Being able to buy and sell cryptocurrencies is one of the most exciting ways to get involved in trading. And it is not hard to see why. With easy-to-use trading platforms and fascinating technology underpinning it all, cryptocurrencies have become an intriguing proposition for many. In the meteoric rise of crypto, one currency has stood head and shoulders above the rest.
Much like Kleenex with tissues, Google with search engines and Band-Aid with plasters, for many, Bitcoin has become synonymous with cryptocurrency. But just because it has become the go-to trading option for millions around the world, does not mean it has been, or continues to be, a smooth ride to legalisation in every market. Bitcoin legality has hit some bumps along the way, with a couple of occasions of a lack of transparency and nasty motives behind trades, making it harder for would-be traders in some parts of the world to get involved.
So, is Bitcoin legal? Unfortunately, there is not necessarily one simple answer. Read on to learn more about Bitcoin legality around the world and how and why some political and legal institutions face issues in making cryptocurrency trading accessible for all.
Why is Bitcoin not legal everywhere?
As with many things in life, sometimes a few bad apples ruin something great for the masses. And while most who want to trade Bitcoin can, there are some people who have prevented it from being made legal everywhere.
Here are a few reasons why Bitcoin and other cryptocurrencies are not fully legalised in some parts of the world.
- Anonymity
One of the most appealing aspects of trading cryptocurrency is that it allows users to remain anonymous. While this can be great for general safety and can keep trading methods and decisions private, it can also make it easier for criminals to use cryptocurrency for illegal purposes, such as money laundering and funding illicit activities. This lack of control has caused many governments and law enforcement agencies to restrict or even ban Bitcoin trading.
- Cyber fraud
Along those same lines, Bitcoin has become a favorite tool of cyber criminals at various levels, specifically because of its anonymity. Rather than asking for your credit card or online gift cards, they can threaten or trick Internet users into sending funds through Bitcoin systems. Unfortunately, all Internet users need to be careful of scams or tricks when online.
- Lack of control
Bitcoin is a decentralised system of trading, without a bank or central authority to regulate trading. This peer-to-peer method of transacting has several key advantages, including placing the defining value of the currency in the consumer’s hands (rather than a central bank), being mostly impervious to bank collapses or high fees and borderless for smooth, cheap international transaction costs.
On the flip side, the appeal of Bitcoin’s democratic model is what can cause governments to be hesitant about engaging with the currency. Along with it being potentially difficult to track to whom Bitcoin is sent and how it is used, an overall lack of control of the currency is another issue when it comes to Bitcoin regulation. Some governments worry that a drastic shift to cryptocurrency could devalue traditional forms of currency and have a massive impact on the economy. Others are concerned by the ease in which money can be sent overseas, therefore removing these funds from the local economic ecosystem. This decentralisation worries many governments and economic bodies.
This lack of regulation and security scares not only government officials, but also those on Wall Street. One good example of this lack of regulation impacting traders was the infamous disintegration of Mt. Gox in 2014. At the time, Mt. Gox was the largest Bitcoin exchange around, but a massive hack led to millions in theft from traders. While Mt. Gox is one example of unregulated trading exchanges gone bad, there are many more examples of platforms operating seamlessly that have never been hacked.
Where is Bitcoin legal around the world?
Some areas around the world have leaned into cryptocurrency, allowing people to trade at will. Others have varying regulations and laws that treat the currency differently. Here’s a brief rundown of how some key regions are treating cryptocurrency trading.
North America
Cryptocurrency traders in North America should not have any major issues when buying and selling Bitcoin and other forms of crypto. Bitcoin is legal in the United States, Canada and Mexico.
However, there are some regulations surrounding crypto in these areas. For example, in the United States, crypto exchanges based in the country must operate in accordance with laws established to help curb illegal activities such as money laundering. These laws require exchanges to collect personal information from traders, which removes much of the anonymity traditionally associated with crypto trading. That being said, it is quite easy for traders to access offshore exchanges, which have fewer regulations.
Canada has some similar regulations in that Bitcoin and other cryptocurrencies are legal, but are regulated more than offshore crypto trading. It is also not considered a legal tender, but, rather, a commodity.
Mexico permits Bitcoin under its relatively new fintech law.
South America
The largest country in the continent, Brazil has no regulations or restrictions on people or other entities owning or trading Bitcoin. The same goes for Chile. Argentina allows the use of cryptocurrencies as a medium of exchange or a store of value, but they are not considered a legal currency as the government has not issued them. In Venezuela, Bitcoin mining was not legal until 2018, when the government reversed course and dropped charges against those who had been penalised in previous years.
On the other hand, Bitcoin is completely banned in Bolivia and Ecuador as cryptocurrency is not part of any sort of nation run, centralised currency. This is a prime example of a nation’s leaders hesitating to legalise something over which they have little to no control.
Europe
As with many other large, developed nations and economies, Bitcoin is legal in the UK. It is a good representation of this sprawling continent, which has dozens of countries throughout its various regions in which Bitcoin is legal, including France, Germany and Italy.
