Now you’re thinking to yourself “anonymous, untraceable, private money? I’m in!” Not so fast. As of now it’s still very in the grey area, even for some of the more accepting countries. To find out what your countries current stance is on Bitcoin and cryptocurrencies in general, a good website to check out is http://www.bitlegal.io/ .
They have a color coded map with green showing friendly, yellow showing in between, and red showing hostile.
A good contender for most accepting country legally for Bitcoin is the USA. Now with politicians and even a political party accepting Bitcoin as donations, Bitcoin use is quite friendly there, and has some of the better guidelines.
In the United States, Bitcoin is taxed as capital gains, for exchanges and mining. The IRS considers mining gains to be ordinary income and is treated as such by the IRS according to Notice 2014-21. It is also treated as General income for exchanges, commerce, and mining again.
However, due to the decentralized process of Bitcoin, the IRS really has no way of enforcing this unless they really expend effort to follow transactions through the blockchain or something. So yes, legal guidelines are available, but there’s really nothing to back them.
The IRS and the rest of the government (Federal Reserve, politicians, etc.) have different views and guidelines on Bitcoin as well so there are no clear cut legal guidelines. If you would like to start a mining company or something major, I’d suggest going to an attorney or tax specialist to make sure you are abiding by regulations. But for now, most hobby miners should be unaffected.
Canada is also quite friendly when it comes to Bitcoin. Canadian government officials seems to be okay with people using Bitcoin, shown through the fact that they have not required cryptocurrency exchanges to adhere to anti-money laundering and know your customer procedures like so in the USA with FINCEN.
Canada has also issued one of the easier guidelines stating that transactions without using legal tender currency are taxable income upon the seller under Canada’s barter rules. Europe is also quite friendly towards Bitcoin, for example Amsterdam which boasts several Bitcoin ATMs.
On the other hand we have economic superpower, China. China has had many bans on Bitcoin all of which have been appealed or lifted in one way or another. It’s very unclear how China stands legally with Bitcoin, and companies that work in Bitcoin must tread carefully.
In the same boat is Russia, with mixed responses. With the government trying to clamp down on Bitcoin use, and people trying to advocate it, guidelines have been very neutral and slowly edging towards restriction. Russia has tried to put “limits” on transaction volume of “anonymous virtual currencies” however that has failed too. As more time passes by and Bitcoin becomes more and more mainstream, we imagine Russia’s stance will change.
Then we have Iceland, which plain absolutely against Bitcoin. This caused quite an upset was Auroracoin, the first country coin that planned on distributing certain amount of coins to every Iceland resident. After its all time high of around $90 it fell hard, and is now available for less than $0.50. Iceland does not allow for any currency to fight with the national currency of Krona due to capital controls from 2008. For example it allows the selling of Bitcoin, but not the other way around. The reason why is that selling means money is moving into Krona, and not into Bitcoin.
Aboard this train is Vietnam as well. Even more extreme than Iceland, Vietnam bans any use of crypto-currency, period. How they enforce that is another question, but bitcoin is still banned. It wasn’t always like this however, with Vietnam only having this stance on February 27 of this year.
Most of Europe is okay with bitcoin, implementing some tax or another for cryptocurrencies. This applies for mining, exchanging, capital gains, etc. All of Europe’s guidelines are all similar but different, so be sure to do research for your individual country.
For example, Poland has a 23% VAT (Value Added Tax) which was quite recent in the news. With Poland, Bitcoins are treated as a commodity and taxed as such in sales and exchanges.
Then there is Germany, with also one of the more straight-forward guidelines with regulations on how Bitcoin should be described as, taxed, and when a Bitcoin business should register with the government and have KYC and AML compliance.
As such, most companies that specialize in Bitcoin related endeavors are German, Canadian, or another friendly country.
For the more accepting countries, cryptocurrency is a hard topic to regulate as bitcoin is inherently unregulatable. Is it a commodity, currency, or a security? With trial and error, guidelines will improve and one day Bitcoin will be used as an everyday payment. As more mass adoption occurs, prices will become less volatile, making governments that put Bitcoin to the side reconsider.