In their early years, Bitcoin and altcoins developed in a legal vacuum: states did not regulate their use, limiting themselves to general recommendations at the central bank level. The growing popularity of cryptocurrencies forced them to reconsider the legal framework in this area.
Hi all, Alex here! Cryptocurrencies and everything connected with them is a very interesting and rapidly developing sphere, because according to the latest data, the number of countries that take cryptocurrency seriously is growing every year. Let’s take a look at them.
Countries Where Cryptocurrencies are Legal
At the moment, most states prefer to observe the development of virtual currencies from the outside, without creating separate laws to regulate this sphere. Supervisory authorities intervene in the situation only in extreme cases, when it comes to the protection of the general public from fraud. Given the unpredictable development of the cryptocurrency market, this position looks reasonable, but creates additional inconveniences for fintech startups and individuals exchanging digital coins for fiat money.
Countries that allow cryptocurrencies have an additional advantage in attracting startups that develop blockchain-based products. Some experts believe this model can help laggard states become global financial centers and attract large investments to their economies. Further development of blockchain technology will inevitably lead to improvements in the legal framework in this area.
The decentralized nature of cryptocurrencies presents states with the challenge of striking a balance between anonymity and citizen security. This issue is now the subject of studies by economists and IT specialists, the results of which will determine the nature of regulation of cryptocurrencies in the future.
Today Japan is one of the most liberal countries in the field of cryptocurrency regulation. On April 1, 2017, Japan’s parliament passed a package of amendments that recognized Bitcoin and other cryptocurrencies as legal tender. Under Japanese law, cryptocurrencies are not a full-fledged currency, but they can be used to pay for goods and services on a par with traditional money. The status of cryptocurrency exchanges has been formalized: they must now obtain a license for their operation and comply with anti-money laundering legislation.
In 2016, the Swiss city of Zug began accepting Bitcoin to pay for public services. The innovation was an important signal for companies developing blockchain technology. Despite the lack of a clear legal status for cryptocurrencies, Switzerland has become a popular country for registering blockchain startups.
The country’s monetary authorities do not clearly define digital currencies, viewing them as something in between an exchange-traded asset and ordinary money. In June 2017, the Singapore Monetary Authority announced plans to use the Ethereum blockchain to digitize the national currency.
The legal status of cryptocurrencies in the U.S. is best captured by a phrase from a 2016 Supreme Court opinion: Bitcoin is cash in the literal sense of the term. Thus, the United States is one of the countries where cryptocurrency is legalized. Bitcoin and altcoin transactions in the United States are taxable. View our latest guide about the best cryptocurrency exchanges in the U.S.
Bitcoin and its analogues are not a means of payment in Canada, but payment for goods and services in the cryptocurrency can be made on a general basis. Income derived from investing in virtual currencies is taxable. The law allows Bitcoin ATMs to be used in the country.
Swedish authorities consider cryptocurrency as a means of payment, but do not enshrine this status legally. Profits from the sale and mining of digital money are subject to income tax. Swedish financial regulators recognize the legality of Bitcoin ATMs and cryptocurrency exchanges by individuals, but such transactions are restricted by anti-money laundering and counter-terrorism laws.
The German regulator defines cryptocurrency as private money that can be used for payments between banks and other organizations. Any purchase made with Bitcoin is subject to VAT. At the same time, the payment of taxes on cryptocurrency transactions remains a subject of discussion between the Ministry of Finance and the official bodies that control financial transactions in Germany.
According to the position of the Central Bank, operations with digital money are not subject to licensing and payment of additional taxes. However, owners of bitcoin ATMs, cryptocurrency exchanges and other organizations exchanging cryptocurrencies for fiat money must conduct mandatory verification of their customers. Some restaurants and stores in Prague accept Bitcoin to pay for goods and services.
Countries Where Cryptocurrencies are Illegal
Regulators of the countries that fell into this category decided to completely ban the circulation of cryptocurrencies. This rightful status of cryptocurrencies in such countries is the end of it.
Conducting any transactions with cryptocurrencies is illegal in Vietnam. Mining is also prohibited in the country, and any deviations from the aforementioned rules are punishable by very hefty fines. Moreover, repeated violation of the above requirements may result in real imprisonment terms for the guilty.
The Bank of Lebanon issued an official statement announcing that the regulator completely prohibits absolutely any transactions with cryptocurrencies for citizens and business entities. Cryptocurrency as such was described as a commodity whose value is unjustifiably increasing/decreasing, which consequently has a negative impact on economic stability in the state.
The Monetary Authority of Morocco, together with the Bank of Al Maghrib stated that any financial transactions with virtual currencies are in direct violation of the current legislation of Morocco. They also urged individuals and entities to comply with stock exchange regulations in force in Morocco. On the other hand, the regulator is not reluctant to soften its stance on this issue in the future.
The Ecuadorian government banned cryptocurrency in general and bitcoin in particular back in 2014. In parallel, Ecuador’s regulator tried to create a regulatory framework for its cryptocurrency, but neither the cryptocurrency nor the regulatory framework ever emerged. The fate of cryptocurrency in Ecuador remains questionable.
The Central Bank of Pakistan does not and will not recognize cryptocurrencies as a legal means of payment. From the regulator’s point of view, cryptocurrencies are a convenient way to launder proceeds of crime and to finance terrorism, so the Central Bank made this decision. Moreover, in order to verify compliance, the Federal Bureau of Revenue of Pakistan began to analyze transactions related to cryptocurrencies.
Special mention should be made of Kyrgyzstan, Namibia, Nepal, Algeria, Bolivia – these are the countries that have completely banned any operations with cryptocurrencies by any entities.
It is clear that cryptocurrency is the future. And the faster all countries get involved in developing a unified legal framework for cryptocurrency, the faster cryptocurrency will enter the mainstream and spread to more and more industries. If you are interested in learning about cryptocurrencies or want to understand how the market functions, our website will help you. Every week we publish materials that will interest you, for example, Zebpay cryptocurrency exchange or Luno cryptocurrency exchange. Stay tuned!
I have been studying cryptocurrency for over 5 years. I have accounts in every exchange and I test everything on myself.
I want this market to be more understandable for everyone.