Countries where Bitcoin is legal
Bitcoin is not issued, endorsed, or regulated by any central bank. Instead, it is created through a computer-generated process known as mining
Cryptocurrency Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software. Since its debut in 2009, the peer-to-peer digital currency bitcoin ushered in a new era of cryptocurrency.
Bitcoin is not issued, endorsed, or regulated by any central bank. Instead, it is created through a computer-generated process known as mining, reports the Investorpedia.
The word bitcoin was defined in a white paper published on 31 October 2008. It is a compound of the words bit and coin. The real-world value of the bitcoins is extremely volatile. The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto implemented the bitcoin software as open-source code and released it in January 2009. On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block.
Embedded in the coinbase of this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
In addition to being a cryptocurrency unrelated to any government, bitcoin is a peer-to-peer payment system since it does not exist in a physical form. As such, it offers a convenient way to conduct cross-border transactions with no exchange rate fees. Consumers have a greater ability to purchase goods and services with bitcoin directly at online retailers, pull cash out of bitcoin ATMs, and use bitcoin at some brick-and-mortar stores.
The currency is being traded on exchanges, and virtual currency-related ventures and initial coin offerings (ICOs) draw interest from across the investment spectrum.
While bitcoin appears at a glance to be a well-established virtual currency system, there are still no uniform international laws that regulate bitcoin.
Despite its use for buying goods and services, there are still no uniform international laws that regulate bitcoin. Many major and developed countries allow the use of bitcoin, such as the US, Canada, and the UK. Other countries, however, are opposed to any use of bitcoin, including China and Russia.
Bitcoin can be used anonymously to conduct transactions between any account holders, anywhere and anytime across the globe, which makes it attractive to criminals and terror organisations. They may use bitcoin to buy or sell illegal goods like drugs or weapons. However, that trend has shifted lately, as criminals move away from bitcoin for fear of being tracked.
Most countries have not clearly determined the legality of bitcoin, preferring instead to take a wait-and-see approach. Some countries have indirectly assented to the legal use of bitcoin by enacting some regulatory oversight. However, as of June 2021, El Salvador is the only country that recognizes bitcoin as legal tender.
Here is a list of countries that have said yes to bitcoin -
United States
The United States has taken a generally positive stance toward bitcoin, though several government agencies work to prevent or reduce bitcoin use for illegal transactions.
Prominent businesses like Dish Network, Microsoft, Subway, and Overstock welcome payment in bitcoin. The digital currency has also made its way to the US derivatives markets—adding to its legitimacy.
The US Department of Treasury's Financial Crimes Enforcement Network has been issuing guidance on bitcoin since 2013. The Treasury has defined bitcoin not as currency, but as a money services business (MSB). This places it under the Bank Secrecy Act, which requires exchanges and payment processors to adhere to certain responsibilities like reporting, registration, and record keeping.
In addition, bitcoin is categorised as property for taxation purposes by the Internal Revenue Service (IRS).
Canada
Canada maintains a generally bitcoin-friendly stance while also ensuring the cryptocurrency is not used for money laundering. Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA). This means bitcoin transactions are viewed as barter transactions, and the income generated is treated as business income.
The taxation also depends on whether the individual has a buying-selling business or is only concerned with investing.
Canada considers bitcoin exchanges to be money service businesses. This brings them under the purview of the anti-money laundering (AML) laws. Bitcoin exchanges need to register with the Financial Transactions and Reports Analysis Centre of Canada, report any suspicious transactions, abide by the compliance plans, and even keep certain records.
In addition, some major Canadian banks have banned the use of their credit or debit cards for bitcoin transactions.
Australia
Similar to Canada, Australia considers bitcoin neither money nor a foreign currency, with the Australian Taxation Office (ATO) ruling it an asset for capital gains tax purposes.
European Union
On 22 October 2015, the European Court of Justice (ECJ) ruled that buying and selling digital currencies is considered a supply of services and that this is exempt from value-added tax (VAT) in all European Union (EU) member states.
Additionally, some individual EU countries have also developed their own bitcoin stances.
In Finland, the Central Board of Taxes (CBT) has given bitcoin a VAT exempt status by classifying it as a financial service. Bitcoin is treated as a commodity in Finland and not as a currency.
The Federal Public Service Finance of Belgium has also made bitcoin exempt from VAT. In Cyprus, bitcoin is not controlled or regulated either.
The National Revenue Agency (NRA) of Bulgaria has also brought bitcoin under its existing tax laws. Germany is open to bitcoin, where it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.
United Kingdom
The Financial Conduct Authority (FCA) in the United Kingdom has a pro-bitcoin stance and wants the regulatory environment to be supportive of the digital currency. Bitcoin is under certain tax regulations in the UK.
El Salvador
El Salvador is the only country in the world to allow bitcoin as legal tender. In June 2021, the country's Congress approved a proposal by President Nayib Bukele to formally adopt bitcoin as a form of payment.