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Cryptocurrency Trading Laws & Regulations

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5 min read
Cryptocurrency Trading Laws & Regulations

Understanding your liabilities when it comes to your local laws and regulations is important to keep yourself safe as a cryptocurrency trader.


Staying a step ahead as a vendor is always a good thing, but sometimes one thing that new vendors can overlook is compliance. While this is one topic that isn't the most fun, knowing where you stand can make you feel a lot more comfortable, which has a lot of value.

Ensuring Compliance with Your Local Regulations

When trading on a P2P marketplace like LocalCoinSwap, it's crucial to ensure that you know the local regulations you face when using and trading cryptocurrency. These regulations vary across the world and can be as volatile as cryptocurrency itself, changing with little warning, but this is beginning to taper off as the world's governments become more accustomed to dealing with cryptocurrency trading.

It doesn't matter what platform you are using, be it a P2P exchange or a centralized order-book style exchange; you'll still be expected to account for your local laws and restrictions. Never assume that just because you can use a platform without oversight that you don't have other obligations or considerations in this regard. In most parts of the world, a little research online through verifiable sources such as government websites will help you understand what the expectations for you are when working with cryptocurrency. Take the time to know where you stand to best prepare for your growth as a vendor.

Some Questions to Research:

  • Am I required to collect KYC documents, and if so, what?
  • What records do I need to keep, and for how long?
  • What do I need to consider when accepting payments?
  • Are there some regions I can't legally trade with residents of?

The Basics of Dealing With Cryptocurrency Taxation

The first thing to understand when thinking about cryptocurrency taxation is that hearsay on this topic is incredibly varied and often incorrect. Don't rely on what you hear from others (that aren't specialized in crypto taxation) when planning to deal with any taxation obligations. If you live in a country where cryptocurrency is taxed, it's quite possible that you may be dealing with some form of capital gains tax (CGT), which is the case in places like Australia. If you are dealing with CGT, you may find you can minimize your obligations by holding assets for certain periods or avoiding unnecessary trades between assets.

Assume everything you hear is wrong unless it comes from your government itself or a cryptocurrency taxation specialist operating in your region. There are several benefits to seeking professional advice. You can ensure that you aren't paying any more than you need to and are claiming any losses or business expenses correctly in a way that saves you money while keeping you compliant with your crypto tax obligations.

The last thing you want to do is not be planning ahead and end up with an unexpected tax bill down the road. Once you understand your obligations, you can work with your accountant, or even on your own with some preparation, to start taking the necessary records as part of your trade flow. Just like ensuring you are complying with local regulations in terms of legality is important, so is taxation. Hence, understanding where you stand is fundamental when starting your trading journey.

Exporting Your Trade History

Whether you are trying to keep track of your profit and loss or other metrics, one crucial thing to do is keep track of your trades. You may not realize that most platforms (like LocalCoinSwap) support this feature as a new vendor. If you are using a secondary exchange as a liquidity source (or several) other than your P2P marketplace, be sure that you regularly export and collate your trade history from all the sources you use.

Having access to data is vital for any type of business. It doesn't matter if you operate a large or small business; utilizing your data correctly can make or break you. Have you been taking into account all the expenses, including any secondary trading fees or withdrawal fees? If not, you may not be as profitable as you think you are, or you may even be taking a loss on thin margin trades. The data is easy to get, make the most of it, and be as informed as you can be about your own business, whether you only perform a few trades a month, or a few trades an hour, understanding your data and making the most of it will help you become a better vendor.

Most platforms will export trade history in CSV format. You don't need expensive software just to work with these files. Whether you opt to use something like Google Sheets, which is free to use with only minimal limitations (primarily on storage), or some open source software like Libre Office and Open Office, there's plenty of options that can allow you to work with your trade history exports without having to spend anything.

Don't fall into the trap of thinking you are required to spend big on bookkeeping software to manage your trades; there's plenty of alternatives out there for just about anything you could need, thanks to the contributions of developers across the world to free and open-source software.

Reporting Fraud & Criminal Activity

Being a P2P vendor puts you in contact with a range of people. Unfortunately, like anything involving people, some of the people you deal with may not have the best intentions. Fraud is always a possibility when money is involved, as are most other forms of criminal activity. It's essential to watch for strange behavior when vending to ensure that you aren't negligent to illegal activity that you could be enabling.

Does the person you are dealing with seem to match the person whose accounts you are interacting with? Is a trader being flakey or showing strange behavior like being unsure of simple personal details or not being able to find the information they should have access to as the account owner? If the answer is yes to either of these questions, you may be dealing with someone committing fraud or other financial crime.

When a trader comes to you with a large order that seems odd to you, pay attention to red flags like preferring to use payment methods with high margins that would result in significant expense for them. If something about a trade seems off, sometimes it's just better to be safe than sorry and opt-out.

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