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Is Bitcoin Legal in my Country?

Is Bitcoin Legal in my Country?
Asked by
Jane Goodwin categorie-icon time-icon4 months ago

Sheila Olson
Answered time-icon4 months ago

Bitcoin was born in January 2009, and it changed the financial world forever as it ushered in the new era of cryptocurrencies. It’s been a tumultuous time for the infant cryptocurrency industry as governments, regulators, tax authorities and enforcers worldwide debate how to deal with cryptocurrencies. Among all this the primary question many users ask is, ‘is bitcoin legal in my country?’

The answer depends on what country you’re talking about, and what you’re using bitcoin for. There’s no set answer, since confusion reigns even within individual countries.

Bitcoin is a computer generated digital currency, and as such it has no ties to any one government or central bank. It was created as a peer-to-peer alternative to government issued fiat currencies and it offers users a convenient and inexpensive way to transfer value while also remaining private.

With growing acceptance from merchants, the ability to convert bitcoin into fiat currency, the growth of exchanges and trading, and the burgeoning number of investments in other blockchain based platforms it certainly looks as if Bitcoin and its kin have been accepted.

Yet there is no global regulation of bitcoin, and even local governments have conflicting views on the new payment method.

Let’s have a closer country-by-country look to determine if bitcoin is legal in your country.

Countries where bitcoin is legal

Most countries have yet to fully rule on the legality of bitcoin, but we can say that it is not an acceptable substitute to any country’s legal tender currency. Some countries have accepted bitcoin’s usage by enacting regulations, others have outright demonized the digital currency, and most are taking a wait-and-see approach. Here are the countries where bitcoin usage and ownership are considered legal:
Japan – Japan is at the forefront of bitcoin acceptance. It was the first, and so far, the only, country to declare bitcoin legal tender in 2017. It is also ahead of other countries in regard to regulations, with laws being passed in 2017 to license cryptocurrency exchanges, while also putting them under Know-Your-Customer and Anti-Money Laundering regulations.

United States – In the United States there has been a generally positive attitude from government entities regarding bitcoin. While some do work to stop its use in illegal transactions, others have begun to draft regulations regarding taxation and investing, including the introduction of a bitcoin derivative on the Chicago Mercantile Exchange and the Chicago Board Options Exchange. The IRS has deemed bitcoin a property for taxation purposes, the U.S. Treasury has said it is a money services business rather than a currency, and the Securities and Exchange Commission is drafting regulations to define bitcoin trading.

On the commercial front there are a growing number of U.S. businesses that accept bitcoin in payment.
Canada – Canada has a friendly stance towards bitcoin, while also working to ensure it isn’t being used for illegal purposes. Canada’s Revenue Agency has determined bitcoin to be a commodity, which makes bitcoin transactions in Canada a barter transaction subject to business income laws and regulations. Taxation is determined by the intent of the bitcoin buyer and seller.

Like the U.S., Canada largely considers bitcoin exchanges to be money service businesses. That makes them subject to KYC and AML regulations and requires them to register with Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC). On a negative note, some Canadian banks have banned the use of their credit and debit cards in Bitcoin transactions.

Australia – Australia has also taken a friendly stance towards bitcoin and considers it to be like any other foreign currency. Entities in Australia are permitted to transact with Bitcoin, as well as trading, buying and mining it.

The European Union – So far, the European Union hasn’t issued a formal decision regarding bitcoin and other cryptocurrencies. In the absence of a central decision individual countries have been developing their own stance regarding bitcoin. In many cases that has led to a lack of regulation and tax-exempt status for bitcoin across much of the European Union.

United Kingdom – The U.K. is pro-bitcoin and has been supportive of the digital currency in its regulatory and taxation approaches.

Countries where bitcoin is unwelcome

There are countries that haven’t embraced bitcoin with open arms due to worries over the decentralized nature of bitcoin, its links to illicit activities, its volatility, or its perceived threat to the current fiat currencies. In some countries it has been outright declared illegal and banned, while in others it has seen access to banking and financial services severed.

Bangladesh – This South Asian country is one of the few that has openly declared against cryptocurrencies. The Bangladesh government made it clear as early as 2015 that it is a “punishable offense” to use bitcoin and other cryptocurrencies in Bangladesh.

China – Because of its link to bitcoin mining, and the large number of altcoin projects in China, it has seen sometimes intense media scrutiny regarding its policies towards bitcoin. While the Chinese government has openly stated that they have no plans to ban bitcoin, they have also banned ICOs in 2017, and have cracked down on cryptocurrency exchanges by suspending trading of digital assets against the Yuan. It has also been removing the tax breaks and cheap electricity that made bitcoin mining so attractive and profitable in China.

Russia – Russia has also had a sometimes contradictory relationship with bitcoin and cryptocurrencies. At various points it was going to be regulated, then banned, then allowed, but not for transactions, and finally in early 2018 the Russian government released regulations making bitcoin exchanges officially legal in Russia. There are still rumors that the Russian Finance Ministry is drafting legislation to make it illegal to use bitcoin as a substitute to the Russian Ruble.

Vietnam – The central bank and government of Vietnam have stated that bitcoin is not a legitimate payment method, but they have not released any formal regulations regarding its use as an investment. That said, the Vietnamese government seized control of the country’s largest cryptocurrency exchange in May 2017 and banned the import of cryptocurrency mining equipment in August 2018.
Egypt – There hasn’t been a government ban on bitcoin in Egypt, but in January 2018 the highest religious leader in Egypt stated that cryptocurrency trading is forbidden under Islamic religious law.

South America (Bolivia, Columbia and Ecuador)

The Central Bank of Bolivia has banned the use of bitcoin and in Columbia it cannot be used for purchases or investment. Ecuador has also banned the use of bitcoin by a vote in their national assembly.

Africa (Namibia, Nigeria and Zimbabwe)

In Namibia it has been made expressly clear that bitcoin transactions are illegal, and users will face penalties. Nigeria has prohibited banks from dealing with cryptocurrencies, but the government has also said they are working on their official stance towards bitcoin as a method of payment and as an investment. Zimbabwe has banned its banks from processing transactions linked to bitcoin, but in May it also lifted a ban on cryptocurrency exchanges. The new finance minister has been outspoken in his desire to see Zimbabwe embrace cryptocurrencies.

The Bottom Line

Even though bitcoin is over 10 years old most countries haven’t yet determined how to deal with the fledgling digital currency. Progress is being made however, and in the free and open countries bitcoin has been accepted. Governments that typically exert greater control over their citizens have been hesitant or unwilling to embrace bitcoin, which isn’t surprising given their lack of control over the digital currency.

While bitcoin usage and investment remain a grey area in much of the world, its acceptance is slowly increasing, and most of the world’s citizens will find that bitcoin is legal in their country, especially as an investment.

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