How Governments Around the World View Crypto
Even though Bitcoin was intended to function outside of governments, governments are finding ways to get involved. Some embrace the technology, some attempt to regulate it, and some try to ban it outright. In Egypt, for example, any interaction with crypto violates Islamic law. In El Salvador, however—where they just adopted Bitcoin as legal tender—you can buy a sandwich with Satoshis.
The crypto world is watching the Salvadoran Bitcoin experiment closely. If it goes well, it could inspire other governments with similar economic circumstances to follow suit, leading to wider Bitcoin adoption. If not, things could get a little more challenging. In the meantime, here’s what we’re dealing with across the world.
Friends of crypto
Other than El Salvador, the most permissive frameworks for crypto are found in Europe. Cryptocurrencies are legal throughout the continent, and some countries—including Portugal, Ireland, Italy, and Greece—have issued no specific policies related to crypto. In those countries, you can do what you want, whether that’s setting up a new mining operation in a warehouse or accepting Ether for haircuts.
Friends of crypto (with a slight catch)
Bitcoin has more official recognition in the United States, where the Treasury has classified it as a convertible decentralized virtual currency. In the U.S.—as well as Israel, Brazil, Japan, and Sweden—it is legal to own, trade, and spend cryptocurrency as you would any other currency. But you will be taxed. If you provide a service or sell a good and are paid in crypto, you are expected to report it to the IRS. If you sell crypto for a profit, that also counts as taxable income. The one bonus here is that, if you aren’t a hard-core hodler and sell your crypto at a loss, you can claim that loss as a deduction.
One special case in this category is South Korea. Although the Korean government is relatively hands off when it comes to crypto, there is one major restriction: It is illegal for minors and foreigners to trade in virtual currency.
Friends of Crypto (but not if you're a bank)
These are the countries in which it is legal to buy, sell, and spend Bitcoin as an individual, but it gets much less simple—and in some cases forbidden—for financial institutions. Countries with such restrictions include Iran, Nigeria, Colombia, Saudi Arabia, and Turkey.
Of course Russia has its own category
The legality of crypto is particularly ambiguous in Russia. In 2017, the country’s federal tax service declared Bitcoin to be “not illegal.” However, Russian courts consider Bitcoin to be a “currency substitute,” which is illegal, and Bitcoin exchange sites are blocked. So you’re going to have to find a slightly less aboveboard way to buy and sell.
While the majority of governments remain in wait-and-see mode when it comes to cryptocurrency, many understand the promise of blockchain technology. For example, even as India expresses “major concerns” about crypto and considers legislation to ban it, the country is said to be contemplating the creation of a government-backed, blockchain-based digital currency.
China is also developing its own state-backed electronic currency, the digital yuan, which has been approved for use in certain cities like Shenzhen, Chengdu and Suzhou. In tandem with this effort, the country has begun to heavily restrict cryptocurrencies, drastically affecting the estimated 50% of worldwide miners who operate there. In May, China made it illegal for financial institutions and third-party payment facilitators to process Bitcoin transactions. The measure also outlaws crypto exchanges and initial coin offerings. A few years earlier, the People’s Bank of China vowed to crack down on Bitcoin mining within the country’s borders. Many believe these displaced miners will end up in clean- and cheap-energy-producing areas like Florida and Texas.
Along with Egypt, a number of countries have banned cryptocurrencies outright. For example, it is illegal to hold Bitcoin in Morocco, Algeria, Bolivia, and Nepal. It makes sense that strict anti-crypto laws are more common in authoritarian states, since those countries aim for total control—the exact thing crypto was created to circumvent.
Although El Salvador is the only country to have made Bitcoin legal tender, other nations are interested. Lawmakers and politicians in Paraguay, Argentina, Brazil, and Panama are said to be considering similar measures. Certain countries have also toyed with allowing Bitcoin payments for public services in limited contexts, setting examples for other areas to follow. In 2017, for instance, the tech-friendly town of Zug, Switzerland, allowed the use of Bitcoin to pay city fees, making it effectively legal tender on a local level. And in 2020, Zug announced that tax payments could be made in Bitcoin or Ether.