As the market capitalization of the cryptocurrency market continues to climb, regulators around the world are stepping up the debate on oversight into the use and trading of digital assets.
To date, very few countries have completely outlawed bitcoin. But that doesn’t mean it’s considered “legal tender” either. So far as of this writing in April 2022, only two countries – first El Salvador, then the Central African Republic – have gone as far as to allow bitcoin to become a legally accepted form of instrument for payments.
That being said, just because bitcoin isn’t widely considered legal tender doesn’t mean it’s illegal. Rather, it just means that there are no protections for either the consumer or the merchant and that its use as a payment is completely discretionary.
Other jurisdictions are still mulling what steps to take. The approaches vary: Some smaller nations such as Zimbabwe have few qualms about making brash pronouncements casting doubts on bitcoin’s legality, while larger institutions, such as the European Commission, are preparing a sweeping set of rules and laws to regulate digital assets.
In the United States, the issue is complicated further by the fractured regulatory map – who would do the legislating, the federal government or individual states?
A related question in other countries, to which there is not yet a clear answer, is who should be responsible for oversight? Should central banks keep an eye on cryptocurrencies or financial regulators? In some countries, they are one and the same, but in most developed nations, they are separate institutions with distinct remits.
Another divisive issue is whether bitcoin should be regulated on a national or international basis? The International Monetary Fund (IMF) fears uncoordinated regulation may pose a risk to financial stability, but in some countries, even national watchdogs have opposing approaches.
There needs to be a further distinction between regulation of the cryptocurrency itself (is it a commodity or a currency? is it legal tender?) and cryptocurrency businesses (are they money transmitters? do they need licenses?). In a few countries, the considerations are tied together – in most others, they have been dealt with separately.
Below is a summary of pronouncements made by certain countries. This list was last updated in April 2022.
The Australian government has been supportive of cryptocurrency and blockchain technologies and has one of the highest crypto adoption rates globally.
In 2017, it declared that cryptocurrencies were legal and that they would be treated as assets subjected to a capital gains tax. The Australian Transaction Reports and Analysis Centre (AUSTRAC) requires exchanges operating in the country to register their businesses, maintain records and verify their users. To combat money laundering and terrorism financing, unregistered exchanges will face charges and monetary penalties in the future.
The government announced plans at the end of 2021 to overhaul laws related to the country’s payments systems, including a “world-leading” regulatory framework for cryptocurrencies and digital asset companies. Plans for the nation’s own central bank digital currency were also included.
Cryptocurrencies are popular in Argentina where economic woes and high inflation have crippled the local peso currency, but as of March 2002, the country hadn’t drawn up many regulations. The Central Bank of Argentina (BCRA) together with the Securities Commission (CNV) expressed that cryptocurrencies and bitcoin aren't legal tenders because they aren’t issued by a central bank.
The statement mentioned several risks, but didn’t deem cryptocurrencies and bitcoin illegal.
Argentines are permitted to buy up to only $200 a month in dollars through official channels, with an additional tax of 65% above the official limit. Exchanges are also subject to a tax on sales and purchases.
In 2015, Bangladesh expressly declared that using cryptocurrencies was a “punishable offense.” Authorities have been on the hunt for illegal bitcoin traders in the country.
Canada was one of the first countries to draw up what could be considered “bitcoin legislation.” The government has specified that bitcoin isn’t legal tender but is legal, acknowledging that cryptocurrencies can work as a medium of exchange. The Canada Revenue Agency (CRA,), the country’s tax authority, has deemed bitcoin a digital commodity. Thus transactions are taxable, depending on the type of activity.
Cryptocurrency businesses are considered money service businesses and are bound to comply with strict anti-money laundering (AML) and know-your-client (KYC) requirements. Canada regulates bitcoin under securities laws that are based on provinces given the lack of a federal securities regulator such as the Securities and Exchange Commission in the U.S. For example, the Purpose Bitcoin ETF, the world’s first physically settled exchange-traded fund for bitcoin, was approved by the Ontario Securities Commission in February 2021 and extended to other territorial jurisdictions under the country’s passport system.
