Countries Where Bitcoin Is Legal and Illegal

The peer-to-peer digital currency Bitcoin debuted in 2009, introducing the concept of decentralized finance to the world. While tax authorities, enforcement agencies, and regulators globally are still debating how to control it, many consumers wonder if they can use Bitcoin legally.

Whether or not you can use Bitcoin depends on which country you're in. Learn more about Bitcoin's legal status and how it is—or isn't—regulated by authorities worldwide.

Key Takeaways

  • The cryptocurrency Bitcoin has raised financial concerns for governments worldwide.
  • Despite its use for buying goods and services, there are still no uniform international laws that regulate Bitcoin.
  • Many developed countries allow Bitcoin to be used, such as the U.S., Canada, and the U.K.
  • Several countries have made it illegal to use Bitcoin, including China and Egypt.

Countries Where Bitcoin Is Legal

Bitcoin can be used anonymously to conduct transactions between any account holders worldwide. This has introduced some currency concerns for governments. While some legislators and officials may not support its use because of the lack of control and illicit ties, many have introduced regulations under their country's anti-money laundering and counter-financing of terrorism laws (AML/CFT) in attempts to reduce its use for these purposes.

The Library of Congress (LOC) conducts periodic reviews of countries' stances on Bitcoin and cryptocurrencies. In November 2021, it identified 103 countries whose governments directed their financial regulatory agencies to develop regulations and priorities for financial institutions regarding cryptocurrencies and their use in AML/CFT.

The LOC also identified many countries that allow cryptocurrencies to be used. Here are a few of them.

The United States

The U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has been issuing guidance on Bitcoin since 2013. The Treasury has defined Bitcoin as a convertible currency with an equivalent value in real currency or one that can act as a substitute for real currency.

The Internal Revenue Service has categorized Bitcoin as property for taxation purposes.

Any entity that administers or exchanges Bitcoin, such as cryptocurrency exchanges and payment processors, falls under the definition of a money services business (MSB). As such, an MSB is subject to the Bank Secrecy Act and is required to register with the U.S. Treasury and file reports on transactions over $10,000, purchases using the cryptocurrency.

Additionally, FinCEN is developing regulations for financial and non-financial institutions to establish national priorities for cryptocurrency tracking and reporting. These regulations will require these institutions—such as banks and cryptocurrency exchanges—to report specific transactions and suspicious activities. This reporting will allow them to investigate suspected financial crimes and illicit activities conducted with cryptocurrencies.

The European Union

The European Union recognizes Bitcoin and other cryptocurrencies as crypto-assets. It is not illegal to use Bitcoin within the EU; however, the European Banking Authority, the currency regulatory authority in the union, has stated that crypto-asset activities are outside of its control and continues to warn the public and businesses of the risks of cryptocurrency.

In 2020, The European Commission finalized a proposal for legislation to regulate crypto-assets, which many agencies have endorsed within the union. This legislation is intended to keep financial regulatory frameworks from fragmenting and level the financial playing field across the EU. The commission also wants to ensure the public has access to and can safely use cryptocurrency.

Canada

Canada maintains a generally bitcoin-friendly stance like its southern neighbor, the U.S. Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA) for income tax purposes. This means any income from a transaction using Bitcoin is viewed as business income or a capital gain and must be reported as such.

Canada considers cryptocurrency exchanges to be money service businesses. This brings them under the purview of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada's version of AML/CFT laws). As a result, cryptocurrency exchanges need to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), report any suspicious transactions, abide by the compliance plans, and even keep certain records.

Australia

Like Canada, the Australian Taxation Office considers Bitcoin a financial asset with value that can be taxed when specific events occur. If you trade, exchange, sell, gift, convert it to fiat currency, or use Bitcoin for purchases, you trigger a capital gains tax. You're also required to keep records of any transactions you make using Bitcoin for tax purposes.

In Australia, if you hold your Bitcoins strictly for personal use and make gains on them, you may not owe any taxes in certain situations.

El Salvador

El Salvador is the only country in the world that has declared bitcoin to be legal tender. In June 2021, the country's Congress approved President Nayib Bukele to formally adopt bitcoin as a form of payment.

Other Countries Where Bitcoin Is Legal

Several other countries allow Bitcoin to be used in transactions and have developed forms of regulation. Some examples are:

  • Denmark
  • France
  • Germany
  • Iceland
  • Japan
  • Mexico
  • Spain
  • United Kingdom

Countries Where Bitcoin Is Illegal

While Bitcoin is welcomed in many parts of the world, several countries are wary of its volatility and decentralized nature. Some also perceive it as a threat to their current monetary systems while being concerned about its use to support illicit activities like drug trafficking, money laundering, and terrorism. Several nations have outright banned digital currency, while others have tried to cut off any banking and financial system support essential for its trading and use.

Countries With Implicit Bans

The Library of Congress identified 42 countries with implicit bans on certain cryptocurrency uses in its November 2021 update. Some of the countries it lists are:

  • Bahrain
  • Burundi
  • Cameroon
  • Central African Republic
  • Gabon
  • Georgia
  • Guyana
  • Kuwait
  • Lesotho
  • Libya
  • Macao
  • Maldives
  • Vietnam
  • Zimbabwe

Countries With Absolute Bans

The Library of Congress identified nine countries with absolute bans on cryptocurrency in November 2021:

  • Algeria
  • Bangladesh
  • China
  • Egypt
  • Iraq
  • Morocco
  • Nepal
  • Qatar
  • Tunisia

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.

Article Sources

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  1. Financial Crimes Enforcement Network. "Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies," Page 1. Accessed Dec. 14, 2021.

  2. Internal Revenue Service. "Notice 2014-21," Page 2. Accessed Dec. 14, 2021.

  3. Office of the Comptroller of the Currency. "Bank Secrecy Act (BSA)." Accessed Dec. 14, 2021.

  4. Financial Crimes Enforcement Network. "Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies," Pages 1-2. Accessed Dec. 14, 2021.

  5. Financial Crimes Enforcement Network. "Anti-Money Laundering and Countering the Financing of Terrorism National Priorities." Accessed Dec. 14, 2021.

  6. European Banking Authority. "EBA Reports on Crypto-Assets." Accessed Dec. 14, 2021.

  7. European Commission. "Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and Amending Directive (EU) 2019/1937." Accessed Dec. 14, 2021.

  8. Canada Revenue Agency. "Guide for Cryptocurrency Users and Tax Professionals." Accessed Dec. 14, 2021.

  9. Government of Canada Justice Laws Website. "Proceeds of Crime (Money Laundering) and Terrorist Financing Act." Accessed Dec. 14, 2021.

  10. Canada Gazette. "Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2019: SOR/2019-240." Accessed Dec. 14, 2021.

  11. Australian Taxation Office. "Transacting With Cryptocurrency." Accessed Dec. 14, 2021.

  12. The New York Times. "El Salvador Becomes First Nation to Make Bitcoin Legal Tender." Accessed Dec. 14, 2021.

  13. International Trade Administration. "El Salvador Adopts Bitcoin as Legal Tender." Accessed Dec. 14, 2021.

  14. Library of Congress. "Regulation of Cryptocurrency Around the World," Pages 17-59, 64. Accessed Dec. 14, 2021.

  15. Library of Congress. "Regulation of Cryptocurrency Around the World," Pages 6-62, 63. Accessed Dec. 14, 2021.

  16. Library of Congress. "Regulation of Cryptocurrency Around the World," Pages 2-56, 63. Accessed Dec. 14, 2021.

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