Bitcoin has become a highly debated and controversial topic in finance circles over the past few years. However, the legality of Bitcoin varies depending on the policies of individual countries. Let’s find out if Bitcoin is legal in your country through this article by CoinMinutes.
Is Bitcoin Legal?
The legal status of Bitcoin varies from country to country. While some countries have embraced it as a legitimate form of currency or asset, others have imposed restrictions or outright bans. Understanding the legal framework regarding Bitcoin in your specific jurisdiction is crucial to ensure compliance with local laws and regulations.
Countries Where Bitcoin Is Legal
Bitcoin has gained widespread acceptance across the globe. Governments of several countries have recognized its potential and legalized its use as an official currency. The following list provides detailed information on the countries where Bitcoin is recognized as a legitimate form of payment.
United States
The legal status of Bitcoin in the United States is complex and varies from state to state.
In 2013, the Financial Crimes Enforcement Network (FinCEN) classified Bitcoin as a “decentralized virtual currency that can be exchanged for real currency”.
However, the legal status of Bitcoin is not uniform across all states. For instance, Hawaii banned all cryptocurrency activities in 2014, but the ban was lifted in 2018. Presently, Hawaii requires anyone engaging in cryptocurrency-related activities to obtain a money transmitter license. Similarly, some states such as New York, Delaware, Florida, and Kansas have implemented regulations, but most states have not passed laws regarding cryptocurrencies yet.
European Union
In the European Union, Bitcoin is classified as a convertible decentralized virtual currency. Currently, the European Union has not passed specific legislation regarding Bitcoin’s status as a currency but has stated that VAT/GST does not apply to conversions between traditional currencies and Bitcoin. VAT/GST and other taxes (such as income tax) still apply to transactions made with Bitcoin for goods and services.
India
The Indian government has been skeptical of cryptocurrencies, and in 2018, the Reserve Bank of India (RBI) banned banks from dealing with cryptocurrency exchanges. However, in March 2020, the Supreme Court of India lifted the ban on cryptocurrency trading, which led to a surge in trading volumes. Since then, the Indian government has been working on a new bill to regulate cryptocurrencies.
Brazil
According to the recent crypto regulation bill approved by Brazilian President Jair Bolsonaro, Bitcoin is recognized as a digital representation of value that can be used as a means of payment and as an investment asset in Brazil.
The new law in Brazil has introduced a crime of fraud involving virtual assets, with a penalty of four to six years of imprisonment along with a fine. Digital asset companies, including exchanges and trading intermediaries, are required to obtain a “virtual service provider” license under this law.
South Korea
Bitcoin and other cryptocurrencies are not considered legal tender in South Korea but people are free to buy, sell, and trade them. The South Korean government has issued regulations applicable to companies that carry out or facilitate the purchase, sale, custody, storage, or transfer of virtual assets as well as regulations applicable to financial entities.
The March 2020 Amendment requires all Korean virtual asset service providers to register an authorized bank account and provide customers with real-name bank accounts held at the same bank, acquire an Information Security Management System certification from the Korea Internet Security Agency, provide all company details and bank account details to the Korea Financial Intelligence Unit, and implement expanded Anti-Money Laundering/Know Your Customer procedures.
Countries Where Bitcoin Is Restricted
The following is a comprehensive list of countries where the use of Bitcoin is restricted or regulated somehow. These restrictions may include limitations on buying, selling, or trading Bitcoin, as well as restrictions on mining or using it as a form of payment. Being aware of these restrictions is important if you plan to use Bitcoin while traveling or conducting business internationally.
Canada
Bitcoin is legal to purchase and trade in Canada, but it is not considered a legal tender. Cryptocurrencies are not regulated or managed by financial institutions or supported by any central authority in Canada.
In April 2018, the Bank of Montreal (BMO) announced that it would prohibit its credit and debit card customers from buying cryptocurrencies using their cards. This decision came after another Canadian bank, Toronto-Dominion Bank (TD), had already imposed a similar ban.
United Arab Emirates
According to a report by Freeman Law, the United Arab Emirates is considered one of the most progressive crypto countries in the world. While Bitcoin and other cryptocurrencies are not considered legal tender by the Central Bank of the United Arab Emirates, the people of the UAE are completely free to buy, sell, and trade Bitcoin and cryptocurrencies.
However, it is prohibited to use Bitcoin for payments. The Dubai Financial Services Authority (DFSA) accepts Bitcoin, Ethereum, and Tether as payment for various trade licenses and visas on behalf of the government-owned licensing firm KIKLABB in Mina Rashid, Dubai.
Russia
According to a document released by the Russian Ministry of Finance in 2019, there is no legal prohibition related to Bitcoin or other cryptocurrencies in Russia. Buying or selling Bitcoin is perfectly legal, albeit considered a foreign currency transaction.
However, in 2020, Russia adopted a major crypto law, “On Digital Financial Assets,” which officially prohibited the use of cryptocurrencies like Bitcoin for payment purposes.
In September 2022, the Bank of Russia agreed to legalize crypto for cross-border payments. On the other hand, in July 2022, Russian President Vladimir Putin signed a law banning digital payments across the nation, which includes digital securities and utility tokens as a means of payment for goods, services, and products in Russia.
Nigeria
Cryptocurrencies are not recognized as legal tender by the Central Bank of Nigeria (CBN). In February 2021, the CBN prohibited commercial banks in Nigeria from conducting any cryptocurrency transactions.
