $200 |
|---|---|
| Coins | MicroBitcoin, MicroEthereum |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | WebTrader, App |
| Minimum Deposit | $100 |
| Regulator | CFTC, NFA |
| Account Currencies | USD |
Pros
- Plus500 is a publicly traded company with a good reputation, over 24 million traders, and a sponsor of the Chicago Bulls, instilling a sense of trust
- The trading app provides a terrific user experience with a modern design, a clean layout and mobile-optimized charts
- The Futures Academy is an excellent resource for new traders with engaging videos and easy-to-follow articles, while the unlimited demo account is great for testing strategies
Cons
- While Plus500 US continues to broaden its investment offering, it's currently restricted to around 50+ futures with no stocks
- Plus500 US does not offer social trading capabilities, a feature available at alternatives like eToro US which could strengthen its offering for aspiring traders
- Despite competitive pricing, Plus500 US lacks a discount program for high-volume day traders, a scheme found at brokers like Interactive Brokers
Interactive Brokers
"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."
Christian Harris, Reviewer
Interactive Brokers Quick Facts
| Coins | BTC, LTC, ETH, XRP |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | 0.12%-0.18% |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, TradingView, eSignal, TradingCentral, ProRealTime, Quantower |
| Minimum Deposit | $0 |
| Regulator | FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
| Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Pros
- With low commissions, tight spreads and a transparent fee structure, IBKR delivers a cost-effective environment for short-term traders.
- The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.
- IBKR is one of the most respected and trusted brokerages and is regulated by top-tier authorities, so you can have confidence in the integrity and security of your trading account.
Cons
- TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
- IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
- You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
eToro USA
"eToro remains a top pick for traders looking for leading social investing and copy trading services. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer day traders."
eToro USA Quick Facts
| Bonus Offer | Invest $100 and get $10 |
|---|---|
| Coins | BTC, ETH, BCH, DASH, LTC, ETC, MIOTA, XLM, EOS, NEO, ZEC, XTZ, MKR, COMP, LINK, UNI, YFI, DOGE, AAVE, ALGO, MANA, ENJ, BAT, MATIC, FLR, SHIBxM |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | BTC 0.75% |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | eToro Trading Platform & CopyTrader |
| Minimum Deposit | $100 |
| Regulator | SEC, FINRA |
| Account Currencies | USD |
Pros
- The low minimum deposit and straightforward account opening process means beginners can get started quickly
- A free demo account means new users and prospective day traders can try the broker risk-free
- Investors can access Smart Portfolios for a more hands-off approach, covering a range of sectors and markets such as renewable energy and artificial intelligence
Cons
- The proprietary terminal doesn't support trading bots and there are no additional stock market analysis tools
- Average fees may cut into the profit margins of day traders
- There's a narrower range of day trading instruments available compared to competitors, with only stocks, ETFs and cryptos
OANDA US
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
OANDA US Quick Facts
| Coins | BTC, ETH, LTC, BCH, PAXG, LINK, UNI, AAVE |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | $100 |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | OANDA Trade, MT4, TradingView, AutoChartist |
| Minimum Deposit | $0 |
| Regulator | NFA, CFTC |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- There's a strong selection of 68 currency pairs for dedicated short-term forex traders
- Day traders can enjoy fast and reliable order execution
- OANDA is a reliable, trustworthy and secure brand with authorization from tier-one regulators including the CFTC
Cons
- The range of day trading markets is limited to forex and cryptos only
- There's only a small range of payment methods available, with no e-wallets supported
- It's a shame that customer support is not available on weekends
IQCent
"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "
IQCent Quick Facts
| Bonus Offer | 20% to 200% Deposit Bonus |
|---|---|
| Coins | BTC, ETH, LTC, ETC, DOGE, MATIC, QNT, SOL, XRP, USDT, XMR, BNB |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Online Platform, TradingView |
| Minimum Deposit | $250 |
| Regulator | IFMRRC |
| Account Currencies | USD, EUR |
Pros
- CFD trading fees are competitive based on tests, including 0.7 pips on major forex pairs such as EUR/USD
- Keen traders can take part in trading contests with cash prizes
- The broker offers up to 98% payouts on binary options, which is more than alternatives like Pocket Option, only offering up to 92%
Cons
- IQCent trails binary brokers like Quotex with its narrow investment offering of around 175 assets with limited stocks
- IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
- The broker is not overseen by a respected regulator, though this is common among binary options firms
History Of Cryptos
The technical foundations of cryptocurrency were pioneered by an American cryptographer named David Chaum in 1983. He invented a cryptographic system that has a blinding algorithm, which is still used in modern web-based encryption. This algorithm provided secure exchanges and confidential transactions amongst parties, which was known as ‘blinded money’.