While Bitcoin is generally considered legal throughout the European Union, there are different regulations and rules from country to country regarding its recognition as a currency, how it is traded and taxed, and more.
Asia
Of all the major regions in the world, Asia and the surrounding Oceania/Australasia areas are perhaps the most variable when it comes to regulations and legal roadblocks to trading cryptocurrency. From country to country, there are different rules, regulations and levels of legality.
For example, Bitcoin is legal in Japan and Australia. But China represents one of the largest economies in the world in which Bitcoin is heavily restricted. In 2019, China’s banking regulatory authority, the People’s Bank of China, said that it was blocking access to crypto exchanges. While this did not necessarily make trading Bitcoin illegal, it greatly decreased the ability of Chinese citizens to partake in the crypto market. Meanwhile, Vietnam has outlawed Bitcoin and other crypto.
Bitcoin legality around the world
So, is Bitcoin legal where you are? While certainly not exhaustive, here’s a snapshot of Bitcoin legality standards in some of the largest countries and economies in the world. Just remember that legislation determining whether or not cryptocurrency is legal and the restrictions around it are always changing. Make sure to research your own country’s laws and regulations before getting started.
| United States | Legal, with purchasing and investing permitted and anti-money laundering regulations in effect |
| Canada | Legal, though not considered legal tender |
| Mexico | Legal, in accordance with recent fintech laws |
| Brazil | Legal, unregulated |
| Argentina | Legal, though not considered legal tender |
| Chile | Legal, though not considered legal tender |
| Ecuador | Illegal |
| Bolivia | Illegal |
| United Kingdom | Legal, though not considered legal tender and subject to anti-money laundering registration regulations |
| Italy | Legal, unregulated |
| France | Legal, mostly unregulated |
| Germany | Legal, though not considered legal tender |
| Japan | Legal, considered legal tender |
| China | Legal, though heavily restricted |
| Vietnam | Illegal |
| Australia | Legal, subject to anti-money laundering registration regulations |
| Russia | Legal, but prohibited as a means of payment |
Bitcoin regulatory bodies
So, just who calls the shots when it comes to Bitcoin rules and regulations? Each country’s own governing financial bodies will generally determine the legality of Bitcoin and any rules and restrictions placed upon it.
However, here’s how a few of the major regulatory bodies around the world have played a part in shaping the international cryptocurrency tax law landscape. As noted above, if in doubt about how Bitcoin is taxed in your part of the world, make sure to do some research so you stay on the right side of the law.
- The US Securities and Exchange Commission (SEC) is one of the most powerful federal agencies in one of the most important economies in the world. In general, it has not regulated Bitcoin trading in the US. In fact, it has gone out of its way to declare that Bitcoin is not a security.
- FinCEN, otherwise known as the Financial Crimes Enforcement Network, is another powerful US agency. Its main focus is to track and analyse financial movements to help monitor any potential fraud, money laundering, funding of terrorism, or other financial crimes. In regards to Bitcoin, FinCEN does not require individual traders to register detailed transaction records and personal information. However, exchangers (businesses that facilitate these trades) must do so.
- In the US, the Commodity Futures Trading Commission (CFTC) is generally seen as the governing body for all things crypto. That is because, as mentioned above, Bitcoin and other cryptocurrencies are not considered securities, but rather commodities. In good news for crypto traders, the CFTC has generally backed the creation and operation of markets, while also levying fines and charges against those who have defrauded traders.
- As buying and selling of Bitcoin and other cryptocurrency have become more popular in the US, the Internal Revenue Service (IRS) has tried to stay on top of how to tax what it refers to as a ‘virtual currency.’ It is treated as property, so if you buy, sell or trade Bitcoin in the US, you will be taxed as if you are buying or selling an asset.
- Cryptocurrency on the whole is legal across Europe, with member states differing in their approach to the digital coin exchange. To cater to the segmentation of the continent, the European Union regularly releases different types of legislation directing results that each country should aim for. The 5th AML Directive (5AMLD) is the most recent of these changes, addressing the need to prevent money laundering and terrorist funding.
- In Australia, the Australian Taxation Office (ATO) is similar to the IRS in that its stance on cryptocurrency taxation is constantly evolving. Also similar to the IRS, for taxation purposes, crypto is more or less viewed as a piece of property. That means capital gains tax comes into play for any trading or use of Bitcoin to make purchases.
Is it safe to trade Bitcoin with eToro?
With so many different trading platforms operating across the globe and little regulation occurring across the industry, it comes as no surprise that scams and a lack of security are real issues for Bitcoin traders. eToro protects its funds with industry-leading security protocols and data encryption, so users from more than 140 countries can trade crypto confidently.
There are no hard and fast rules when it comes to whether or not Bitcoin and Bitcoin mining are legal around the world. As cryptocurrency trading continues to grow and evolve, so, too, will the rules and regulations governing it in markets across the globe. Once you have read up on the rules and are ready to get involved, you can trade like eToro’s top traders with just a few taps on your favorite device. Check it out!
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This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments. This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.