The Legal Status of Bitcoin
As Bitcoin becomes more and more widespread people start to think about the legal aspects of cryptocurrency usage. For the reason this is the brand new type of money and actually there is no laws and regulations, Bitcoin legal status varies depending on the country. The opinions are divided but fall into the following groups:
- The ones who chose to work on the issue of a regulatory framework for bitcoin or at least not to stand in the way of those who use it (Australia, Belgium, Brazil, Canada, Colombia, Croatia, Czech Republic, Cyprus, Denmark, France, Germany, Hong Kong, Israel, Italy, Japan, Ukraine, New Zealand, Norway, Poland, Singapore, Slovenia, South Korea, Spain, Switzerland, Sweden, Turkey, United Kingdom, United States etc.)
- The ones who defined cryptocurrency as illegal and try to restrict it in some way (Bangladesh, Bolivia, China, Ecuador, Iceland, Indonesia, Kyrgyzstan, Lebanon, Russia, Thailand, Vietnam etc.) Although there are many states where the legal status of Bitcoin is established and you are free to make transactions with cryptocurrency, still there is no consensus on the essence of Bitcoin among the countries where cryptocurrency is allowed.
In this way, the United States have a pro-bitcoin stance. The Department of Treasury considers Bitcoin as money services business (MSB), but not currency. This definition places it under some obligations like reporting, registration, and keeping of the records. For Internal Revenue Service (IRS) Bitcoin is regarded as property with its taxation applied. In some states it is refered to an asset like gold or art that is worth money. Anyway America is one of a few countries whose government is already working on preventing or reducing the use of cryptocurrency for illegal purposes. The legal status of Bitcoin was established quite soon comparing with other countries.
Canada has taken a positive approach towards Bitcoin. Canada Revenue Agency (CRA) considers it as a commodity (the income received due to transactions is considered as business one). The taxes may vary depending on how you used your bitcoins: in buying-selling business or just like investment. Also the anti-money laundering (AML) laws are applicable for the bitcoin exchanges as for the money service businesses.
United Kingdom tries to let digital money take its place in the British economy. So the governors are seeking how to regulate Bitcoin exchanges, they agree it is important to support innovation, having prevented its criminal use first. It was said that it would be created a favorable environment for legitimate actors and a hostile environment for illegal users at the same time. That announcement came as part of the 2015 Budget.
In Finland Bitcoin is viewed as financial service and it is free from a value-added tax. In the majority of cases people consider it rather commodity than the money. In Belgium the same situation is observed.
The governors of Cyprus haven’t decided yet on their stance concerning Bitcoin. So it’s not prohibited, but not regulated at the same time. However in Bulgaria it is taxed. Bitcoin legal status is established in Germany where the taxes are different for enterprises, miners, users or exchanges.
Speaking of those who are considering Bitcoin illegal, the countries have different explanations for having negative attitude towards digital money.
Russia stands strictly against bitcoins, claiming it is near money. This winter Roskomnadzor has blocked access to several websites dedicated to Bitcoin. The reason for it was the increase of risks of the rapid growth of the shadow economy. Although the Russian government is still working on the draft bill that would officially ban bitcoin in Russia, it is already illegal to use it as a money substitute. One of the ways of Bitcoin prohibition could be heavy fines for the use of cryptocurrencies (91-364 USD for individuals; up to 1,822 USD for government officials; 9,113-18,225 USD for legal entities).
After 2008 crisis Iceland strictly controls the outflow of its currency from the country. In this case Bitcoin is pretty dangerous for such monetary policy, so that it is prohibited. In Vietnam cryptocurrency is illegal. The consequences of its usage (both for people and financial institutions) are compared to the ones of money laundering.
Bitcoin is illegal in Ecuador, but this country created its own digital currency based on the cellphone.
In China the financial institutions are prohibited to deal with digital money, but people are free to use it. Anyway, Chinese bitcoin market is one of the largest in the world despite some restrictions.
To sum it up, digital money is a break-through which has left lawmakers far behind. Those who agreed to adopt Bitcoin, used already existing laws for its regulation which depends on how each country defined bitcoins. Others chose to prohibit digital money, and some even tried to pass the draft bill to ban it at all. Anyway it would be quite difficult to eradicate cryptocurrency because it is decentralised. Certainly, people have enough time to enjoy the advantages of Bitcoin even if Bitcoin legal status is not established.