Is bitcoin legal? Cryptocurrency regulations around the world


At a glance: The global cryptocurrency regulatory landscape

  
The dramatic rise of cryptocurrencies over the past few years has caught regulators by surprise. In countries all over the world, governments have been scrambling to develop laws and guidelines regulating the use of bitcoin and other digital currencies.In the current landscape, most countries have made some kind of statement on the legality of cryptocurrency, even if it’s only a declaration that they’ll “wait and see”.

This guide examines how governments around the world treat cryptocurrency and crypto exchanges, so take a closer look to find out whether your country is a friend or foe of digital coins.

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Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

Cryptocurrency regulations by region

Before we examine how governments and regulators around the globe treat cryptocurrencies, it’s important to point out that nothing is set in stone. Bitcoin and other digital currencies are such a new phenomenon that regulatory frameworks are still being developed and fine-tuned.

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

Country Regulation ranking Cryptocurrency regulation landscape
Albania On the fence
  • Cryptocurrencies are legal
  • They are unregulated
  • The Bank of Albania has advised caution, while regulation is being developed
Antigua and Barbuda Global leader
  • Cryptocurrencies are legal
  • They are unregulated
  • Fund raising projects are permitted to conduct ICOs
  • Member of the ECCB pilot, which will test cryptocurrencies alongside national fiat
Argentina On the fence
  • Cryptocurrencies are increasingly used but are not classed as legal tender
  • They are unregulated
Armenia On the fence
  • Cryptocurrencies are legal
  • They are unregulated
  • The government is waiting to see how other states regulate cryptocurrencies
Australia Global leader
  • Cryptocurrencies are legal
  • They are subject to Capital Gains Tax
  • Digital currency exchanges must register with AUSTRAC and meet AML/CTF compliance and reporting obligations
Austria Improving
  • Cryptocurrencies are legal
  • Tighter regulations were proposed mid-2018
  • EU member
Azerbaijan On the fence
  • Cryptocurrencies are legal
  • The central bank has advised caution when using cryptocurrencies
  • Regulations are being drafted
Bahamas Global leader
  • Cryptocurrencies are legal
  • They are regulated
  • Regulations depend on whether the given cryptocurrency is a security, currency or commodity
  • They are actively promoting the blockchain industry
Bahrain Banned
  • Cryptocurrencies are illegal
  • However, Bahrani citizens are allowed to invest in cryptocurrnecies outside of Bahrain
Bangladesh Banned
  • Cryptocurrency transactions are illegal
  • Transacting with digital currency is punishable by up to 12 years imprisonment
Barbados On the fence
  • Cryptocurrencies are legal
  • Positive attitudes expressed by the Central Bank of Barbados, but no actions made
Belarus Global leader
  • Cryptocurrencies are legal
  • They are regulated
  • Income generated from mining and operations in cryptocurrencies is exempt from tax until 20123
Belgium On the fence
  • Cryptocurrencies are legal
  • The Belgian government is waiting for guidance from the EU
  • The government has warned investors about the risk of crypto fraud and the lack of regulatory oversight
  • There is a special economic area, the High Technologies Park which confers special benefit's on cryptocurrency businesses
Bolivia Banned
  • The Bolivian government has labelled bitcoin a “pyramid scheme”
Brazil Hostile
  • Cryptocurrencies are legal
  • Exchanges are unregulated
  • Cryptocurrencies are not classified as financial assets and cannot be acquired by investment funds
Brunei On the fence
  • Cryptocurrencies are legal
  • They are unregulated
Chile Global leader
  • Cryptocurrencies are legal
  • They are unregulated
China Banned
  • In February 2018, the Chinese government announced it would block access to all domestic and foreign cryptocurrency exchanges
  • The Chinese government has banned ICOs
  • Cryptocurrencies are not recognised as legal tender
Cyprus On the fence
  • EU member
  • While it doesn’t consider cryptocurrencies illegal, the Central Bank of Cyprus has warned about the risks of using them
Dominican Republic Hostile
  • Cryptocurrencies are legal
  • They are not legal tender and not regulated
Ecuador Banned
  • Bitcoin is not a legal currency and is not authorised for use as a means of payment for goods and services in Ecuador
  • However, the purchase and sale of cryptocurrencies through the Internet is not prohibited
Egypt Banned
  • Cryptocurrencies are illegal
  • Bitcoin has been declared haram (prohibited under Islamic law)