Read more: What Is a Bitcoin ETF?
Central African Republic
In April 2022, the Central African Republic became the second nation in the world to adopt bitcoin (BTC) as an official currency. The National Assembly passed a bill that established a legal and regulatory framework for cryptocurrencies, and also made bitcoin a legal tender in the country alongside the existing national fiat currency, the CFA franc.
While China’s leadership touted blockchain technology as a critical innovation, the country has a long history of cracking down on cryptocurrencies. Despite prior bans on initial coin offerings (ICOs) and on banks transacting cryptocurrencies, China grew to become one of the largest markets for digital assets until 2021.
Chinese authorities, however, began to ramp up the enforcement of prior regulations in 2021. The central bank (the People’s Bank of China) together with state governments launched an overarching purge on every part of the crypto industry in 2021. New rules made cryptocurrency trading and transactions, including ones involving in bitcoin, illegal, banned local and foreign exchanges operating in the country and shut down bitcoin mining facilities
Read more: China Crypto Bans: A Complete History
In January 2018, the Grand Mufti of Egypt declared that cryptocurrency trading was forbidden under Islamic religious law because of risks associated with the activity. The Central Bank of Egypt issued a statement in September 2020 prohibiting individuals, banks and other financial institutions from dealing with cryptocurrencies, practically making bitcoin illegal.
El Salvador was the first country in the world to adopt bitcoin as an official currency. The country's legislature passed the Bitcoin Law in June 2021 and came into effect three months later, making bitcoin a legal tender. Under the law, goods, services and even taxes can be paid using bitcoin, and every merchant must accept it as a legal form of payment.
Read more: It's Official: El Salvador's Legislature Votes to Adopt Bitcoin as Legal Tender
As of March 2022, cryptocurrencies including bitcoin were being regulated at the country level in the European Union. The European Commission, the executive branch of the EU, has proposed a sweeping set of rules and laws to regulate digital assets and crypto businesses. The so-called Markets in Crypto-Assets (MiCA) bill sets out a comprehensive regulatory framework for all 27 member countries that will govern crypto issuers, users and service providers, covering everything from cryptocurrencies and tokens to stablecoins. A decisive vote on the bill was expected at the end of 2022 at the earliest.
As of this writing, crypto service providers were set to be subject to strict rules of the EU’s sixth Anti-Money Laundering Directive (AMLD6) that in part aims to prevent the use of cryptocurrencies in money laundering and terrorist financing by bolstering fraud detection efforts.
The European Central Bank stated bitcoin isn’t a currency but a crypto asset, and so refrained from regulating it. Some members of the European Parliament mulled over banning the energy-intensive proof-of-work cryptocurrency mining – the consensus mechanism that Bitcoin uses to mint new coins and validate transactions – but the proposal was scrapped after receiving backlash.
It is easy to lose track of whether cryptocurrencies are legal or illegal in India following a flurry of bans and withdrawals. The Reserve Bank of India (RBI) issued a warning in July 2018 that barred banks, lenders and financial institutions from dealing with cryptocurrencies. India’s Supreme Court, however, overturned the prohibition and the RBI revoked its ban.
The government has since provided some clarity with its new crypto legislation in 2022. The law designates cryptocurrencies and NFTs (non-fungible tokens) as “virtual digital assets,” making them illegal as a method of payment but allowing users to trade and invest in them as assets. Exchanges must comply with anti-money laundering and know-your-customer laws, and issue disclaimers with their advertisements. The legislation also specified how to pay taxes on crypto profits.
Citizens aren’t banned from trading and holding cryptocurrencies, but regulators warned them about the risks involved. The central bank said in April 2021 that banks and licensed money changers can use cryptocurrency mined by authorized Iranian miners to pay for imported goods, at the same time banning the trading of crypto coming from abroad.
Japan’s Financial Services Agency was one of the first national watchdogs to declare bitcoin and other cryptocurrencies as legally accepted forms of payment and characterized them as property. Those provisions, however, don’t mean bitcoin is legal tender.
