Is bitcoin legal? Cryptocurrency regulations around the world

The state of cryptocurrency is constantly shifting in countries all over the world, and each new government announcement about crypto regulation can potentially drive price movements across the entire market. Make sure you stay up to date with policy changes where you live to ensure that your cryptocurrency use doesn’t put you on the wrong side of the law.

That said, here’s how cryptocurrencies currently stand with the world’s regulators:

North America

Canada and the USA both responded quickly and moved to work cryptocurrencies into existing financial systems. However, the two countries have adopted quite separate approaches to how they regulate digital coins and tokens.

In Canada, bitcoin and other cryptocurrencies are not classed as legal tender, but Canadians can use digital currencies to buy goods and services on the Internet and in stores. Cryptocurrencies are subject to the country’s Income Tax Act, and entities dealing in digital currencies are regulated under anti-money laundering and counterterrorism financing laws.

Across the border in the United States, the regulatory landscape is quite confusing. Laws surrounding cryptocurrency exchanges differ from state to state, while national-level regulators have differing opinions on exactly how cryptocurrencies should be treated.

For example, while the Securities and Exchange Commission considers cryptocurrencies to be securities and has been cracking down on everything from ICOs to crypto hedge funds, the Commodity Futures Trading Commission classes cryptocurrencies as commodities and allows cryptocurrency derivatives to trade publicly.

However, the 2018 Joint Economic Report from the US Congress was the first ever to include cryptocurrencies, and the next 12 months will hopefully see the US move towards a more streamlined regulatory approach.

South America

There’s a diverse patchwork of individual approaches from different countries in South America, ranging from outright bans to openly embracing cryptocurrencies.

For example, the Bolivian government has banned all cryptocurrencies, labelling bitcoin a “pyramid scheme” and has even gone so far as to arrest cryptocurrency advocates.

But things are a little different in Venezuela, where cryptocurrencies have offered a viable alternative to the fiat Venezuelan bolivar, which has been plagued by hyperinflation. The Venezuelan government has even issued its own controversial cryptocurrency, Petro, which has since been banned in the United States.

Europe

It’s legal to use cryptocurrencies in the European Union (EU), but member states aren’t allowed to introduce their own digital currencies. The regulatory environment also varies from one country to the next, with some nations delegating all crypto regulation to the EU and others taking a more hands-on approach.

In April 2018, the EU Parliament voted to introduce tighter regulations for cryptocurrencies. In an effort to prevent the use of cryptocurrencies in money laundering and terrorism financing, the regulations aim to tackle the anonymity of digital coins. As a result, crypto exchanges and wallet providers will be required to register with authorities and introduce customer due diligence procedures, including identity verification.

As for what the future holds, we can find some clues in a July 2018 report from the EU’s Policy Department for Economic, Scientific and Quality of Life Policies entitled “Virtual currencies and central banks monetary policy: challenges ahead”. Referring to cryptocurrencies as virtual currencies (VCs), the report states that:

“Policy makers and regulators should not ignore VCs, nor should they attempt to ban them. Both extreme approaches are incorrect. VCs should be treated by regulators as any other financial instrument, proportionally to their market importance, complexity, and associated risks.”

Africa

Many African countries have yet to issue a ruling either way, but reasonable concerns around terrorist funding, tax evasion and other criminal uses have led to outright bans in some countries and tight regulations in others.

A report on cryptocurrency regulation in Africa, released in August 2018 by Ecobank, analysed the crypto stance of 39 governments in sub-Saharan Africa. Only two of those countries – South Africa and Swaziland – were seen to have a favourable and permissive stance to cryptocurrencies. The report found that 21 governments had not adopted any public stance, while several other nations (including Botswana, Kenya, Nigeria and Zimbabwe) had a position classified as “contentious”.

However, the only country to have deemed cryptocurrencies illegal was Namibia.

The Middle East

Several countries across the Middle East have banned cryptocurrency, including Saudi Arabia, Qatar, Egypt, Bahrain and Iraq. In Egypt, the Dar al-Ifta, who is the primary Islamic Legislator, went so far as to label cryptocurrency Haram, prohibiting it under Islamic law. Several other nations in the region have banned it at an institutional level, preventing financial firms and banks from engaging with cryptocurrencies.

Moving away from the Gulf states, things start to look a little better. In Turkey, cryptocurrency ownership is higher than that of the United States according to a June 2018 ING report, with the government still developing regulations. Israel is in the process of updating its legal framework around cryptocurrencies. In the meantime, however, they are legal and subject to capital gains tax.

Despite bans at institutional and consumer levels, some Middle Eastern states are exploring the use of digital currencies within government ranks. In Saudi Arabia there are plans for a national digital currency to be traded exclusively between banks, and in July 2018, Iran confirmed that it was working on a state-issued cryptocurrency to help combat US trade sanctions. In addition, the government in Bahrain is waking up to the economic benefits of the blockchain industry and developing a "regulatory sandbox", despite locals still being prohibited from trading cryptocurrencies locally.

Asia and Oceania

Many countries around Asia were some of the earliest and most enthusiastic cryptocurrency adopters, but government responses vary. China is clamping down on the sector, having banned ICOs in 2017 and shut down domestic cryptocurrency exchanges.

Over in Japan, authorities are known for their thorough but forward-thinking regulation of the market. Virtual currencies are allowed as a legal form of payment, and digital currency exchanges are tightly regulated.

South Korea, the world’s largest adopter of cryptocurrencies, was initially known for its favourable legislation. However, authorities have made moves to throw cold water on the market in recent times, with new regulations in the works.

Australia quickly moved to integrate cryptocurrencies into existing systems, but several other countries in the region are considerably more cautious.

Cryptocurrency exchanges and trading are legal in countries like Australia, Singapore and New Zealand, but regulatory frameworks are still being developed.

Index of cryptocurrency regulations by country

• What's our regulation ranking criteria?

  Each country below has been classified into one of the following five categories:

  • Banned. Cryptocurrencies are illegal in these countries.
  • Hostile. While these governments have not gone so far as to ban the use of cryptocurrencies or the operation of crypto exchanges outright, they’ve introduced regulations designed to limit the use and/or growth of digital currencies.
  • On the fence. These nations have either not taken any public stance on cryptocurrencies or have yet to legally recognise cryptocurrencies.
  • Improving. These countries are in the process of working towards legal recognition of cryptocurrencies and introducing robust regulatory frameworks.
  • Global leader. Governments of these nations have a welcoming approach and/or have taken steps to recognise and effectively regulate cryptocurrencies.

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