Bitcoin made its debut a decade ago, and it brought with it a new world of cryptocurrencies. Earlier there was a lot of uncertainty about the way cryptocurrencies worked, but today, people have become more aware of the nuances of the system. Crypto trading is still not legal in many countries and enforcement agencies, tax authorities, and regulators continue to argue over the best practices. Whether or not Bitcoin is legal will depend on the user activity and user location.
Why is the Bitcoin popular?
It is important to understand that the Bitcoin is peer-to-peer digital transactions not regulated by any bank or financial institution and can be exchanged on cryptocurrency trading platforms (Read more here: https://finanso.se/bitcoin-era/). It is produced through mining, a computer-run process where cryptographic puzzles have to be solved for miners to earn rewards in the form of Bitcoins. Bitcoin will not exist physically; this explains why it is convenient for conducting cross-border transactions and allows users to stay anonymous.
Where is the Bitcoin legal and where is it not legal?
Since Bitcoin can be used privately for conducting transactions at anytime from anywhere in the world, it can be misused by terrorist and criminal organizations. These criminals can use the Bitcoin for buying and selling illicit weapons, drugs and illegal goods. The truth is most nations have adopted a wait-and-watch policy when it comes to making Bitcoins legal. Some have agreed to its legal use but have established some regulations for overseeing the trade. The bottom line is that Bitcoin will never be accepted as replacement for a nation’s legal currency.
- The US is positively inclined towards the Bitcoin and there are many governmental agencies that are working hard to reduce its use in illegal trade. Large businesses like Microsoft Store, Overstock.com, and Subway are accepting Bitcoin payments; these are proofs of Bitcoin’s legal presence in this country. The FinCen or US Department of Treasury’s Financial Crimes Enforcement Network issues guidance as far as Bitcoin’s use is concerned since 2013. It is under a Bank Secrecy Act that requires payment processors to conform to certain duties like registration, reporting, and record maintenance. Besides, Bitcoin has also been classified as property liable for taxation by the IRS.
- Canada is also positive towards the Bitcoin but makes sure that the cryptocurrency is not a part of money laundering. It is seen as commodity by the CRA or Canada Revenue Agency; so, income produced from Bitcoin transactions is viewed as business income. Bitcoin is also under AML or anti money laundering laws here; all exchanges have to register with FINTRAC and report any suspicious transactions.
- Australia also considers the Bitcoin legal like a currency and lets entities mine, buy, and trade in Bitcoins.
- The EU has not yet made any official decision about the Bitcoin’s legality or acceptance. So, since there is no central guidance on the issues, all countries in the US are free to adopt their own stances as they deem fit.
Some countries however are extremely wary of the Bitcoin’s volatility and decentralized nature. They see it as a threat to the existing monetary systems and feel that it is linked to illicit activities like money laundering and drug trafficking.
- China has banned the Bitcoin and all banks or financial firms in the country are prohibited from dealing in Bitcoins.
- Russia does not regulate Bitcoin trade and its payments are not considered illegal.
- Vietnamese government maintains that Bitcoins are not legal methods of payment.
- Bolivia, Ecuador, and Columbia ban the use of all cryptocurrencies, including the Bitcoin for investment purposes.
Apart from nations that have banned use of BTC, there are some where Bitcoin use is restricted, and here, Bitcoins cannot be used for payment purposes or traded. In these countries, the financial services and banks are forbidden from working with crypto firms and cryptocurrency exchanges. These include India, China, Ecuador, Nepal, Zambia, Egypt, and Morocco.