With the introduction of bitcoin in 2009, the cryptocurrency industry entered a new era. In the midst of ongoing debates about best crypto practices among tax authorities, government agencies, and legislators throughout the globe, one important issue remains: Is bitcoin legal or illegal? The response is dependent on the user’s geographic location and behavior.
Though there is no black and white answer to this question, we can try understanding how Bitcoin regulations and legitimacy vary across major countries of the globe.
Understanding Bitcoin
Bitcoin is not created, sponsored, or controlled by a central authority in any way, shape, or form. Conversely, it is produced by a computer-generated procedure known as mining. Bitcoin is a peer-to-peer funding source, as mentioned above, which implies that it doesn’t really exist in the real world. You cannot touch Bitcoin or see it physically, unlike all forms of conventional cash. Thus, it provides a handy method of doing cross-border transactions without having to worry about exchange rate expenses, which are surely on the peaks these days. In addition to online businesses, bitcoin ATMs, and certain brick-and-mortar establishments, individuals now have wider access to purchasing products and services using bitcoin.
Despite the fact that bitcoin looks to be a very well digital money system at first appearance, there are currently no consistent worldwide rules that oversee bitcoin. Trading BTC takes place on several internet-based platforms and virtual currency-related exchanges these days. Finding a platform for your trading needs is no big deal either, as there is a sea of them available for investors all across the globe. Blockchains, which are distributed ledgers, are used to maintain the circulation of bitcoins from one speculator to another. Peer-to-peer transactions allow it to be transferred to or acquired from anybody who has its address.
Because of Bitcoin’s decentralized structure, it is often possible to move it unnoticed from one location to another using a variety of exchanges. However, it is critical to be compliant with regulations in the locations where your Bitcoin buyers and sellers interact and to realize that even in areas where Bitcoin is permitted, the exchange rate versus government-backed banknotes may be very fluctuating, if not completely unpredictable.
Is Bitcoin Legal?
Depending on where you are located physically and what you’re doing with the bitcoin, your actions may or may not be considered legal.
As the market valuation of the cryptocurrency industry continues to rise as a result of price fluctuations and an influx of new tokens, authorities across the globe are ramping up the discussion on how to regulate the usage and exchange of crypto assets to ensure that they are safe and secure. Only a few governments have gone so far as to proclaim bitcoin to be unlawful. But it does not imply that bitcoin is “legal money.” On the other hand, legal tender simply implies that there simply are no safeguards or protective barriers in place for either the customer or the retailer by any authorized party and that its usage as a form of payment is completely optional, never mandatory.
Other governments are currently deliberating about what measures to take in response to this development. It depends on who you ask: some minor countries, like Zimbabwe, have no hesitation with making loud assertions regarding bitcoin’s legitimacy, while others are more diplomatic. Significantly larger organizations, like the European Commission, acknowledge the need for debate and reflection, although the European Central Bank justifiably argues that bitcoins are still not sophisticated enough to have been regulated.
This is made much more difficult in the U.S because of the country’s fragmented regulatory map — who would be in charge of legislation, the federal govt or particular jurisdictions? That’s the question that has been in debate for years and is still unsolved. In other nations, a similar topic, and there is yet no straight solution, is whether central banks, rather than regulatory agencies, should watch cryptocurrencies. They exist in different forms in different countries, but they are independent entities with independent powers in most industrialized countries.
Another controversial question is that whether bitcoin should be controlled on an international and regional level. Further differentiation is required between the governance of cryptocurrency itself, whether it is regulated as a commodity or cash, and if it is considered legal tender. Only a few nations have combined their analysis and laws together; the majority of the other countries have addressed BTC individually.
Moreover, some countries have not decided clearly to regulate crypto assets because there are many complexities related to crypto. So, instead of a short-term approach, governments should consider cryptocurrencies from long-term perspective. Some major nations have not yet decided about crypto future.
Countries That Have Accepted Bitcoin
Bitcoin’s anonymity makes it appealing to crooks and terrorist groups, who may use it to process business with anybody, wherever, at any time. Some of them may utilize bitcoin to purchase or sell illicit items such as narcotics or firearms. However, that pattern has recently altered, as criminals have begun to steer away from bitcoin for concern of being identified.