Regulators also tightened their grip on stablecoin issuers by treating them like banks.
Kazakhstan became one of the world’s biggest centers for bitcoin mining as the government offered tax incentives and cheap energy, while many miners relocated to Kazakhstan after China cracked down on mining. Authorities turned more hostile toward miners as power shortages plagued the electricity grid in late 2021, cracking down on illegal operations, limiting power consumption and calling for heavier taxes.
The country is still a hotbed for bitcoin, and it amended its financial laws with regulations on “digital assets’ in 2020, but as of March 2022, it hadn’t ratified a comprehensive framework for cryptocurrencies.
Read more: How Much Energy Does Bitcoin Use?
In September 2021, Malaysia’s central bank tested its central bank-issued digital currency platform for cross-border payments with a number of partner countries, including Australia, Bangladesh and Singapore.
In June 2018, the European island-nation passed a series of blockchain-friendly laws, including one that details the registration requirements of cryptocurrency exchanges. Earlier in 2020, the Malta Financial Services Authority published a document addressing issues related to offerings of security tokens to tighten its grasp on crypto businesses that exploited the country’s lax anti-money laundering rules.
Mexican financial authorities specified that cryptocurrencies aren’t considered legal tender or currencies, and in 2021, Finance Minister Arturo Herrera reiterated that cryptocurrencies are banned from the financial system. On the other hand, crypto was being adopted at a breakneck speed in Mexico. Companies are allowed to offer crypto services as long as they register and comply with reporting requirements. Also, as of March 2022, the Central Bank of Mexico (Banxico) also planned to issue its CBDB to advance financial inclusion in the country.
Cryptocurrencies are banned in Morocco, and the nation’s foreign exchange authority declared that the use of cryptocurrencies violated foreign exchange regulations and would be met with penalties. In spite of the ban, peer-to-peer bitcoin purchases thrive in the country and the central bank was considering launching a digital currency.
Namibia is one of the few countries to have expressly declared that purchases with bitcoin are “illegal.”
Officially, Nigerian banks and other financial institutions are prohibited from handling virtual currencies, according to a warning from the central bank. The local crypto community, however, has found ways to circumvent those laws, causing adoption to boom in Nigeria despite the banking ban. The central bank launched its own virtual currency, the eNaira, in October 2021.
In April 2018, Pakistan’s central bank issued a statement barring financial companies from dealing with virtual currencies. In April 2019, the federal government introduced new regulations and licensing schemes for crypto firms. Authorities, however, prepared a tougher stance toward digital assets that could include banning cryptocurrencies.
Previously, the central bank considered outlawing bitcoin mining and crypto trading while pushing for creating a digital ruble.
Hailed as a crypto haven of the world, Singapore has embraced an innovative approach toward cryptocurrency and blockchain, thanks to the leadership of the Monetary Authority of Singapore (MAS).
In January 2020, the MAS announced a new regulatory framework to cover all Singapore-based crypto businesses and exchanges under anti-money laundering and counter-terrorist financing rules. After a six-month grace period of license exemption, crypto companies have to acquire a license to operate. The country's central bank warned that crypto is “highly risky and not suitable for the general public" and issued guidelines to limit crypto advertisements.
In 2017, the South Africa Reserve Bank implemented a “sandbox approach,” testing draft bitcoin and cryptocurrency regulations with a selected handful of startups.
In April 2020, the Intergovernmental Fintech Working Group proposed to increase oversight of crypto activities and mandate businesses to register with AML watchdog the Financial Intelligence Centre. After a series of scams, the Financial Sector Conduct Authority (FSCA) said it was preparing a regulatory framework for crypto to protect the public and planned to unveil those rules in early 2022. According to the tax authority, crypto assets are subject to the general tax law.
Crypto service providers must partner with a local bank, register with the Korean financial regulators for a license and comply with anti-money laundering and know-your-customer rules to operate in the country.
Thailand regulates cryptocurrencies including bitcoin as investment assets and revenue from crypto trading or mining can be reported as capital gains on income taxes. Thai authorities, however, are seeking to curb the use of crypto as a method of payment. In 2021, Thailand’s Securities and Exchange Commission warned against decentralized finance, banned NFTs and meme coins.
