Countries Where Bitcoin Is Legal and Illegal

The peer-to-peer digital currency, Bitcoin, debuted in 2009 and ushered in a new era for cryptocurrencies. With tax authorities, enforcement agencies, and regulators around the world still debating best practices, an important question is: Is Bitcoin Legal or illegal? The answer depends on the location and activity of the user. Bitcoin is not issued, endorsed, or regulated by any central bank. Instead, it is created through a computer-generated process called mining. In addition to being a non-governmental cryptocurrency, Bitcoin is also a peer-to-peer payment system, as it does not exist in a physical form foreign exchange market today. As such, it offers a convenient way to transact cross-border without currency exchange fees.12 Consumers have more options to buy goods and services directly from Bitcoin-using online merchants, withdraw money at Bitcoin ATMs, and use Bitcoin at certain bricks and 3 Currency is listed on the stock exchange, and companies related to virtual currency and initial coin offerings (ICOs) are attracting interest from across the investment spectrum. While Bitcoin at first glance appears to be an established virtual currency system, there are still no uniform international laws regulating Bitcoin.



Countries That Say yes to Bitcoin

Bitcoin can be used anonymously to transact between any account holder anywhere and anywhere in the world, making it attractive to criminals and terrorist organizations. You can use Bitcoin to buy or sell illegal products like drugs or weapons. However, this trend has recently changed as criminals turn away from Bitcoin for fear of persecution about the foreign exchange market. 4 Most countries have not clearly established the legality of Bitcoin and prefer to act on a wait-and-see basis. Some countries have indirectly consented to the legal use of Bitcoin by implementing regulatory oversight. However, as of June 2021, El Salvador will be the only country to recognize Bitcoin as legal tender.

USA

The United States has taken a generally positive stance on Bitcoin, despite various government agencies working to prevent or reduce the use of Bitcoin in illegal transactions. Leading companies such as Dish Network (DISH), Microsoft, Subway, and Overstock (OSTK) welcome Bitcoin payments.67 The digital currency has also found its way into the US derivatives markets, increasing its legitimacy. 8 The Department of the Treasury of the Eastern Department of the Treasury Crime Fighting Network (FinCEN) has been publishing guidance on Bitcoin since 2013. The Department of the Treasury does not define Bitcoin as a currency but as a money services company (MSB) best broker in India for forex. This falls under the Bank Secrecy Act, which requires exchanges and payment processors to perform certain tasks such as reporting, recording, and keeping records.9 Additionally, Bitcoin is classified as the property of the Internal Revenue Service for tax purposes.


Canada

Like its neighbor to the south, the United States, Canada maintains a generally favorable stance on bitcoin while ensuring that the cryptocurrency is not used for money laundering. Bitcoin is considered a commodity by the Canada Revenue Agency (CRA).11 This means that Bitcoin transactions are treated as exchange transactions and the income generated is treated as business income. Taxes also depend on whether the person is in buying and selling the business or simply investing.12 Canada views bitcoin trading as a money services business. This means that they fall within the scope of anti-money laundering (AML) laws. Bitcoin exchanges must register with the Financial Transaction and Reporting Analysis Center of Canada (FINTRAC), report suspicious transactions, adhere to compliance plans, and even keep certain records13. Also, some of the major Canadian banks can use their credit or debit cards for Bitcoin transactions.

Australia

Like Canada, Australia does not consider Bitcoin to be money or a foreign currency, and the Australian Tax Office (ATO) treats it as an asset for capital gains tax purposes.




China

Bitcoin is generally prohibited in China. All banks and other financial institutions, such as payment processors, are prohibited from trading or exchanging Bitcoin. Cryptocurrency trading is prohibited.18 The government is cracking down on minors.

Russia

Bitcoin is not regulated in Russia, although its use as a means of payment for goods or services is illegal.

Vietnam

The Vietnamese government and the state bank claim that Bitcoin is not a legitimate payment method, although it is not regulated as an investment

Bolivia, Colombia, and Ecuador

The Central Bank of Bolivia has banned the use of Bitcoin and other cryptocurrencies. Columbia does not authorize the use or investment of Bitcoin. Bitcoin and other cryptocurrencies were banned in Ecuador by a majority vote in the National Assembly.

The bottom line

Although Bitcoin is more than 10 years old, there are still no explicit systems in many countries that restrict, regulate or prohibit cryptocurrencies. The decentralized and anonymous nature of Bitcoin has challenged many governments to allow its legal use while preventing criminal transactions. Many countries are still looking at ways to regulate cryptocurrencies. Overall, Bitcoin remains in a legal gray zone for much of the world.

Contact us