However, the term ‘cryptocurrency’ was first coined by Wei Dai in 1998 who published a white paper on b-money. In that year, the software engineer formulated a payment method based on a cryptographic system that had characteristics of decentralisation, but it was never fully developed.
In 2008, Satoshi Nakamoto, a pseudonymous person or secret identity, published a paper called ‘Bitcoin – A Peer to Peer Electronic Cash System’. Nakamoto’s motive to create Bitcoin was in response to the financial crisis of 2008. In 2009, Nakamoto made the Bitcoin software public and a group of enthusiasts began exchanging and mining Bitcoin.
In 2010, Bitcoin was valued for the first time when someone decided to sell theirs by swapping 10,000 Bitcoin for two pizzas. Around the same time, dozens of similar cryptocurrencies began to appear with Litecoin and Ethereum gaining popularity by 2016. The number of establishments where Bitcoin could be used started to gradually increase in 2017, with the likes of Tesla now indicating that they will accept Bitcoin payments for its cars.
Blockchain technology continues to disrupt the fintech industry, bringing with it both trading opportunities while also capturing the attention of regulators.
Crypto Regulations
Government policies and crypto regulations vary by country as authorities aren’t globally coordinated on the matter. In the US, for example, cryptocurrencies are not insured by the government like bank deposits are. Cryptocurrencies stored online won’t have the same legal protections as the money in your bank account. If a digital wallet company goes out of business, the government is unlikely to step in.
New crypto regulations are continuously being updated so it’s important to stay abreast of trading exchange requirements, along with rules around crypto mining, lending, custody and taxes. And while there aren’t many blanket prohibitions or bans on crypto trading, governments always issue caution when investing due to market volatility.
Crypto Regulations In the UK
The UK’s cryptocurrency regulations allow users to buy and sell altcoins though they are not considered legal tender. However, as of January 6th 2021, the Financial Conduct Authority (FCA) banned the sale of retail crypto derivatives and ETNs. The motive behind the ban comes from the risky nature of the industry, which puts consumers in danger from scams and market instability.
Note, UK residents can still participate in cryptocurrency exchanges as the ban is focused on retail trading products. The direct purchase of established cryptocurrencies is still permitted.
Crypto Regulations In the US
US crypto regulations are more complicated due to the inconsistent approaches taken across the country. This is because laws vary by state, while others still have pending legislation.
Cryptocurrencies are not considered legal tender and are not backed by the US government or the central bank. Crypto exchange regulations in the US are in uncertain legal territory. With that said, one of the United States’ major regulatory bodies, the Securities and Exchange Commission (SEC), stated that it considers cryptocurrencies to be securities, with the intention to apply securities laws for digital wallets and exchanges.
On the other hand, the Commodities Futures Trading Commission (CFTC), describes Bitcoin as a commodity and allows for cryptocurrency derivatives to be traded publicly. The Financial Crimes Enforcement Network (FinCEN) has proposed a series of new regulations for financial institutions that deal with digital currencies. However, these have been delayed.
It’s worth checking the rules in your own state before you open an account and start trading. Also, more new USA crypto regulations are coming, so make sure to keep up with the news.
Crypto Regulations In Europe
The European Commission recognised the need for legal certainty on blockchain-based applications. In February 2021, The European Central Bank (ECB) issued an opinion on the MiCA proposal published by the EU Commission in September of the previous year.
