Cryptocurrency Legal Status by Country

Pro-Crypto Nations

In certain early-adopting countries, cryptocurrency and blockchain technology have been completely embraced and integrated with the existing sovereign financial system, even to the point of government promotion and education on the benefits and use of digital currency. Australia has declared Bitcoin to be a fiat-substitute and has streamlined their tax code in order to accommodate its use without penalty. Sweden and Japan have declared efforts to move to digital currency, and have publicly declared Bitcoin to be a legal currency.

Two of the first nation-supported cryptocurrency exchanges were formed in Chile (2015) and Luxembourg (2016). Chile’s SurBTC exchange – supported by taxpayer dollars – was accompanied by robust yet streamlined regulation and taxation statutes in their effort to establish themselves as South America’s leading regional technology and innovation hub. Switzerland has paved the way to allow to investment in cryptocurrency-based ventures and authorized national banks to provide digital asset management services.

Other nations leveraging adoption of cryptocurrency in order to bolster their tech-friendly status include Jamaica, Kazakhstan, and Malta. The Bank of Jamaica has publicly announced their intention to create opportunities for exploitation of digital asset technology and is carrying out a campaign to build up the financial literacy of their population, including awareness of cryptocurrency. Kazakhstan has begun issuing blockchain-based bonds, and promotes worldwide adoption of cryptocurrency on the basis that it “will help the world get rid of monetary wars, black marketeering and decrease volatility in markets.”

The Isle of Man, a self-governing possession of the British Crown, has actively positioned itself as and attractive location for cryptocurrency and blockchain based endeavors.  The small island provides inexpensive electricity, lax regulatory oversight, and attractive tax status requiring only that digital asset companies comply with applicable Anti-Money-Laundering (AML) and Counter Terrorism Financing standards.

In the European Union, Spain leads other member nations in their push for a European-wide regulatory framework through aggressive lobbying and promotion of the European Blockchain Partnership. The Spanish government has rescinded taxes for cryptocurrency-related transactions while Spanish banks invest in Bitcoin companies and regularly fund blockchain startups. The friendly environment has led to many of the larger international cryptocurrency companies calling Spain their home.

In the Caribbean, Bermuda seeks to establish itself as the premiere haven for crypto and blockchain based businesses.  Bermuda maintains friendly corporate structures and standards governing digital currencies, initial coin offerings (ICOs) and blockchain based endeavors.  Bermuda also has no specific taxes on income, capital gains, or other taxes on digital assets.

Each pro-crypto nation above adheres to strict Know-Your-Customer (KYC), Anti Money-Laundering (AML), and Counter Terrorism Financing (CTF) standards, developed either through their own national banks, or through coordination with U.S. FinCEN regulations and European Union directives.

Permitted and Taxed

Many other nations recognize the opportunity for increased tax revenue created by heavily regulating and taxing cryptocurrency transactions, and acknowledged the legality of digital assets, but have stopped short of supporting or adopting the digital currency completely.

A large number of sovereigns have concluded that Bitcoin and other cryptocurrency are assets and/or property, and should be taxed accordingly. Brazil, Bulgaria, Estonia, Finland, Germany, Israel, Italy, Norway, and the United Kingdom treat cryptocurrency appreciation as a taxable event subject to applicable capital gains or other income tax. Argentina, Canada, the Czech Republic, the Philippines, Singapore, Slovenia, and South Africa have recognized the legality of cryptocurrency while reserving the right to tax their use depending on the circumstances in which it occurred – whether that be speculative investing, payment for goods, mining, etc.

Not far behind are Russia, Croatia, Latvia, Slovenia, and Vietnam, each of which have recognized the widespread use of BTC and other coins and are currently developing and implementing methods to profit from and regulate their use.

The United States was an early adopter of cryptocurrency, and houses the largest numbers of individual investors, exchanges, miners, and investment funds. However, due to the governmental structure and competing interests of various federal agencies, the precise sentiment of regulators is harder to define when compared to some other national contemporaries. At the federal level, the Securities and Exchange Commission often considers digital assets to be securities under their purview, but not always. The Treasury Department, the Commodity Futures Trading Commission, the Federal Reserve, and the Internal Revenue Service have all issued “guidance” regarding their respective interpretations of applicable law, at times treating digital assets as “currency”, others as “commodities”, and still others as “stores of value and units of account.” This uncertainty is compounded by the fact that individual States have also endeavored to define the nature of, and thereby regulate and tax, digital currencies. Citizens remain free to both speculate in and transact with various digital currencies, yet professional guidance on securities regulation and tax implications remains a prerequisite to any significant transaction.

Again, each crypto-permitting nation above adheres to strict Know-Your-Customer (KYC), Anti Money-Laundering (AML), and Counter Terrorism Financing (CTF) standards, developed either through their own national banks, or through coordination with U.S. FinCEN regulations and European Union directives.

The Wild West

Still other nations have seemed to lag innovation in the digital asset space. There are quite a few countries that lack an official position or regulatory framework to deal with, or profit from, widespread adoption of cryptocurrency.

Within Europe, The Netherlands has declared that Bitcoin is an item of barter, not a financial product, and therefore requires no specific licensing or compliance requirements other than observance of EU money laundering directives. Portugal has declared that the use of cryptocurrency is taxable, yet has neither elaborated on that stance, nor implemented applicable regulations codifying that position. Portugal is widely considered crypto-friendly due to their lack of legislation and permissive tax rules. Ukraine has pointed to various financial statutes that might vaguely regulate the use of cryptocurrency without taking an official stance, while at the same time major banks allow the purchase of Bitcoin from their ATMs.

