Countries Where Cryptocurrencies Are Legal And Where They Are Illegal

Illustrative Image | source It hasn't been that long since the very first cryptocurrency saw the light of day It was 2009 when the Bitcoin blockchain was launched.

This peer-to-peer digital currency laid the foundation for the concept of decentralized finance The growing interest in cryptocurrencies and their widespread adoption has forced regulatory authorities to take notice of this new asset and spurred efforts to enshrine it in the modern legal system.

While governments, tax authorities, and central bankers around the world debate how they can control decentralized finance and, by extension, cryptocurrencies, consumers are grappling with the opposite question of where they can legally use Bitcoin and similar cryptocurrencies While it is legal to use Bitcoin in most states, it may also come with a certain obligation on the part of the user.

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in the Czech Republic you can legally purchase any cryptocurrency and use it as you see fit But the moment you convert your cryptocurrency back to the Czech crown or another fiat currency, you are required to pay income tax.

Assuming, of course, that you made a profit on the exchange back to fiat currency This means that the tax liability refers to the positive difference between purchase and sale.

The legal status of Bitcoin depends on which country you are in and whether or not it is regulated in that country Some kind of regulation is a common part of almost most states today.

The degree of such regulation has a major influence on the legality or illegality of cryptocurrencies Countries where bitcoin is legal Bitcoin set the basic contours for other cryptocurrencies.

Due to this, most cryptocurrencies today are decentralized, i e.

that no central authority can interfere with the blockchains of individual cryptocurrencies Cryptocurrencies are relatively anonymous and transaction history is transparent.

However, in addition to ordinary users, these properties also attracted criminals who started using cryptocurrencies to commit crimes such as extortion, financing terrorism, or so-called money laundering (legalization of the proceeds of crime) The high degree of decentralization, anonymity of transactions, wider acceptance of cryptocurrencies by the lay and professional public has prompted some governments to adopt at least basic legislation to combat money laundering and terrorist financing (AML/CFT).

Today, this set of legal measures is considered the minimum that every developed state should respect Late last year, Price Waterhouse Coopers (PwC) released an extensive report on the global regulation of cryptocurrencies.

In the report ( ), she analyzed selected countries and individual regulatory frameworks that are already in force or that the local legislators are about to adopt At the same time, the report mentioned several states where the use of cryptocurrencies is illegal.

Below we present a basic overview of countries in which the use of cryptocurrencies is legal, at most partially regulated After the list of countries in which the user can handle his cryptocurrency without any worries, we also list, for completeness, the countries in which the use of bitcoin and other cryptocurrencies is illegal.

United States The Financial Crimes Enforcement Network (FinCEN), which operates under the US Department of the Treasury, has been issuing regulatory guidance on Bitcoin since 2013 At that time, the Ministry of Finance there already defined bitcoin as a convertible currency with an equivalent value in real currency or a currency that can act as its substitute ( ).

The US Internal Revenue Service (IRS) views Bitcoin as property for tax purposes ( ) Anyone who uses bitcoin and other cryptocurrencies for management and exchange, typically cryptographic exchanges, or transaction processors, falls under the definition of a money services business (MSB) under current US law.

According to this law, all money services businesses must register with the US Treasury Department, comply with bank secrecy and submit periodic reports on all transactions that exceed the $10,000 limit ( ) The US Department of the Treasury and FinCEN are currently working together on the development of legislation, on the determination strategy for monitoring and supporting each other in the implementation of legislative processes.

European Union The use of Bitcoin and other cryptocurrencies is legal throughout the European Union The EU grants crypto-currencies the status of crypto-assets.

However, it should be noted that the European Central Bank, as the highest monetary regulatory authority of the EU, warns the user that all activities and transactions associated with these crypto assets are not subject to any supervisory authority and individual deposits at central cryptographic exchanges are not covered by legal insurance as in the case of a deposit at a regular banking institution The ECB continues to warn the public and entrepreneurs about the risks associated with cryptocurrencies.

The EU left cryptocurrencies without central regulation for a long time It was not until 2020 that the European Commission finalized the draft legislation for the regulation of crypto-assets referred to as (MiCA).

MiCA then headed to the committees for comment proceedings This lasted for another two years, after which various agencies, but also the crypto players themselves, commented on the proposal.

The final version was sent to the European Commission for a vote only last October (2022) With the adoption of cryptocurrency regulation, some EU member states are waiting for the final form of MiCA to initiate their own legislation, which will be based on the legal framework of the MiCA proposal.

MiCA only offers broader outlines of how to regulate the cryptographic sector in the EU For example, it does not deal with so-called security tokens or non-fungible tokens (NFT) at all.

The aim of this emerging legislation is to prevent the fragmentation of financial regulatory frameworks while maintaining user access to cryptocurrencies and to level the financial playing field across the EU so that users can use them safely Canada Like the United States of America, Canada also has a positive attitude towards cryptocurrencies, namely Bitcoin.

The Canada Revenue Agency (CRA) views cryptocurrencies as commodities and considers any profit from transactions with these commodities Whether it is an entrepreneur or an end user, in the case of a profit from the sale of both groups, the obligation to tax such profit arises with income tax.

The same principle is also applied in the Czech Republic At the same time, all crypto exchanges there are considered companies that provide financial services.

Thanks to this, they have to comply with the legislative measures of proceeds from criminal activity (so-called money laundering) and The supervisory body is the Center for the Analysis of Financial Transactions and Reports ( ).