Finland Global leader
  • EU member
  • The Finnish regulatory body has declared that bitcoin is generally an asset, subject to VAT and capital gains tax, but is slightly different in that capital losses won’t be deductible.
Georgia On the fence
  • Cryptocurrency is legal
  • They are not legal tender
Germany Improving
  • Cryptocurrency is a legal means of payment
  • Germany is pushing for co-ordinated regulations on a European and international level
  • Digital currency exchanges must register with the Financial Supervisory Authority (BaFin) and follow AML regulations
  • There is no tax on cryptocurrencies when used as a means of payment
Ghana Hostile
  • Cryptocurrencies are legal
  • They are not legal tender
  • The central bank has advised cryptocurrencies are not licensed and discourage their use
Grenada Global leader
  • Cryptocurrencies are legal
  • Member of the ECCB pilot, which will test cryptocurrencies alongside national fiat
Honduras On the fence
  • Cryptocurrencies are legal
  • They are not legal tender
  • They are not regulated
Hong Kong On the fence
  • There is no specific legislation or regulation of cryptocurrencies and ICOs
  • The Secretary for Financial Services and the Treasury has indicated that cryptocurrencies are considered virtual commodities
Hungary On the fence
  • There is no official regulation
  • Cryptocurrencies do not qualify as legal tender or cash equivalent
  • Tax applies to cryptocurrency mining and trading
  • EU member
Iceland Banned
  • It is legal for Icelandic citizens to own and mine cryptocurrency
  • However, in the words of the Icelandic Central Bank: ”It is prohibited to engage in foreign exchange trading with the electronic currency bitcoin, according to the Icelandic Foreign Exchange Act”
India Hostile
  • Cryptocurrencies are not accepted as a means of payment
  • Digital currency exchanges are technically legal but face increasingly tight restrictions
  • In April 2018, the Reserve Bank of India banned banks and regulated financial institutions from providing services to any person or business that deals with cryptocurrencies
Indonesia On the fence
  • Cryptocurrencies are treated as commodities
  • Crypto futures trading was approved in June 2018
  • Currently it’s lightly regulated, but regulations surrounding cryptocurrency exchanges and taxation are expected soon
Iran Hostile
  • In April 2018, the Central Bank of Iran banned all Iranian financial institutions from handling cryptocurrencies
  • The clampdown is designed to tackle money laundering
  • Despite the ban, Iran is reportedly experimenting with a state-run cryptocurrency
Iraq Banned
  • Cryptocurrencies are illegal
  • Traders who use cryptocurrency will be punished according to AML laws
Ireland Banned
  • Currently, no laws specifically regulate cryptocurrencies
  • Existing tax rules apply to cryptocurrency transactions
  • EU member
Israel Improving
  • Virtual currencies are considered to be financial assets
  • Capital gains tax applies to virtual currency trades
  • New regulations are due to be introduced in Q4 2018 and are expected to feature increased reporting requirements for crypto exchanges
Italy Improving
  • New regulations classifying the use of cryptocurrencies and concerning service providers related to digital currencies are being developed
  • EU member
Jamaica On the fence
  • Cryptocurrencies are legal
  • They are not legal tender
  • The central bank has advised caution
Japan Global leader
  • Cryptocurrency is accepted as a legal form of payment
  • Digital currency exchanges are legal if registered with the Japanese Financial Services Agency
Jordan Hostile
  • Cryptocurrencies are legal
  • Banks and financial institutions are prohibited from dealing in cryptocurrencies
  • Citizens are warned against using cryptocurrencies
Kazakhstan Global leader
  • Kazakhstan aims to become a fintech and cryptocurrency hub
  • The nation’s president has called for global regulation of cryptocurrencies under UN oversight
Korea, South Improving
  • Cryptocurrencies are legal but are not legal tender
  • Anonymous trading is prohibited
  • Exchanges must register with the Financial Supervisory Service
  • Cryptocurrencies quickly became extremely popular and widely available in South Korea. Regulators appear to be torn between wanting to clamp down tightly and recognising that cryptocurrency is now too ubiquitous to effectively do so
Kosovo On the fence
  • Cryptocurrencies are legal
  • They are not legal tender
  • The central bank has issued a series of stern warnings against the use of cryptocurrencies
  • The central bank has established a working group to address virtual currencies
Latvia Improving
  • Cryptocurrency is accepted as an exchange instrument but it’s not legal tender
