The legality of Bitcoin: Everything You Need to Know to Use it Securely
Just like other virtual currencies, Bitcoin is entirely beyond the regulation of the central currency regulating institutions. Due to this, it is singled out as an illegal type of currency in most countries. However, the rules regarding electronic money have drastically evolved over the last few years, making Bitcoin an acceptable mode of payment. Now, have these regulations made Bitcoin a legal type of currency? Read on to learn more.
What does the British Law Say?
In 2017, the United Kingdom government ruled that Bitcoin is an uncontrolled currency. The government labelled it a ‘foreign currency’ that could not be eligible for various purposes such as VAT/GST. Notably, Bitcoin is regarded as ‘private money’ throughout the United Kingdom. Whenever Bitcoin is exchanged for foreign currencies like the dollar and the euro or even the sterling pound, customers will not be subjected to VAT on the Bitcoin’s value. Nevertheless, the VAT will be customarily subjected to the suppliers of any products or services sold or purchased in exchange for the Bitcoin or any other type of cryptocurrency. In the United Kingdom, the profits and losses made on cryptocurrencies are subject the capital gains tax.
What does American law say?
In 2013, the United States Treasury categorized Bitcoin as an exchangeable decentralized virtual currency. In September 2015, the CFTC (Commodity Futures Trading Commission) classified Bitcoin as a commodity. According to IRS (Internal Revenue Service), Bitcoin should be taxed as a property.
In the United States, money service businesses, including cryptocurrency exchanges, anonymizing services, and money transmitters, are needed to accomplish the following whenever they carry out a considerable amount of business in the country:
- It should register with the United States FinCEN as a money service business
- The company should design and impose an AML (anti-money laundering) program
- It should also keep correct records and send reports to FinCEN, including the CTRs (Currency Transaction Reports) and SARs (Suspicious Activity Reports).
Lastly, a federal judge ordered that Bitcoins are monies within the underlying meaning of that term in September 2016.
What is contained in Australian law?
The governor of the RBA (Reserve Bank of Australia) Participated in an interview in December 2013 to talk about the legality of Bitcoin in the country. The governor stated that Australians were not restricted to transact in any form of currency they wanted to when shopping. He said that there was no law limiting the use of Bitcoin in the country, and thus the field was free for all currencies. The Australian Transaction Reports and Analysis Centre (AUSTRAC) was required to register all Australian digital currency exchanges at the start of April 2018. It also needed to impose the ‘know your customer’ policies to conform to the new anti-money laundering law.
Some countries have not yet legalized Bitcoins. Others have restricted its usage, while in other countries; it is neither illegal nor legal.
Countries where Bitcoin is illegal
The main reason why some countries have strict regulations against the use of Bitcoin as a mode of payment is that it is a decentralized currency that is not regulated by any central authority. As a result, these countries view Bitcoin as a severe threat to their financial system. The top 9 countries that still ban Bitcoin to date are Afghanistan, Algeria, Saudi Arabia, Bangladesh, Bolivia, the Republic of Macedonia, Pakistan, Vanuatu, and Vietnam.
Countries That Restrict the Trading or Use of Bitcoin
In some countries, Bitcoin is legal, without actually being free. In these countries, its exchange and usage as a means of payment are substantially controlled. For instance, a standard bank or an institution in the financial system can't deal with companies specializing in the exchange of cryptocurrencies. Here is a list of countries that restricts use of Bitcoin: China, Egypt, Ecuador, India, Indonesia, Morocco, Nepal, American Samoa, Qatar, and Zambia
Countries Where Bitcoin Is neither Legal nor Illegal
While it is possible to use Bitcoin in these countries, there is no legal framework surrounding transactions to protect users. These countries include Albania, Argentina, Andorra, Barbados, Colombia, the United Arab Emirates, Gabon, French Guinea, Jamaica, Jordan, Kazakhstan, Kosovo, Kenya, Kyrgyzstan, Mauritius, Maldives, Malaysia, Nigeria, Paraguay, Peru, Panama, Tunisia, Tanzania, and Uruguay.