The legality of Bitcoin differs from country to country.
For example in countries including the US, Canada, the UK, India, China, Hong Kong, Singapore and Germany, Bitcoin has been announced as legal for certain purposes.
There are other countries that have issued bans on Bitcoin including the UAE, Bolivia, Ecuador, Nepal, Algeria and Morocco.
The key points to note are:
- Most countries have not placed absolute bans on Bitcoin (and other cryptocurrencies).
- Bitcoin has various potential functions – including as payment for goods and services, as an investment/financial bet, and to covert between other currencies. Countries vary in which functions they allow and disallow.
- As Bitcoin is relatively new and complex, most use cases in most countries do not have specific issued guidance from the authorities – resulting in users needing to do their best to understand whether any particular use case for Bitcoin is permitted using the country’s general legal framework.
- This can be difficult as Bitcoin is new technology for which historical laws can be difficult to interpret. We have also seen that when new laws or guidance issued by the authorities, this can seem to contradict with the country’s existing laws. In some cases, this has resulted in instructions from a governments being overturned in the country’s courts (for example in the case of India earlier this year).
- Adding to uncertainty, different authorities within a single jurisdiction can treat Bitcoin differently – for example in the US, the Treasury treats Bitcoin as a virtual currency and the Commodity Futures Trading Commission (CFTC) classes Bitcoin as a commodity.
- Many of the restrictions placed by governments on Bitcoin are intended to help avoid: money laundering; the financing of terrorism; making it easier to conduct other illegal transactions (for example some of the transactions that took place through the Silk Road marketplace); bypassing sales and other taxes, bypassing currency controls, and fraudsters taking advantage of individuals. Some officials have also expressed the risk that Bitcoin and other cryptocurrencies could pose to the monopoly power of the state to issue money.
- In the cases where guidance has been provided, countries typically treat Bitcoin as either a form of currency (including as a foreign currency, a virtual currency, electronic money or private money), a commodity, a financial asset, another form of non-financial asset or a private contract (for example a contract for difference). The meanings of thee terms can also differ from country to country.
- As new laws and guidance are provided, the legality of Bitcoin (by purpose) is likely to change over time in many cases.
Below are some examples of guidance provided by authorities in a number of jurisdictions:
US – the US Treasury has classed Bitcoin as a convertible decentralized virtual currency. The Commodity Futures Trading Commission (CFTC) has classed Bitcoin as a commodity. The Inland Revenue Service (IRS) has classed Bitcoin as property for taxation purposes.
China – Various announced restrictions on the use of Bitcoin and other virtual currencies.
India – the Reserve Bank of India (RBI) banned regulated entities from buying and selling cryptocurrencies – but this ban was overturned by the Supreme Court of India
The European Union – the European Court of Justice stated that bitcoins should be treated as a means of payment (in relation to whether VAT should be charged when converting Bitcoin to other currencies).
Russia – Deputy Finance Minister in 2017 stated that it is probably illegal to accept cryptocurrency payments.
Japan – Cryptocurrency exchanges are regulated.
UK – Bitcoin is treated as a foreign currency or as private money.
Canada – Digital currency exchanges are regulated.
Israel – Bitcoin is a taxable asset (not a currency for tax purposes).
Iran – financial institutions are banned from dealing with cryptocurrencies.
Switzerland – not prohibited.
Singapore – Bitcoin is classed as a digital payment token in Singapore’s Payment Services Act.
Hong Kong – The Hong Kong Monetary Authority has called Bitcoin a virtual commodity.
United Arab Emirates (UAE) – Transactions in all virtual currencies are banned.
South Korea – Bitcoin may be traded on registered exchanges.
Germany – the German Finance Ministry classes Bitcoin as private money. The Bundesbank has stated that it does not class Bitcoin as a virtual currency or digital money. Banks are allowed to sell and store Bitcoin and other cryptocurrencies (as of 1st January 2020).
Taiwan – Financial institutions are prohibited from facilitating Bitcoin transactions.
Indonesia – Bank Indonesia has banned Bitcoin as a means of payment.
Sweden – the Finansinspektionen has classed Bitcoin as a means of payment.
Thailand – Bitcoin exchanges are only allowed to exchange Bitcoin into Thai Bhat.
Vietnam – the State Bank of Vietnam has banned the use of Bitcoin as payment for goods and services.
France – the Ministry of Finance regulates cryptocurrency exchanges.
Australia – the Reserve Bank of Australia (RBA) indicated that purchasing goods and services with Bitcoin is legal.
Pakistan – the State Bank of Pakistan (SBP) has banned Bitcoin and other cryptocurrencies.
Bangladesh – using Bitcoin is banned.
Nepal – Nepal Rastra Bank has banned Bitcoin.
New Zealand – the Reserve Bank of New Zealand has indicated that purchasing goods and services with Bitcoin is legal.
Denmark – the Financial Supervisory Authority stated that Bitcoin is not a currency.
Ecuador – The National Assembly of Ecuador has banned cryptocurrencies including Bitcoin.
Venezuela – Bitcoin mining is legal.
Colombia – The Superintendencia Financiera has banned financial institutions from facilitating Bitcoin transactions.
Bolivia – the Central Bank of Bolivia has issued an absolute bank on Bitcoin.
Mexico – Bitcoin is classed as a virtual asset in Mexico’s Fintech Law.
South Africa – The South African Revenue Service has classed Bitcoin as an intangible asset for taxation purposed.
Namibia – the Bank of Namibia has banned cryptocurrency exchanges and stated that cryptocurrencies (including Bitcoin) cannot be used to pay for goods and services.
Mauritius – the Financial Services Commission of Mauritius regulates Bitcoin as a Digital Asset.
Algeria – The use, sale and ownership of Bitcoin is banned.