The legal status of bitcoin (and related crypto instruments) varies substantially from state to state and is still undefined or changing in many of them. Whereas the majority of countries do not make the usage of bitcoin itself illegal, its status as money (or a commodity) varies, with differing regulatory implications.
Consumers have greater ability to purchase goods and services with Bitcoin directly at online retailers, pull cash out of Bitcoin ATMs, and use Bitcoin at some brick-and-mortar stores. The currency is being traded on exchanges, and virtual currency-related ventures and ICOs draw interest from across the investment spectrum. While Bitcoin appears at glance to be a well-established virtual currency system, there are still no uniform international laws that regulate Bitcoin
Bitcoins are not issued, endorsed, or regulated by any central bank. Instead, they are created through a computer-generated process known as mining. In addition to being a cryptocurrency unrelated to any government, Bitcoin is a peer-to-peer payment system since it does not exist in a physical form. As such, it offers a convenient way to conduct cross-border transactions with no exchange rate fees. It also allows users to remain anonymous.
While fears of widespread cryptocurrency crackdowns have long affected the industry, digital assets like Bitcoin remain entirely legal in many of the largest markets around the globe.
According to findings from Coin Dance, there are currently at least 111 countries where Bitcoin is legal. In many others, Bitcoin’s legal status is up for question or the currency is subject to some restrictions.
While some states have explicitly allowed its use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. While this article provides the legal status of bitcoin, regulations and bans that apply to this cryptocurrency likely extend to similar systems as well
Bitcoin’s status is in the clear in the majority of top markets
LongHash previously looked at the currencies that are most often used in trades between fiat and Bitcoin. Bitcoin trading is legal in most of the countries with the top Bitcoin-fiat trading pairs.
Of the top 20 national currencies most commonly traded for Bitcoin, there are only three in which Bitcoin does not currently hold legal status.
The first is Nigeria, where Bitcoin is not illegal but has yet to get a formal legal status. As of February 11, 2019 at 8:30am UTC, the Nigerian naira represented around 0.03% (239.35 BTC) of the total Bitcoin-fiat trading volume over the last 24 hours. As a result, it ranked 15th on Coinhills.com’s rankings of the national currencies most traded for Bitcoin.
Back in 2017, Nigeria’s central bank cautioned citizens about engaging with cryptocurrencies. However, officials since clarified that the currency’s legal status in Nigeria is often misunderstood, as the country’s central bank “cannot control or regulate bitcoin.”
As of press time, the Indonesian rupiah ranks 10th on the list of the national currencies most commonly traded for Bitcoin. It accounted for 529.89 BTC in volume in the last day. However, Bitcoin’s legal status in Indonesia is “restricted,” according to Coin Dance. In late 2017, the country banned the use of Bitcoin as a payment tool. Since then, reports claimed that Indonesia would regulate Bitcoin and the trading of crypto futures. At present, there are seemingly some restrictions placed upon Bitcoin in the country, with established regulation expected in the future.
Lastly, the Vietnamese dong placed 18th on Coinhills’ rankings at the time of our snapshot. According to the site, the Vietnamese dong accounted for 0.02% of the fiat-Bitcoin volume over the last 24 hours. This volume is estimated at around 146.53 BTC. In Vietnam, it is legal to trade and hold Bitcoin but it is illegal to use it as payment tool.
Countries That Say Yes to Bitcoin
Bitcoin can be used anonymously to conduct transactions between any account holders, anywhere and anytime across the globe, which makes it attractive to criminals and terror organizations. They may use Bitcoin to buy or sell illegal goods like drugs or weapons. Most countries have not clearly determined the legality of Bitcoin, preferring instead to take a wait-and-see approach. Some countries have indirectly assented to the legal use of Bitcoin by enacting some regulatory oversight. However, Bitcoin is never legally acceptable as a substitute for a country’s legal tender.
The United States
The United States has taken a generally positive stance toward Bitcoin, though several government agencies work to prevent or reduce Bitcoin use for illegal transactions. Prominent businesses like Dish Network (DISH), the Microsoft Store, sandwich retailer Subway, and Overstock.com (OSTK) welcome payment in Bitcoin. The digital currency has also made its way to the U.S. derivatives markets, which speaks about its increasingly legitimate presence.
The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has been issuing guidance on Bitcoin since 2013. The Treasury has defined Bitcoin not as currency, but as a money services business (MSB). This places it under the Bank Secrecy Act, which requires exchanges and payment processors to adhere to certain responsibilities like reporting, registration, and record keeping. In addition, Bitcoin is categorized as property for taxation purposes by the Internal Revenue Service (IRS).
Like its southern neighbor, the United States, Canada maintains a generally Bitcoin-friendly stance while also ensuring the cryptocurrency is not used for money laundering. Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA). This means that Bitcoin transactions are viewed as barter transactions, and the income generated is considered as business income. The taxation also depends on whether the individual has a buying-selling business or is only concerned with investing.
Canada considers Bitcoin exchanges to be money service businesses. This brings them under the purview of the anti-money laundering (AML) laws. Bitcoin exchanges need to register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), report any suspicious transactions, abide by the compliance plans, and even keep certain records. In addition, some major Canadian banks have banned the use of their credit or debit cards for Bitcoin transactions.
Australia considers Bitcoin a currency like any other and allows entities to trade, mine, or buy it.
The European Union
Though the European Union (EU) has followed developments in cryptocurrency, it has not issued any official decision on legality, acceptance, or regulation. In the absence of central guidance, individual EU countries have developed their own Bitcoin stances.
In Finland, the Central Board of Taxes (CBT) has given Bitcoin a value-added tax exempt status by classifying it as a financial service. Bitcoin is treated as a commodity in Finland and not as a currency. The Federal Public Service Finance of Belgium has also made Bitcoin exempt from value-added tax (VAT). In Cyprus, Bitcoin is not controlled or regulated either. The Financial Conduct Authority (FCA) in the United Kingdom (U.K.) has a pro-Bitcoin stance and wants the regulatory environment to be supportive of the digital currency. Bitcoin is under certain tax regulations in the U.K. The National Revenue Agency (NRA) of Bulgaria has also brought Bitcoin under its existing taw laws. Germany is open to Bitcoin; it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.
There are very few countries where Bitcoin is outright illegal
While Coin Dance classifies Bitcoin as being legal in 111 out of 251 countries and regions, there are not many countries where Bitcoin is listed as being illegal. Currently, it says Bitcoin is illegal in only the following ten countries or regions: Afghanistan, Algeria, Bangladesh, Bolivia, Pakistan, Qatar, Republic of Macedonia, Saudi Arabia, Vanuatu, and Vietnam.
There are a further nine countries where Bitcoin is classified as “restricted” according to the site. Of these nine, the two most prominent examples are China and India.
China is perhaps the most famous example of a harsh cryptocurrency crackdown. The nation’s authorities previously banned initial coin offerings (ICOs) and cryptocurrency exchanges. In July 2018, state-run media in China reported that Bitcoin trading using the country’s national currency fell to less than 1 percent of the international total from a peak of more than 90 percent.
In India, the country’s central bank famously took action action against Bitcoin last year. Since then, reports indicated that this may have backfired and driven illegal activity outside of the view of the country’s authorities.
In most of the countries where Bitcoin is not listed as being legal, the reason is simply that Bitcoin’s legal status has yet to be determined. This is not surprising considering that cryptocurrencies in their current form have only existed since Bitcoin’s first transaction in 2009.