The Cryptocurrency Conundrum: An Examination of the Issues Facing Digital Currency on the Global Stage

Cryptocurrency stands at a critical juncture in international legal and financial systems, presenting a complex challenge for global lawmakers and regulators to navigate the intricate landscape of digital currency utilization, both domestically and on the world stage. The collapse of FTX in 2022, a then Bahamas-based cryptocurrency exchange, sent shockwaves around the world and plainly showed the need for increased regulation and scrutiny in the cryptocurrency landscape.[1] But how should nations regulate cryptocurrency? This blog post examines that question and offers a solution to the constantly evolving world of digital currency.

Countries vary drastically in their approach to cryptocurrency regulation.[2] Some nations, such as El Salvador, have fully embraced cryptocurrency as legal tender while other nations, such as China, have banned cryptocurrency exchange and the mining of cryptocurrency outright.[3] For its part, the United States has been more open to cryptocurrency in some ways, focusing on the regulation of the cryptocurrency platforms rather than cryptocurrency itself. While the United States does not recognize cryptocurrency as legal tender, it does utilize agencies such as the Federal Trade Commission (FTC) and the Commodity Futures Trading Commission (CFTC) to provide oversight and aims to balance innovation with consumer protection by implementing “Know Your Customer” laws, addressing cybercrime, and preventing market manipulation.[4] Still, such varied regulation from country to country makes it difficult to provide international players with a standard to follow on the global playing field.

Additionally, tax systems vary wildly from country to country regarding digital currency, as cryptocurrency has been difficult conceptually for governments to deal with.[5] Governing bodies face the dilemma of classifying cryptocurrency as currency or property for tax purposes, affecting capital gains and sales.[6] The United States, for example, views cryptocurrency as property and the Internal Revenue Service (IRS) taxes it as such.[7] Additionally, the fast-evolving nature of blockchain technology demands frequent updates to existing tax laws.[8] The absence of standardized global reporting practices for cryptocurrency transactions adds another layer of complexity, making it harder for tax authorities to enforce tax obligations effectively.[9]

In order to deal with these issues, it is necessary to create a firmer global framework between nations. In some ways, international cryptocurrency regulation has made headway through its use of international tax treaties.[10] For example, various treaties void double taxation by providing methods like tax credits for taxes paid in other jurisdictions.[11] Tax treaties also include mechanisms to prevent tax evasion, such as information exchange and mutual agreement procedures.[12] These agreements clarify which country has the right to tax specific crypto-related income, making it easier for taxpayers to understand their obligations and comply with international tax law.[13] Ultimately, the development of international agreements or frameworks, akin to tax treaties, could establish unified standards for cryptocurrency regulation and taxation, ensuring greater consistency across jurisdictions and minimizing the global discrepancies in how cryptocurrencies are managed.

 Matthew T. DegliObizzi Jr. is a staff member of Fordham International Law Journal Volume XLVIII.

[1] See Coryanne Hick, Cryptocurrency Regulations Around the World, Forbes (Dec. 11, 2024),

https://www.forbes.com/advisor/investing/cryptocurrency/cryptocurrency-regulations-around-the-world/

[2] See Cryptocurrency Regulations Around the World, Comply Advantage (Dec. 11, 2024), https://complyadvantage.com/insights/cryptocurrency-regulations-around-world/

[3] See id.

[4] See An Overview of U.S. Government Cryptocurrency Regulation, Montague Law (Dec. 11, 2024), https://montague.law/blog/an-overview-of-u-s-government-cryptocurrency-regulation/

[5] See Krishna Lohia, Crypto Conundrums: Legal Complexities From Lens of International Taxation, Tax Guru (Dec. 11, 2024), https://taxguru.in/income-tax/crypto-conundrums-legal-complexities-lens-international-taxation.html#i_The_Need_to_Tax_Crypto

[6] See Katherine Baer, Ruud de Mooij, Shafik Hebous, Michael Keen, Crypto Poses Significant Tax Problems – and They Could Get Worse, IMF Blog (Dec. 11, 2024), https://www.imf.org/en/Blogs/Articles/2023/07/05/crypto-poses-significant-tax-problems-and-they-could-get-worse

[7] See Dave Birnbaum, Cryptocurrency Taxes Guide: How They Work and Rates to Know, Forbes (Dec. 11, 2024), https://www.forbes.com/sites/digital-assets/article/cryptocurrency-taxes-guide-how-they-work-rates-to-know/

[8] See International Crypto Taxation: Principles & Compliance Challenges, SnapCard (Dec. 11, 2024), https://snapcard.io/international-tax-aspects-of-crypto/#google_vignette

[9] See id.

[10] See id.

[11] See id.

[12] See id.

[13] See id.

This is a student blog post and in no way represents the views of the Fordham International Law Journal.