Bitcoin Legality: Is Bitcoin Legal in Different Countries?

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Bitcoin is a digital asset created in 2009 by a person or group using the pseudonym Satoshi Nakamoto. Bitcoin differs from conventional currencies in that it is not issued by a government or central bank, but is generated by computers spread around the world through a process called mining.

Bitcoin is also decentralized, which means there is no central authority that controls or supervises Bitcoin transactions. Bitcoins can be used to purchase goods and services online, or stored as a form of investment.

However, the legality of Bitcoin has always been a controversial topic. How does a government deal with global digital assets that are not meant to be controlled by a centralized party or an organization? A new censorship-resistant, community-focused currency? However, is Bitcoin regulated?

In this article, we will discuss the legal and regulatory status of Bitcoin in different countries of the world, as well as the challenges and opportunities faced by the cryptocurrency industry.

Is Bitcoin Legal in the United States?

On a federal level, buying and storing Bitcoin has never been "illegal" in the United States. However, the regulatory status of these assets varies based on a person's state of residence. Some states, such as New York, California, and Texas, have stricter regulations than others, such as Wyoming, Montana, and Alaska, that are more friendly to Bitcoin.

Some of the federal agencies involved in regulating Bitcoin in the United States are:

Securities and Exchange Commission (SEC)

The SEC is the body responsible for protecting investors and ensuring fair and efficient capital markets. The SEC also oversees initial coin offerings (ICOs), which are ways to raise funds by selling new digital tokens based on blockchain.

In 2018, former SEC head Jay Clayton stated that Bitcoin is not a security and should be taxed as property. Although most cryptocurrencies are considered securities, Bitcoin is not, as the network is autonomous and considered by the SEC to be a traditional currency like the US dollar.

Internal Revenue Service (IRS)

The IRS is the body responsible for collecting taxes and enforcing tax laws. The IRS classified Bitcoin as property in 2014, which means investors must pay capital gains tax on every cryptocurrency transaction and report it to the IRS in USD each year. Capital gains tax is a tax levied on gains earned from selling an asset that has increased in value since it was purchased.

Commodity Futures Trading Commission (CFTC)

The CFTC is the body responsible for regulating the derivatives market, that is, contracts whose value is determined by the performance of other assets, such as commodities, stocks, or currencies. The CFTC considers Bitcoin to be a commodity similar to gold and other precious metals. They focus on derivatives-related regulation and other activities, such as Bitcoin futures, options, and swap trading, as well as fraud prevention and market manipulation.

Is Bitcoin Legal in China?

China is one of the countries where Bitcoin is banned. In May 2021, China banned cryptocurrencies and restricted financial institutions from providing related services to Bitcoin. This measure was taken to protect financial stability and prevent risks posed by cryptocurrency speculation. However, citizens who already own cryptocurrencies are allowed to keep them but cannot use them for any transactions.

China is also the country with the largest Bitcoin mining activity in the world, contributing to about 65% of the total computing power of the Bitcoin network. Bitcoin mining is a process that uses specialized computers to solve complex mathematical problems and verify Bitcoin transactions.

In return, miners receive new Bitcoins as a reward. However, Bitcoin mining also requires a lot of electricity, which can have a negative impact on the environment. Therefore, China also plans to crack down on Bitcoin mining and reduce the energy consumption associated with cryptocurrencies.

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Bitcoin Regulation Around the World

Besides the United States and China, here are some examples of other countries with varying Bitcoin regulations:

Asia

Rusia

Russia has legitimized Bitcoin trading but prevented its use for the exchange of goods and services. In 2020, Russia passed a law recognizing Bitcoin as a financial asset, but banning its use as a means of payment. In addition, Russia also requires cryptocurrency service providers to register and comply with anti-money laundering (AML) and customer identification (KYC) rules.

Japanese

The Japanese government has declared Bitcoin legal tender since 2016 and requires crypto exchanges to comply with AML and KYC policies. Japan is also one of the largest cryptocurrency markets in the world, with over 3.5 million active users. Japan also has an industry association called the Japan Virtual Currency Exchange Association (JVCEA), which aims to raise security and ethical standards among its members.

India

India has an ambiguous attitude towards Bitcoin. The Reserve Bank of India (RBI) banned local businesses from servicing cryptocurrencies in 2018, but in March 2020, India's Supreme Court overturned this ban. However, the Indian government is still yet to provide legal clarity on the status and regulation of cryptocurrencies in the country. In 2021, there were reports that India was planning to ban all cryptocurrencies and introduce an official digital currency issued by the RBI, but no legislation has been passed to confirm this.

Europe

French

France regulated ICOs and crypto services in 2019 and increased KYC and AML requirements for French exchanges. France also imposes taxes on cryptocurrency profits, which can reach 30% depending on the amount and source of income. France is also one of the countries supporting the development of central bank digital currencies (CBDCs), which are digital versions of fiat currencies issued and regulated by central banks.

German

Germany granted an official license to Coinbase in 2021, becoming the first crypto group to receive it. This license allows Coinbase to offer cryptocurrency custodial services in Germany, meaning they can store and protect their customers' digital assets. Germany also considers Bitcoin to be the equivalent of legal currency, meaning it is not taxed if used for transactions.

Central and South America

El Salvador

El Salvador became the first country to make Bitcoin legal tender in 2021. This decision was taken to increase financial inclusion and reduce the cost of sending money from abroad. El Salvador

How to Buy Crypto on Bittime

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To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. In addition, also make sure that you have enough balance by depositing some funds into the wallet. For your information, the minimum asset purchase at Bittime is Rp10,000. After that, then you can make a crypto asset purchase in the application. Learn the Complete Guide on How to Buy Crypto on Bittime.

Monitor the price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also Read:
Satoshi Nakamoto and the Origin of Bitcoin

Japanese E-Commerce Giant Mercari to Accept Bitcoin Payments Starting June 2024

Crypto Payments and Their Use in Digital Finance: Bitcoin Pioneers

DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices may change significantly from time to time and Bittime is not responsible for fluctuations in crypto asset exchange rates.