Bitcoin's Legal Status Around the World: A Country-by-Country Breakdown

Created in 2009, Bitcoin, a decentralized digital currency operating on a peer-to-peer network, has sparked much debate in the financial world.

Bitcoin, created in 2009, is a decentralized digital currency that operates on a peer-to-peer network without the involvement of any central bank or single administrator. Its unique nature has sparked curiosity and debate in the financial world, especially regarding its legal status.

As Bitcoin is not regulated by any centralized authority, many are left wondering how governments will approach this form of currency. To shed light on this topic, this article explores the legal landscape of Bitcoin in various countries.

Countries Where Bitcoin is Legal

United States

In the United States, Bitcoin is considered legal, although the regulations are constantly evolving. Any entity that facilitates the administration or exchange of Bitcoin, such as cryptocurrency exchanges and payment processors, is classified as a money services business (MSB) under U.S. law. Consequently, MSBs must comply with the Bank Secrecy Act, which requires registration with the U.S. Treasury Department and the reporting of transactions exceeding $10,000.

However, the national regulation of Bitcoin remains a subject of debate, as different federal agencies apply distinct regulations. The Securities and Exchange Commission (SEC) aims to classify digital assets as securities, while the Commodity Futures Trading Commission (CFTC) views cryptocurrencies as commodities. Moreover, the Internal Revenue Service (IRS) classifies digital assets as property. Each of these classifications significantly influences the legal standing of Bitcoin in the U.S.

United Kingdom

With the Property (Digital Assets, etc) Bill coming into effect in September 2024, digital assets are now officially recognized as personal property in the United Kingdom. Being one of the first countries to legally recognize digital assets, the UK aims to maintain its leadership in the global crypto landscape.

Previously, digital assets were not clearly defined within English and Welsh property law. This new regulation will provide essential legal protection for individuals and businesses against fraud and scams, while also assisting judges in navigating complex disputes involving digital holdings.

European Union

When it comes to Bitcoin, the European Union is still working to reach a regulatory consensus. In 2015, the European Court of Justice ruled that trading cryptocurrencies qualifies as a supply of services, exempting digital assets from value-added tax. However, individual countries are permitted to create their own regulations, similar to U.S. states.

Canada

In Canada, it is legal to buy cryptocurrencies, but they are not considered legal tender. The Investment Industry Regulatory Organization of Canada (IIROC) requires that all trading platforms register with provincial regulators. Income generated from Bitcoin transactions is categorized as either business income or capital gains and must be reported accordingly. Additionally, Canada treats cryptocurrency exchanges as money services businesses, requiring them to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Australia

For over 5 years, Bitcoin has achieved its legal status in Australia, being recognized as a new asset class that is subject to taxation. This classification allows individuals to buy, sell, trade, hold, and spend Bitcoin with the same confidence as traditional investments.

Countries Where Bitcoin is Illegal

China

In China, cryptocurrencies are prohibited and considered illegal financial activities. This ban extends to every trading platform within the country. One of the key reasons behind this regulation is the potential risk that cryptocurrencies pose to the stability of the national currency.

Pakistan

Another country that makes Bitcoin illegal is Pakistan. While the innovative currency is not officially banned, the State Bank of Pakistan (SBP) has issued warnings about the risks associated with cryptocurrencies, reflecting concerns about the potential dangers of using it.

Saudi Arabia

Similar to Pakistan, Saudi Arabia maintains a cautious approach to digital currencies. The Saudi Arabian Monetary Agency (SAMA) has issued warnings about the dangers and risks associated with cryptocurrencies since 2017, primarily due to the lack of oversight by any legitimate financial authority.

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