The constitutionality of bitcoin has not been definitively decided in most nations, which have instead chosen to adopt a wait-and-see attitude. A number of nations have indirectly approved the legitimate use of bitcoin by implementing legislation that includes some kind of regulatory monitoring. Nevertheless, since about June 2021, El Salvador is yet the only nation in the entire world that acknowledges bitcoin as a legitimate form of payment.
Here’s a list of countries that have accepted Bitcoin:
- The United States of America
Regulatory fragmentation is a problem in the United States, with lawmakers both at federal and state level accountable for setting up laws, domains and regulations.
Some states have moved farther than others in terms of cryptocurrency regulation. As an example, the government of New York issued the contentious BitLicense in 2015, allowing bitcoin enterprises to legally do business with the government.
To add on, Bitcoin vendors in New Hampshire must get a currency transmitter license and deposit a $100,000 bond, according to state regulations. Moreover, the Texas Securities Commission is keeping a tight eye on all bitcoin-related investment possibilities to the maximum possible extent. When it comes here to Securities and Exchange Commission, their attention has been to determine whether specific bitcoin capital assets may be marketed to the general public and whether or not a given transaction is fraudulent.
As a result of its classification of bitcoin as a “commodity,” Commodities Futures Trading Commission may have a greater impact on bitcoin regulation than other regulatory agencies do. While it has not yet developed full bitcoin laws to date, it has recently concentrated on overseeing the budding bitcoin futures prices. It has also pressed charges in other bitcoin-related operations, demonstrating the government’s intention to exert authority over cryptocurrencies anytime it feels there may be any sort of deception in the market.
Apart from the firms mentioned above, the Uniform Law Commission, a non-profit organization, was also put into place. It was dedicated to bringing clarity and cohesiveness to state laws and regulations. Several states are also considering passing the Uniform Regulation of Virtual Currency Business Act in forthcoming committee hearings. The Act is intended to define whether virtual currency operations constitute money transmission enterprises and the kind of license they usually require. Critics are concerned that it is too similar to the BitLicense, which has been generated by the New York government.
- Canada
Like its southern neighbor, the United States, Canada maintains a generally pro-bitcoin posture while also guaranteeing that the bitcoin is not utilized for laundering money purposes across the internet. The Canada Revenue Agency considers bitcoin as a commodity. The money earned by bitcoin transactions is categorized as an investment return since they are seen as barter transactions rather than cash transactions. When it comes to the amount of taxes an individual has to pay, it depends on whether the entity has a buying-and-selling business or is interested in investing in BTC only.
Bitcoin exchanges are considered money service enterprises in Canada. Because of this, they fall within the jurisdiction of the money laundering (anti-money laundering) legislation. In order to operate legally, bitcoin exchanges must enroll with the Monetary Transactions and Reports Analysis Centre of Canada (FINTRAC), notify any fraudulent or suspicious transactions, adhere to the compliance procedures, and even maintain specific records.
- Australia
Canada and Australia are both of the opinions that bitcoin is neither a currency nor a cash equivalent, rather an investment option. Australian Taxation Office firmly believes that bitcoin is a commodity for the sole purpose of capital gain only.
- The European Union
According to a ruling issued by the European Court of Justice on October 22, 2015, the purchase and sale of virtual money constitute a provision of services and, as such, is free from value-added tax (VAT) in all member states of the Eu Union (EU). Additionally, several individual EU member states have adopted and created their very own set of Bitcoin policies and regulations.
By defining bitcoins as a financial service, the Central Board of Taxes (CBT) in Finland has granted the cryptocurrency VAT exemption status. Here, just like Canada and Australia, bitcoin is considered as a commodity rather than as a form of payment.
Belgium’s Federal Public Service Finance also have exempted bitcoin from the country’s value-added tax (VAT). In addition, bitcoin is neither governed or supervised in the country of Cyprus.
British financial regulators, the Financial Conduct Authority, are very intrigued by BTC and they, therefore, seek a legislative framework that supports digital currencies. Bitcoin is subject to specific tax legislation in the United Kingdom.
Germany is favorable to bitcoin, where it is regarded as legal but charged differentially depending on the type of interaction. Germany is one of the most open countries to bitcoin.
- El Salvador
El Salvador is really the only nation in the world that accepts bitcoin as legitimate money or legal tender. When the country’s congress adopted a proposal by President Nayib Bukele in June 2021, bitcoin was officially recognized as a legitimate means of payment at EL Salvador.