Venezuela
Venezuela has legalized the use of cryptocurrencies, as well as mining. In September 2020, the Venezuelan government announced that it would grant mining licenses by utilizing the Integral Miners Registry (“RIM”). All mining activities must be exercised through the National Mining Pool (“NMP”) whereby the government will oversee and distribute the rewards obtained from mining activities. Those who operate outside the NMP will be penalized.
In March 2023, regulators imposed a temporary ban on cryptocurrency mining due to concerns over corruption and embezzlement. As of December, the ban remained in place.
Countries Where Bitcoin Is Illegal
These are nations that have imposed a complete prohibition on Bitcoin and consider it an illegal form of currency.
China
The People’s Bank of China has declared that all transactions of cryptocurrencies are illegal, effectively banning digital tokens such as Bitcoin. The bank argues that its ban on cryptocurrencies is to curtail financial crime and prevent economic instability.
However, the ban comes amid fears that cryptocurrencies were facilitating capital flight from its markets, bypassing conventional restrictions. The ban is part of a new trend in Chinese economic policy toward greater state intervention, epitomized in the “common prosperity” campaign.
Previously, China has placed an annual limit of $50,000 for the purchase of foreign currencies as part of its already strict capital controls. As such, the capital flight facilitated by cryptocurrency is especially notable. Although Bitcoin is not illegal in China, financial institutions such as banks are banned from dealing with any cryptocurrency.
Afghanistan
In 2022, the central bank of Afghanistan made a decision to prohibit the usage of cryptocurrencies across the country. As a result, the Taliban regime took strict actions against those who continued to trade digital tokens despite the ban. Several dealers were arrested for defying the orders, reflecting the severity of the government’s stance on the matter.
Bangladesh
According to the Foreign Exchange Regulation Act of 1947 and the Money Laundering Prevention Act of 2012, the use of cryptocurrencies is illegal in Bangladesh.
Bangladesh Bank, the central bank of Bangladesh, has issued several warnings against the use of Bitcoin and other cryptocurrencies, stating that they are not legal tender issued by any country and do not depend on or are approved by a central payment system. The bank has also warned that people may be financially harmed by using cryptocurrencies.
In 2017, Bangladesh Bank issued a circular on its website banning the use of Bitcoin in Bangladesh. Any person who violates this rule may be fined up to $15,000 and could potentially spend up to five years in prison.
Nepal
On August 13, 2017, Nepal’s government took a firm stance by imposing a blanket ban on the use of Bitcoin throughout the country. The government cited Clause 12 of the Foreign Exchange (Regulation) Act, 2019 BS as the legal basis for this decision. The move caused a stir among the cryptocurrency community, as it marked a significant setback for Bitcoin’s adoption and growth in Nepal.
Algeria
Cryptocurrencies are currently banned under Algerian law. The 2018 Financial Law of Algeria has prohibited the use of any cryptocurrencies, including Bitcoin. It stipulates: “The purchase, sale, use, and possession of so-called virtual currency are prohibited. A virtual currency is one used by Internet users over the Internet. It is characterized by the absence of physical support such as coins, paper money, or payments by check or credit card. Any violation of this provision is punishable in accordance with the laws and regulations in force”.
Future Outlook
Evolving regulatory landscape
The regulatory landscape for Bitcoin is in a state of continuous evolution. Governments and regulatory bodies around the world are grappling with how to balance innovation and consumer protection.
As cryptocurrencies gain prominence, more comprehensive regulations are being developed to address concerns such as money laundering, tax evasion, and investor security. The extent to which governments impose regulations will play a significant role in shaping Bitcoin’s acceptance and integration into mainstream financial systems.
Potential for global harmonization of regulations
The decentralized nature of cryptocurrencies like Bitcoin presents a challenge for regulatory harmonization across different countries. However, as the importance of cryptocurrencies becomes more apparent, there is a growing incentive for international collaboration to create cohesive regulatory frameworks.
Such harmonization could reduce confusion, ensure a level playing field for businesses, and enhance cross-border transactions involving Bitcoin. Organizations like the Financial Action Task Force (FATF) are actively working toward a global consensus on crypto regulations.
Impact of technological advancements on Bitcoin’s legality
Technological innovations have been at the core of Bitcoin’s development since its inception. As the technology supporting Bitcoin evolves, it has the potential to address regulatory concerns and enhance its legality.
Advancements in privacy features, scalability, and interoperability may mitigate some of the risks associated with cryptocurrencies, paving the way for wider adoption and regulatory acceptance. Additionally, advancements like decentralized finance (DeFi) platforms are reshaping traditional financial services, further influencing how Bitcoin and other cryptocurrencies are perceived from a regulatory standpoint.
To sum up, the future of Bitcoin is marked by a delicate balance between regulation, international cooperation, and technological progress. The cryptocurrency’s journey from the fringes of finance to mainstream adoption will be shaped by how well these three factors converge. As governments strive to strike the right balance between innovation and control, the global community of Bitcoin users, developers, and stakeholders will continue to shape its trajectory, driving it toward greater acceptance and legitimacy.
Conclusion
CoinMinutes has provided useful information about the legality of Bitcoin and the countries where it can be used. In most cases, the legality of Bitcoin depends on where you live and how you use it. While Bitcoin is legal in many parts of the world, there are still some places where it is not allowed. However, the number of countries accepting Bitcoin will soon increase in the future.