South Korea has not enacted any regulation of cryptocurrency for adult citizens, despite Bitcoin’s wide adoption in that country. Malaysia has publicly declared that the Bank Negara Malaysia does not regulate the operation of cryptocurrencies, and warns against the use of unregulated financial instruments. Costa Rica, Taiwan, and Pakistan have indicated that they are on an official governmental level, indifferent to the use of cryptocurrency, and declare only that their respective governments do not regulate its use.

Wait and See

A large contingent of nations have recognized the adoption and utility of cryptocurrency and indicated their intent to regulate the use of digital assets after further observation. This includes a large swath of European countries awaiting the outcome of Spain’s lobbying efforts within the European Union. Many of these countries are wary about establishing complex regulation only to be preempted by EU policy in the near future. This includes Austria, Belgium, France, Greece, Ireland, Lithuania, and Poland.

Outside of Europe, Iran has declared trading of cryptocurrency illegal but has publicly declined to enforce the regulation until the Iranian Central Bank has studied its implementation. UAE. has indicated that policymakers are collecting data on the use and regulation of digital assets for further study. Zimbabwe has declared that such immature technology as cryptocurrency is not yet ready for regulation.

Do-it-yourself

Certain countries have seen such enormous potential in cryptocurrency and blockchain technology that they’ve become determined to develop their own. From most to least restrictive is Ecuador, who has banned the use of cryptocurrency within their borders in the hope of development and adoption of their own state-sponsored Bitcoin competitor.

While widely considered a crypto-friendly nation, Mexico has yet to take a position of the taxation of digital currency, but has been accommodating of its use domestically.  Mexico is widely expected to develop a state-sponsored digital asset, as well as a Mexican blockchain exclusively for use within their borders.

Having already established a favorable tax structure for individual use of cryptocurrency, Denmark is now studying the development and implementation of a state-sponsored coin known as the “e-krone”. Likewise, Sweden is also developing a digital currency similarly known as the “e-krona”.

Politely Discouraged

Other Countries have been less than hospitable to the rise in use and awareness of cryptocurrency. Any discussion regarding the use of digital assets in an unfriendly country must begin with China. China leads the world in cryptocurrency mining operations and exchange transactions, and consistently ranks high in adoption among the general population. However, at the same time the Central Bank of China has barred financial institutions from partaking in any digital currency transaction, including Bitcoin transactions, and has been known to (from afar at least) arbitrarily target large mining operations and wealthy individual holders for infringements of China’s cryptocurrency policy.

Understandably, the cryptocurrency posture of the Chinese mainland extends, at least in part, to Hong Kong and Taiwan. While there is no formal ban on cryptocurrency use, even by financial institutions, in Hong Kong, no bank has yet been granted permission to invest or transact in digital assets and policymakers have proposed blanket bans on retail trading activities. Meanwhile, Taiwan abstains from taking any action whatsoever other than to declare cryptocurrency as “unregulated.”

China’s populous regional neighbors in India, who declared cryptocurrency illegal only to have the statute judicially overturned, and Indonesia, have experienced widespread adoption of cryptocurrency, Bitcoin in particular, but have warned their citizens that there exists no clear determination that cryptocurrencies are legal within those countries. Colombia has said the same, declaring that legal recognition of digital assets will not occur soon, if ever.

Several countries warn against the adoption of cryptocurrency by their population without going so far as to criminally punish its use. Cyprus considers the use of any kind of virtual money as “particularly dangerous”. Hungary’s National Bank has declared cryptocurrencies such as Bitcoin are unregulated and therefor attractive to various criminals and investment schemes. The Central Bank of Kenya believes that virtual currency is an insecure technology used to fund terrorism. New Zealand regards digital currencies as “non-currency payment systems” and warns against their vulnerabilities, but expects tax revenue from appreciation all the same. Uganda asks its citizens to avoid all cryptocurrency.

Saudi Arabia has continuously stressed the risks associated with digital assets and has banned their use by financial institutions within the country. Other countries that have done the same include Lebanon; Thailand who continues to allow individuals to purchase, but not export, individual assets; and Turkey, where major digital exchanges have closed due to pressure from their local banks.

Plainly Illegal

Finally, there are a group of nations so opposed to the use and adoption of cryptocurrency that they have declared it criminally punishable. In some nations, these prohibitions apply only in certain circumstances, such as Vietnam’s ban on cryptocurrency for use as payment, but not as a speculative investment.

Countries that have implemented total bans on cryptocurrency include Algeria, whose blanket ban on any virtual currency not supported by a physical asset makes any transaction or possession of common coins indictable. Citizens of Bangladesh face up to 12 years in prison for conducting any transaction involving digital currency. Bolivia, Kyrgyzstan, Egypt, Morocco, and Nepal have all likewise banned cryptocurrency from any use within their borders.

Iceland, once extremely wealthy through their banking-friendly policies and tax structures, has faced a substantial expatriation of wealth since the 2008 financial crisis, and has outlawed any digital currency in order to avoid the accelerated loss of capital that cryptocurrency facilitate.

Nigeria remains an interesting case. Its citizens consistently maintain some of the highest levels of cryptocurrency and digital asset adoption and possession in the world, with more than 30% of its population owning some coin (mostly Bitcoin and Litecoin). However, the official policy of the Central Bank of Nigeria is that digital currencies are outlawed due to concerns over money laundering and terror financing.

One of the last places you would want to be caught holding or transacting with cryptocurrency is Venezuela. Due to recent political instability giving rise to astronomical inflation, the use of digital assets such as Bitcoin and Litecoin has undergone a steep increase. Despite its growing popularity, the de facto stance of Venezuela is that cryptocurrencies are illegal and unpatriotic, and violators have been known to suffer violent arrest, extended incarceration, and torture at the hands of state police. This persecution has occurred simultaneously with the government’s creation of an official digital asset backed by national oil reserves, the Petro.