Bitcoin as the main asset of the independent, decentralized system of trade was always under the eye of the institution's such tax authorities, law enforcement agencies, and any other legal regulators. All those institutions are trying to keep track of Bitcoin to understand how it is possible that one digital currency can comfortably fit into the market without the central authority.
The legality of the use of Bitcoin largely depends on who you are, in which country you live, and in which manner you are using this cryptocurrency. It bothers authorities also because BTC is suitable for some totally normal actions, such as buying a laptop from Microsoft website, but also for some underground, illegal operations common to Dark Web and other similar areas.
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Over the years, Bitcoin poses a huge trouble for regulators and enforcers, but they never managed to succeed in controlling it, which was obviously their main goal. It is still early to tell how far will those institutions get with their efforts, but it is sure that they are struggling and trying to make new laws around this digital currency. Anyway, the main question is still: “Is Bitcoin legal?” The general answer is YES, but again, it depends on what are you doing with it. Most dramatic shifts in the battle between the decentralized system and legal authorities happen in the United States, where the institutions are quite determined to win.
Main concerns about Bitcoin
Numerous government agencies have a huge problem with the fast implementation of Bitcoin into the market, and its ability to operate quite anonymously. They ask themselves how dangerous this cryptocurrency cab become when it comes to money laundering. However, the main worry is about the decentralized nature of this digital currency and the inability to take control over it.
In 2014, FBI created a document that puts an accent to fears around Bitcoin, in particular, emphasizing the difference between BTC and centralized digital currencies, such as eGold and WebMoney. They were concerned about offshore services. While US exchanges are highly regulated, foreign services are not, so it could be a perfect playground for criminals who wish to use BTC for suspicious activities, without leaving a trace.
Bitcoin was the only currency accepted on SilkRoad, an anonymous online marketplace that could have been accessed only through TOR anonymous network. In late 2013, it was closed by the FBI. SilkRoad is well-known as a marketplace for selling goods that are illegal in many countries, including the narcotics trade. Later in 2013, US DEA seized all Bitcoin units for a US citizen who was purchasing drugs.
Who regulates this?
Regulators vary from country to country, but it’s not uncommon to see national financial regulators attempting to enter the world of Bitcoin and other powerful cryptocurrencies, along with some regional regulators.
FinCEN
In the United States, the Financial Crimes Enforcement Network, FinCEN, operating within the US Treasury Department, decided to take things on its own. They made guidelines script explaining the use of all cryptocurrencies. In that same guidance, published in 2013, it was defined which digital currency users could be categorized as money services businesses. It was established that the protocols such as KYC (Know Your Customer) and AML (Anti-Money Laundering) should be strictly followed.
CFTC
The United States Commodity Futures Trading Commission that takes care of financial derivatives didn’t announce the regulation so far, but their representatives claim that they would do it if necessary.
SEC
The United States Securities and Exchange Commission did not issue regulations on digital currencies, but they did publish an investor alert to put an accent of frauds in investment schemes that involve Bitcoin via their Office of Investor Education and Advocacy. This investor alert specifically warned people about famous Ponzi schemes.
Countries where Bitcoin is legal
Bitcoin is legal in countries such as United States, Canada, Australia, Belgium, Cyprus, UK, Switzerland, Italy, Netherlands, France, Singapore, Japan, and Israel.
After all the battles with this cryptocurrency, the United States has a positive stance about Bitcoin, while Canada’s relationship with BTC is similar to the US. Australia thinks that Bitcoin is non-harmful, in Europe, many countries support it, but with different regulations.
Countries in which Bitcoin is illegal
Bitcoin is illegal in countries such as Bangladesh, Bolivia, Ecuador, Iceland, Thailand, and Vietnam.
The Central Bank of Bolivia hardly opposed using Bitcoin in this country, Ecuador banned this digital currency because they are working on a national electronic cash system, while Thailand ruled it illegal in 2013. Vietnam banned this currency for use by credit institutions.