Every cryptocurrency exchange is required to register with this supervisory authority, report suspicious transactions, keep accurate records and adhere to a compliance plan Australia Australia, through the Australian Taxation Office (ATO), views Bitcoin and other cryptocurrencies similarly to Canada and the Czech Republic.

The ATO considers Bitcoin to be a financial asset with value and may be taxed as such For example, if bitcoin is used for trading, exchange, purchase, sale, but also as a form of gift, users may in certain cases be taxed.

The key will be whether you have made any capital gains from such a transaction it also arises in cases where bitcoin is converted to fiat currency.

However, those users who hold bitcoins exclusively for their personal use are exempt from the tax obligation They have a tax liability in certain cases, even if they make a profit from the transaction.

France Of the EU member states, France is probably the furthest along in implementing the regulatory framework Last year, it introduced the so-called Monetary and Financial Code (MFC), which regulates the use of cryptocurrencies and other crypto-assets in the country.

Under the MFC, the local government has defined digital assets, which include utility tokens, payment tokens and security tokens NFT is not defined within the MFC, and wider regulation is thus avoided for the time being.

The aforementioned legislation not only regulates the status of tokens, but also includes regulations that concern the services offered in the field of digital assets are obliged to comply with all businesses whose business is buying and selling digital assets, operating crypto exchange services, representing their clients in crypto markets, or even offering and providing advice in the field of digital assets.

Other states where you don't have to be afraid to use bitcoin The states mentioned above are not the only states where you can use cryptocurrencies, i e.

bitcoin Below we offer a list of several other countries where the use of cryptocurrencies is legal subject to certain forms of regulation.

They are: Denmark, Germany, Japan, Switzerland, Spain, United Kingdom States where digital assets are banned Unfortunately, however, there is no such thing as a rose without thorns.

And so users of cryptocurrencies should be careful in which country they are currently located There are countries in which the nature of digital assets still raises a significant amount of concern.

They most often refer to their volatility and decentralized nature At the same time, central authorities fear that cryptocurrencies could be a threat to local fiat currencies and that they could be used to commit criminal activities such as money laundering, support for terrorism or drug trafficking.

Last but not least, they refer to the energy demand of mining bitcoin and other cryptocurrencies The given states enforce their restrictions in different ways.

There are several countries (Qatar, Saudi Arabia and China) that directly any activities related to the use of all unapproved digital assets A typical example is China, which tries to punish all activities that somehow touch decentralized cryptocurrencies.

Only activities that are officially allowed which is related to the central digital currency (digital yuan – e-CNY) Other states then follow the path of regulations and bans that aim to cut off any banking and financial system support necessary for the trading and use of cryptocurrencies to potential users.

Countries with Implicit Bans Last but not least, there is , which has implemented implicit bans on specific forms of use of Bitcoin and other cryptocurrencies All these countries have one thing in common, they are located on the African continent.

Some of these countries are illustrated below They are, for example: Cameroon, Central African Republic, Gabon, Guyana, Lesotho, Libya, Zimbabwe.

Legality vs illegality Today, the thesis that it is better to regulate digital assets than to explicitly outlaw them is much more often accepted.

Developed Western countries have already taken this path, when they accepted the fact that the field of cryptography is widely used and its benefits in the markets will probably soon surpass the systems commonly used today This is most clearly evident in the banking sector, where the first banking institutions are already switching from their outdated systems to new blockchain systems.

However, there are still a number of states that consider cryptocurrencies illegal One of the most frequently cited reasons for the need and justification of such a ban is high volatility.

Other arguments are the high energy demand required for the operation of blockchain systems, concerns about the destabilization of one's own currency and financial market, or the ease with which decentralized cryptocurrencies can be used to commit and finance criminal activity Key Takeaways Bitcoin and other cryptocurrencies are raising financial concerns for governments around the world.

There are still no uniform international laws that would regulate the use of Bitcoin In most countries, the use of cryptocurrencies and Bitcoin is legal, for example in the USA, Canada and the UK.

However, there are countries on the opposite pole that have banned any use of Bitcoin They are, for example, China and Saudi Arabia.

Is the use of Bitcoin and cryptocurrencies criminal? Within the EU, there is no penalty for using cryptocurrencies as long as you comply with the legal measures and regulatory measures taken Users who thus use cryptocurrencies for legal personal or business purposes do not have to fear punishment.

A different situation occurs when a user uses digital assets to commit a crime Such actions expose one to the possibility of punishment by law enforcement authorities.

In Conclusion Since cryptocurrencies are still a very young asset, hand in hand with their wider adoption, legislation is being formed that regulates or directly establishes the legal framework for the safe functioning of this market segment Many EU countries are expected to introduce new legislation after the European Commission finalizes its MiCA proposal.

However, what cannot be expected is that at this point the legislators would stand still and leave the adopted legal framework unchanged for the future The legislative environment will continue to evolve.

As the purpose of cryptography changes, so will the legal environment Whatever direction cryptography takes in the future, users should be prepared for the fact that a new regulatory framework will accompany that direction.

Why? Because digital asset laws around the world are still evolving Ing.

Zbyněk Kalousek Studied economics and management at Masaryk University in Brno In the past, he was engaged in the analysis of financial markets.

He returns to this activity after a short pause Co-founder of a company that deals with consulting and accredited education.

He cooperates with several other companies He perceives the world of cryptocurrencies as a progressive part of the market, which offers a lot of opportunities, but at the same time presents a lot of pitfalls, from decentralization, an apolitical approach, to high volatility of exchange rates, to the increasingly difficult mining of cryptocurrencies.

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