The Best (and Worst) Countries by Bitcoin Regulations
There are as many sets of Bitcoin regulation as there are different countries. This is true even within European Union countries, which often tend to have harmonized regulations. And in the United States, Bitcoin regulations often vary considerably between states. This means that you should always research your local laws regarding the regulation and taxation of Bitcoin, rather than assuming they match those of neighboring countries or states.
While each country takes a slightly different approach to crypto due to its existing legislation and outlook on the subject, Bitcoin’s legal status around the world is comprised of five broad categories:
Legal (green): Bitcoin regulations have been passed which explicitly state that Bitcoin may be traded, owned, stored, and used for payments. While Bitcoin may be freely used in these countries, be aware that taxation laws likely apply to your usage of cryptocurrency.
Illegal (red): Bitcoin regulations have been passed which explicitly state that Bitcoin may not be traded, owned, stored, or used for payments (with this latter being the most common restriction).
Contentious (pink): the regulatory situation is unclear, with old laws suggesting that Bitcoin is legally restricted but subsequent laws suggesting that its usage is permitted. Proceed with caution and consider seeking the opinion of a relevant expert.
Restricted (orange): Bitcoin regulations have been passed which don’t entirely prohibit the use of Bitcoin but do limit certain aspects of its usage. Ensure that you stay within the permitted areas of usage to avoid any legal difficulties.
Unregulated (grey): no relevant Bitcoin regulations have been passed to either allow or prohibit the use of Bitcoin. Until such laws are passed, Bitcoin may be freely used in such countries. It is still recommended that one monitor the situation for any changes to Bitcoin’s legal status
To illustrate just how differently Bitcoin is regulated around the world, here are some examples of laws relating to Bitcoin from a variety of countries:
Bitcoin Legal Countries List
Portugal is a great example of a country with a very positive approach to Bitcoin, even by the generally accepting and permissive standards of Bitcoin-friendly countries in Europe. In an official document published in August of 2019, the Portuguese Tax and Customs Authority declared that Bitcoin and cryptocurrency are exempt from income tax and VAT (Value Added Tax). In other words, all crypto payments and trading (including trading between crypto and Euros) will incur no tax within Portugal. Furthermore, the Authority recently clarified that mining rewards are similarly exempt from VAT.
The ruling against imposing VAT on Bitcoin payments stems from a decision taken in 2015 by the European Court of Justice, that Bitcoin payments should be VAT-exempt. By going further and declaring that Bitcoin trading and payments are exempt from income tax, Portugal has put itself on the map as a friendly base of operations for crypto traders and companies. Such tax incentives are likely to attract a lot of people in the business of Bitcoin, and so promote investment and development in the country’s fintech sector.
As for Bitcoin regulation, Portugal has very little on the books besides these recent taxation laws although the Portuguese Parliament has conducted some discussion on the issue.
On the 12th of September, the Finance Minister of France declared that crypto-to-crypto transactions are tax-free. As crypto-only trades are difficult to track and seldom-reported, it’s likely that the country has deprived itself of little in the way of tax revenue by this declaration. Meanwhile, VAT will be levied on crypto payments and income tax on the conversion of crypto to fiat.
Nevertheless, the lifting of tax from crypto-only trades is a definite step in the right direction for encouraging the development of the French crypto industry, which includes major hardware wallet manufacturer, Ledger, among its members.
On the more restrictive side, the French minister declared during the same address that Facebook’s forthcoming Libra cryptocurrency will be banned from the country. The minister said that the monetary sovereignty of nations is threatened by such corporate cryptocurrencies. It’s clear that the country does not view decentralized cryptocurrency as a monetary threat, as Bitcoin is fully legal within France, according to regulations published in mid-2014 and clarified in the recent PACTE bill.
Australia is an interesting case for Bitcoin regulation, which serves to illustrate the complexity of this subject. While Bitcoin is fully legal within the country and its tax treatment is well-defined, the country passed a controversial law against data encryption technologies in December of 2018. This is the first law of its kind to be created anywhere, and compels companies and users to provide passwords necessary for decrypting messages upon request by the country’s authorities.
