While Bitcoin is legal essentially everywhere, some countries are less friendly towards the digital currency than others. Some governments have started crafting regulatory frameworks for cryptocurrency; others have moved to outright ban cryptocurrency; and many governments have not taken an official stance on the technology.
Below is a list of major countries and their regulatory stances on Bitcoin. If you are unsure how your local government feels about Bitcoin, we encourage you to do your own research.
At the federal level, the United States has not taken an official stance on Bitcoin other than declaring it an asset similar to a stock, making it eligible for capital gains tax rather than income tax.
Bitcoin use is legal in all 50 states. However, some state governments have begun regulating bitcoin-based companies by either applying existing licensure regulations to them or crafting special rules for the businesses.
Some states that apply existing regulations to bitcoin have attempted to prosecute individuals selling bitcoin in a peer-to-peer fashion. According to authorities in those states, the individuals in question operated as unlicensed money transmitters, thus violating the states’ financial licensure laws.
The most notorious set of digital currency-specific regulation is the New York BitLicense, designed by the New York Department of Financial Services between 2014 and 2015 while under the leadership of Benjamin Lawsky.
Highly unpopular due to its strict requirements, the BitLicense pushed several business out of New York state when it went into effect.
Much to the dismay of digital currency enthusiasts and entrepreneurs, other states have looked to the BitLicense as a potential template for their own regulatory frameworks.
The Chinese government’s relationship with Bitcoin is often discussed and frequently misunderstood. In late 2013 and early 2014, the People’s Bank of China announced it would not allow its client banks to trade directly with Bitcoin businesses — blocking account transfers for exchange customers. In 2014, the government also requested Chinese cryptocurrency exchanges not attend the first Beijing Bitcoin Conference, and issue a joint statement warning customers against dangerous speculative investments.
Contrary to popular belief, China has never “banned bitcoin”. Many believe the government’s caution stems from past investment schemes and speculative bubbles, which threatened to drain ordinary people’s life savings.
More recently, arms of the Chinese government have shown a warmer attitude to “blockchain technology”, saying China has natural advantages in hardware and innovation it should leverage to become a leader in the space. The Ministry of Industry and Information Technology (MIIT) published a blockchain research paper in October 2016, and followed it up with a two-day blockchain conference intended to present the blockchain concept to high-ranking ruling party officials.
The Russian government has had a volatile relationship with Bitcoin for several years, expressing a desire on multiple occasions to curb its use within the country.
After a few failed attempts at outright bans on the currency, including placing a block on LocalBitcoins in late 2016, Bitcoin use remains strong in Russia. In mid-2016 the Russian Finance Ministry formally opposed a ban on bitcoin use, saying the country risked falling behind and missing opportunities. Though the exact situation remains uncertain, the idea of penalties for bitcoin use has reportedly been shelved.
The Australian government has adopted an open-minded approach to Bitcoin and digital currency so far. It even held a Senate inquiry in early 2015, which concluded the country should treat bitcoin as money, or similar to a foreign currency.
Bitcoin still faces a few hurdles in Australia. First is the country’s Goods and Services Tax (GST), a 10% sales tax applied to most local consumer goods and services. Since bitcoin is treated legally as a “supply” rather than “money”, its sales may be taxed. This has forced Australian exchanges to charge a premium for bitcoin sales, and in turn driven customers offshore.
The Senate report acknowledged this tax problem and recommended legislation to fix it. The government announced in early 2016 that it would do so as part of its wider fintech initiative. However, as of late 2016, the existing tax rules still remain.
Perhaps the main barrier to bitcoin growth in Australia comes from the private banking sector. Bound by strict KYC/AML regulations, large banks have regularly and unilaterally closed accounts belonging to Bitcoin companies and individual traders, at times citing fraud and money laundering. Even compliant startups with friendly banking relationships face this risk if a single customer engages in fraudulent activity.