- Singapore
Singapore, which has been dubbed as “the crypto haven of the world,” has adopted an innovative solution to cryptocurrencies and blockchain technology, owing to the supervision of the Monetary Authority of Singapore (MAS).
In January 2020, MAS released a new legislative regime that will apply to all Singapore-based cryptocurrency firms and exchanges in accordance with anti-money trafficking and counter-terrorist funding regulations. It was then amended to provide a six-month time window for a handful of cryptocurrency businesses, including Bitstamp, Coinbase, Binance, and Gemini, to get license exemptions.
Bitcoin’s supposed anonymity was a driving force for numerous unlawful operations in its early years. It was well known to be used by drug smugglers, with the Silk Road marketplace being the most famous example. Customers might purchase illegal narcotics on this part of the “dark web.” Bitcoin was utilized in every purchase on the Silk Road. The FBI was finally forced to shut these activities in October 2013. Moreover, competitive cryptos, including Monero and Zcash, have now started to provide far stronger data protection than they did before. In light of this circumstance, illicit behavior is increasingly migrating away from bitcoin.
With such transformations, more and more countries are finally embracing BTC. Yet, there are still are few countries that are reluctant to use to bitcoin. Let’s learn about such locations now.
Countries That Refuse to Accept Bitcoin
Many countries around the world have pleasantly embraced bitcoin, but a few are suspicious of it because of its liquidity, decentralized disposition, possible danger to current monetary processes, and links to illegal activities such as drug smuggling and financial crimes. Bitcoin is widely accepted throughout many parts of the globe. The usage and trade of virtual currency have been outlawed in certain countries, while others have attempted to cut off any assistance from the financial systems that are necessary for its exchange or use.
- China
China has intensified its battle with cryptocurrencies with the goal of completely eliminating them for the good of its own economic framework. Chinese authorities have frequently warned its citizens to stay away from the cryptocurrency marketplace. Cryptocurrencies are considered hazardous commodities, and consumers should “guard their pockets,” as per the statement made by Yin Youping, The Deputy Director of PBoC, on August 27. Apart from such warnings, they have likewise imposed severe restrictions on mining inside the nation so as to restrict any online crypto transactions to the greatest possible scale.
Initiatives to weaken Bitcoin are often seen as an endeavor by the ruling parties to introduce their own e-currency on the market. The People’s Bank of China hopes to be one of the world’s inaugural central bankers to establish its own virtual money. This is to guarantee closer, watchful eyes on the financial activities of its citizens. Nevertheless, since Chinese government has been so focused on producing its very own digital assets, they have even prohibited bitcoin transactions across the nation.
- Russia
In spite of the fact that cryptocurrencies are being used in Russia for a variety of purchases and products, the Russian government continued to promote new laws that would restrict cryptocurrency growth across the nation. The central bank stated in November 2019 that it would call for a ban on cryptocurrencies such as bitcoin. In the beginning of 2020, a regulatory bill was released which restricted the operation of cryptos in the nation, as well as the broadcasting of crypto news.
- Ecuador, Bolivia and Columbia
The usage of cryptocurrencies has been prohibited by Bolivia’s central bank, El Banco Central. Columbia doesn’t at all permit the usage or transaction in bitcoin. A majority of the members of Ecuador’s national legislature voted to prohibit the use of digital currencies in the country.
- India
There have been many formal warnings from the Indian central bank about Bitcoin; the government’s ministry of finance also stated in an interview at the end of 2017 that bitcoin is not lawful money. The administration does not currently have any rules governing cryptocurrencies either.
Moreover, the central bank of India has prohibited Indian financial firms from doing business with bitcoin exchanges and other similar services. According to industry insiders, reports of a fresh crypto prohibition were surfaced in June2020, but they were eventually dispelled.
- Turkey
The Central Bank of the Republic of Turkey released a decree on April 16, 2021, prohibiting the use of digital currencies, including Bitcoin, to purchase items & services, either explicitly or implicitly. In a subsequent proclamation, Turkish President Recep Tayyip Erdoan likewise added cryptocurrency exchanges to the list of businesses susceptible to anti-money laundering and counter-terrorist attacks.
Conclusion
A decade after its creation, many governments still don’t have formal structures in place to regulate or prohibit the use of bitcoin or other cryptocurrencies. Because of bitcoin’s decentralized and opaque character, many organizations have struggled to figure out how to enable its legal usage while still prohibiting illicit operations. Many nations are still debating how to handle cryptocurrencies, according to Reuters.