Prominent Bitcoin expert and public speaker, Andreas Antonopoulos, canceled his planned trip to Australia in response to the new anti-encryption laws. Andreas said the law could conceivably lead to him being jailed for up to five years if he refused to provide the passwords to his electronic devices, potentially including the private keys to his Bitcoin hardware wallet. Andreas emphasizes that giving his private data to the Australian government exposes him to the risk that his confidential information will be leaked in the future.
A similar, though less punitive, law has also been recently implemented by New Zealand. While these regulations don’t directly target cryptocurrency, they’re likely to inflict a great deal of “collateral damage.” The full consequence of these new laws on the Australasian crypto (and general software) industry has yet to be measured and assessed. However, the ultimate impact is likely to be deeply negative, given how thoroughly cryptocurrency depends upon encryption technology.
Bitcoin Banned Countries List
The country whose London embassy sheltered Julian Assange for nearly seven might have been assumed to be numbered amongst the world’s Bitcoin-friendly nations. Sadly, this is not the case. In late 2014, Ecuador banned Bitcoin and other cryptocurrencies. Ecuador justified its ban of cryptocurrency in light of its plan to release a national digital currency, Dinero Electrónico, backed by the country’s central bank.
The country’s “fiatcoin” never took off however, and has been largely abandoned. As a demonstration of the resilience of Bitcoin and its users to government restrictions, there is a small but thriving Bitcoin community in the country. At least 2 Bitcoin ATMs are listed in Ecuador and the decentralized exchange of Bitcoin appears to be ongoing within the country.
Judging by a 2018 official communication written by the country’s central bank, the strict prohibition against cryptocurrency is being relaxed. The Banco Central del Ecuador warned that Bitcoin is a risky, speculative asset which they do not supervise or guarantee, thereby tactically admitting that Bitcoin is in demand within the country. The Central Bank further stated that “the purchase and sale of cryptocurrencies – like Bitcoin – through the Internet is not prohibited.” However, the Bank also underlined that Bitcoin is not officially approved for the payment of goods and services either.
It seems that due to the ineradicable nature of Bitcoin’s decentralized network and the tenacity of its supporters, the status of Bitcoin within Ecuador has been upgraded from “illegal” to “contentious.”
Bitcoin is unequivocally and forcefully banned in Nepal. Nepal central bank published an official notice in August of 2017, declaring that Bitcoin is not official currency in the country. In a public speaking engagement during the same year, the Deputy Director of the central bank went on record with the statement that “Bitcoin is illegal in Nepal.”
In October of 2017, seven Nepalese citizens were arrested by the country’s Central Investigation Bureau (CIB) for running a Bitcoin exchange business. One month later, 2 more individuals involved with a Nepalese cryptocurrency business were arrested. It’s clear that anyone using – and especially trading – Bitcoin and other cryptocurrencies in Nepal is doing so at considerable legal risk. At the time of writing, only one method to buy Bitcoin within Nepal could be found online.
As a Communist nation, Nepal joins the ranks of six other Communist governments which have banned or at minimum restricted Bitcoin, including: China, Cuba, Laos, North Korea, and Vietnam.
Egypt’s former ban on Bitcoin was interesting for being religious in nature. The country’s Dar al-Ifta, considered the foremost Egyptian legislator of Islamic law, declared Bitcoin transactions to be “haram,” meaning that they are prohibited under Islamic law.
However, as described in our 2018 article on the subject of Bitcoin under Islamic law, Indonesia found Bitcoin to be “halal,” or permissible. Many other Islamic countries followed Indonesia’s lead and legalized Bitcoin, either fully or partially. Recently, Ethereum was also judged to be halal.
This trend made Egypt something of a holdout, although Bitcoin remains banned in Pakistan, Algeria, and Morocco (and restricted at the bank level in Saudi Arabia, Jordan, and Iran). In May of 2019, a source within the Egyptian government discussed a proposed bill to introduce licensing requirements for cryptocurrency. If this bill comes to fruition, it would lift the absolute ban on cryptocurrency within Egypt. It may then become possible for Egyptians to buy Bitcoin and other cryptocurrencies from an officially approved exchange.