  • Virtual currency exchanges must meet monitoring requirements
  • EU member
Lithuania Improving
  • Having previously adopted a “wait and see” approach, the Lithuanian government introduced new cryptocurrency guidelines in June 2018
  • These provide guidelines for ICOs and the tax treatment of cryptocurrencies as well as details of plans for amendments to AML/CTF rules
  • EU member
Luxembourg On the fence
  • Luxembourg was one of the first countries to officially declare cryptocurrencies to be currencies in 2014 and was the first country to grant a payment institution licence to a bitcoin exchange in April 2016
  • However, the Financial Sector Monitoring Commission has warned about the risks of investing in cryptocurrencies
  • There’s no legal framework that specifically deals with cryptocurrencies
  • EU member
Macau Hostile
  • Cryptocurrencies are legal
  • The central bank prohibits ICOs and any involvement with them. This approach is similar to China's
  • Citizens are stronly advised against participating in cryptocurrencies
Morocco Banned
  • The use of cryptocurrencies in Morocco can lead to penalties and fines
Nepal Banned
  • Cryptocurrencies are illegal
  • Exchange operators have been arrested in the past
Netherlands Improving
  • Cryptocurrency is considered an item of barter, meaning it can be relatively freely exchanged and falls outside most existing regulations
  • There are no plans to ban cryptocurrency
  • AML regulations for exchanges are expected to be implemented by the end of 2019
  • EU member
Nigeria Hostile
  • In January 2017, Nigeria’s central bank outlawed bitcoin and digital currencies, but also openly pointed out that it can’t actually regulate cryptocurrency
  • Banks and financial institutions are prohibited from using, holding or transacting with cryptocurrencies
  • A legal framework for blockchain regulation is being considered
Norway Improving
  • Cryptocurrency is largely unregulated
  • Cryptocurrency is classed as an asset and subject to capital gains tax
Oman On the fence
  • Cryptocurrencies are legal
  • They are not regulated
  • The central bank advises caution and personable responsibility
Philippines Global leader
  • The country is moving to recognise cryptocurrency as a legitimate payment method and implement a thorough regulatory framework for cryptocurrency companies
  • The Philippines’ SEC released draft rules for ICOs in August 2018
Poland Improving
  • The trading and mining of virtual currencies is recognised as an official economic activity, but cryptocurrencies are not legal tender
  • Selling or purchasing cryptocurrency is considered a transfer of property rights
  • EU member
Qatar Banned
  • Cryptocurrencies are illegal at an insitutional level
Romania Improving
  • Cryptocurrencies are legal
  • Income from cryptocurrencies are taxable
  • The central ban discourages involvement by local insitituions due to risk
Swaziland On the fence
  • Cryptocurrencies are legal
  • It is not legal tender
  • It is not regulated
  • The central bank advises caution
Sweden Global leader
  • There is no specific regulation dealing with cryptocurrencies
  • Sweden’s central bank is actively pushing for more widespread adoption of digital currencies.
  • EU member
Taiwan Improving
  • There are no current regulations specifically for cryptocurrencies
  • AML rules are expected to be introduced by November 2018
Uganda Improving
  • Cryptocurrencies are legal
  • They are not regulated
  • In cooperation with a local UN body, regulations are being developed
Ukraine Improving
  • There is no regulatory framework for cryptocurrencies
  • A working group on cryptocurrency regulation was established in January 2018
United Arab Emirates Improving
  • The regulatory landscape is confusing and ambiguous, although making various steps towards regulation
  • The financial regulator of the Abu Dhabi Global Market (ADGM) introduced its own crypto regulatory framework in June 2018
  • Dubai is set to launch a digital currency in 2018, emcash, which is pegged to the dirham and backed by the state
United Kingdom Global leader
  • Cryptocurrencies are legal but are not legal tender
  • There are registration requirements for exchanges
  • There are no laws specifically relating to cryptocurrencies
  • Guidelines on cryptocurrency policy are expected to be released in September 2018
Venezuela Hostile
  • Against the backdrop of a failed fiat currency, cryptocurrency is very widely used in Venezuela
  • Crackdowns are common, and bitcoin users can be arrested
  • Despite this, the Venezuelan government has introduced its own cryptocurrency, the Petro
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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Images: Shutterstock

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