The proposed MiCA regulation aims to set out a comprehensive regulatory and supervisory regime for crypto-assets in the EU while supporting innovation. The proposed regulation also covers both firms that issue crypto-assets and those that provide services such as digital wallets and cryptocurrency exchanges i.e. Crypto.com.
The ECB has generally supported the proposal’s objectives with some concerns on e-money and stablecoins. The concern stems from stablecoins presenting a potential threat to the conduct of monetary policies and smooth operation of payment systems, which fall under the competence of the ECB. For now, it is hard to know when MiCA regulations will be enforced. However, based on estimations from EU regulators and previous EU regulations, this might be enforced over the next two to four years.
On a national level, Germany is preparing a comprehensive national blockchain strategy, which will support the development of European and international regulations for cryptocurrencies. But currently, retail crypto trading is allowed at most EU-regulated brokers.
Crypto Regulations In The Netherlands, Switzerland & Estonia
In the Netherlands, cryptocurrencies aren’t accepted as digital money but are regarded as property. However, the country is striving to regulate them. In contrast, Switzerland accepts crypto exchanges and is regulated by SFTA and FINMA, with the need to obtain a license. Cryptocurrencies as payment are also legal in Swiss stores in certain contexts while retail trading is allowed.
Estonia also holds a similarly progressive stance, where crypto exchanges are legal with approved registration but are not yet considered legal tender. Estonia has planned future regulatory changes i.e. customer identification obligations, payments services and record keeping.
Crypto Regulations In Asia
Asia is the financial hub where most of the world’s crypto trading takes place. Japan has the most progressive regulation, recognising Bitcoin and other digital currencies as legal property. Crypto exchange regulations are also legal with the requirement to register with the FSA.
Singapore’s tax authorities treat Bitcoin as goods, thus, Goods and Services Tax is applied. The surge of Bitcoin in 2017 prompted Malaysia’s Securities Commission to regulate the market by enforcing the Capital Markets and Services Order in 2019.
Crypto is not considered legal tender in India, while exchanges are effectively legal due to the lack of robust regulatory frameworks. Hong Kong considers crypto as virtual commodities, which fall under ‘securities’ that are subject to the SFC’s regulation.
Other Global Views
Other countries take a more conservative view of crypto regulations. In Russia, the law prohibits crypto exchanges, with the Ruble remaining the only legal form of tender. In China, crypto exchanges are illegal and cryptocurrencies are not considered legal tender. In recent years, the Chinese government drafted a law that bestowed legal status on the People’s Bank of China’s digital Yuan.
When it comes to cryptocurrencies in Dubai, the UAE does not recognise Bitcoin as a legal form of tender. However, exchanging digital currencies is allowed, with many UAE-based brokers offering crypto trading. Interestingly, Abu Dhabi’s ADGM was the first to introduce a regulatory framework for virtual assets.
In Canada, digital currencies are not considered legal tender but can be used as payment to buy goods online or in stores that accept them. Canada’s central bank characterises it as securities and Canadian laws have applied tax to crypto transactions since 2013. Exchanges in Canada are regulated as well.
Australia treats cryptocurrencies as legal, classed as property in 2017. Crypto exchanges are also legal, with the requirement to register with AUSTRAC. Retail crypto trading is permitted.
The Future of Crypto Regulations
Cryptocurrency regulations are constantly changing as their popularity grows. While some governments like Japan and Australia have taken a progressive stance on cryptocurrencies, some countries are still concerned with the characteristics of blockchain technology and restrict retail trading, such as in the UK.
The main concerns come from a security perspective, with data protection, money laundering, tax evasion and other financial crimes flagged as issues. Also a perceived problem is their volatile nature, with crypto regulations often attempting to shield individuals from the dangers.
Nonetheless, it looks like cryptocurrencies are here to stay with global regulations likely to try and bring order to a mostly unregulated market. How crypto regulations grapple with the decentralised foundation of blockchain technology will be interesting to follow.
Final Word
Cryptocurrency regulations around the world vary, with retail traders facing different restrictions depending on their location. Many crypto regulations and policies are still a work in progress due to the myriad of considerations. As a result, it’s key that traders keep up to date with the latest rules and requirements in their country.