Read more: What Is DeFi?
Bitcoin and cryptocurrencies have gained popularity as many citizens see them as a hedge against the Turkish lira’s plunge. In April 2021, Turkey’s central bank banned the use of crypto for payments, but as of March 2022, it was still legal to hold bitcoin in the country.
The government is developing cryptocurrency regulations, but there is no intention to prohibit them.
United States of America
The U.S. is plagued by a fragmented regulatory system, with legislators at both the state and the federal level responsible for layered jurisdictions and a complex separation of powers.
Some states are more advanced than others in cryptocurrency oversight. New York, for instance, unveiled the controversial BitLicense in 2015, granting bitcoin businesses the official go-ahead to operate in the state, but the requirements are so onerous that many companies and exchanges don’t provide their services to New Yorkers rather than comply.
States such as Wyoming and Texas stepped in with accommodating regulations to lure in new businesses. Wyoming passed several laws in 2019, including ones that treat cryptocurrencies as a legal medium of exchange and gave licenses to crypto-banks such as Kraken and Avanti. The Texas Virtual Currency Act, passed in June 2021, defined cryptocurrencies as a digital representation of value that is used as a medium of exchange, unit of account or store of value” and state-chartered banks can offer crypto services. Colorado exempted cryptocurrencies from state securities regulation and planned to accept tax payments in crypto by the summer 2022.
Florida, especially its biggest city Miami, poses as a bitcoin heaven, but as of March 2022, state-level regulation had yet to catch up with ambitions. The state’s financial regulator warned that those who sell cryptocurrencies, whether they be a business or an individual, fall under money transmitter regulations and need to be licensed.
At the federal level, several agencies were contending to regulate some part of the growing digital asset industry. The SEC, Commodities Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC) all have issued guidelines and made rule-making efforts on how different sections of the crypto industry should comply with existing regulations. These were largely uncoordinated efforts and a comprehensive regulatory framework for all states had yet to come as of this writing.
The SEC has focused on the use of blockchain assets as securities, such as whether certain bitcoin investment funds should be sold to the public and whether certain offerings constitute fraud. In October 2021, the SEC approved the first bitcoin futures exchange-traded fund (ETF) that allows investors to indirectly participate in the bitcoin market.
The CFTC has a bigger potential footprint in bitcoin regulation, given its designation of the cryptocurrency as a “commodity.” While it had yet to draw up comprehensive bitcoin regulations as of March 2022, its efforts focused on monitoring the futures market. The agency had also filed charges in several bitcoin-related schemes, which underlines its intent to exercise jurisdiction over cryptocurrencies whenever it suspects there may be fraud.
Cryptocurrencies are considered as “property” in the U.K, meaning citizens are allowed to buy and sell the coins, and are subject to taxes depending on their income from trading or staking. Britain’s Financial Conduct Authority (FCA) issued its guidance on crypto assets in July 2019, clarifying which tokens would fall under its jurisdiction. It decided that bitcoin was outside of its regulatory remit.
Exchanges are regulated and have to be registered with the FCA. As of January 2021, they were also banned from offering crypto derivatives such as exchange-traded notes to retail consumers. The government later announced plans to curb misleading crypto advertisements to protect consumers.
Ukraine’s parliament legalized cryptocurrencies by passing amendments to its “On Virtual Assets” legislation in February 2022 and named its national securities agency (National Commission on Securities and Stock Market) as the primary regulator. Ukraine President Volodymyr Zelensky signed a bill into law that allows the central bank to issue digital currency.
Late in 2017, a senior official from Zimbabwe’s central bank stated that bitcoin wasn’t “actually legal.” The country’s reserve bank issued a statement to warn against trading cryptocurrencies, saying that they weren’t legal tender and not guaranteed by the government. CoinDesk produced a podcast series about the future of bitcoin in Africa, including in Zimbabwe.
Noelle Acheson and Hoa Nguyen contributed reporting to this article.
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