April 2nd, 2018
Bitcoin is the world’s first peer to peer digital currency. It first made its way to the financial market in 2009. With the introduction of Bitcoin, a new age of cryptocurrency was ushered in. Currently, there are over 500 different cryptocurrencies available on the market, but Bitcoin still is considered to be the most popular digital currency of its kind. While enforcement agencies, tax authorities, and regulators are still exploring this new phenomenon, one question people are constantly asking is – is Bitcoin legal? The answer to this question depends on the activity of the user and the location.
Bitcoins are not endorsed, issued, or regulated by a central bank. Instead, these digital currencies are created through a computer generated process called “mining”. In addition to being a cryptocurrency that is not related to any one government, Bitcoin, is a peer to peer reviewed payment system that doesn’t exist in any physical form. This digital currency offers a convenient way of conducting cross-border and cross continent transactions without any exchange rate fees. What’s more is these digital currency transactions allow users to remain completely anonymous.
Consumers now get the opportunity to purchase services and goods with Bitcoins directly at online and offline retailers. Many top businesses around the world have started accepting Bitcoin. Even though it is getting accepted in many places, there is still no uniform legal law covering the use of Bitcoin. This is one of the main reasons why Bitcoin is legal in some countries and illegal in others.
Bitcoin can be anonymously used to conduct transactions between users anywhere and anytime around the globe – a feature that can attract criminal activities. Criminals may use Bitcoins to buy or sell illegal items like weapons or drugs. Most countries have made no legality of Bitcoin, instead taking a “wait and see” approach. Here the places where Bitcoin is legal:
While the United States is taking a positive outlook toward Bitcoin,there are several government agencies that are working on ways to reduce or even prevent the use of Bitcoin for illegal transactions. Many popular businesses in this part of the globe like, Dish Network, Dell, Overstock.com, and more have started accepting Bitcoin as payment. What’s more interesting is that this digital currency has made its way to the US derivatives market.
The US Department of Treasury Financial Crimes Enforcement Network has issued guidance on Bitcoin since 2013. The Treasury defined that Bitcoin is not a currency, but as a money service business. Additionally, Bitcoin is also categorized as property for tax by the IRS (Internal Revenue Service).
Like its neighbor the United States, Canada also maintains a Bitcoin-friendly stance, while ensuring that this digital currency is not involved in any money laundering cases or other illegal activities. It is viewed as a commodity by the CRA or Canada Revenue Agency. This means that all digital currency transactions are viewed as barter transaction, and all income generated is considered as business income. The taxation depends on whether the individual has buying or selling business, or is only concerned with investment.
Canada considers digital currency exchanges to be money service businesses, which brings them under anti-money laundering laws. All Bitcoin exchanges should be registered with FINTRAC or Financial Transactions and Reports Analysis Centre, so as to keep track of suspicious transactions, keep detailed records and abide by the compliance of plans.
Australia allows entities to mine, trade, or buy Bitcoin using any conventional currency. The ATO or Australian Taxation Office considers Bitcoin transactions as barter arrangement, subject to proper taxes based on its use and user.
The European Union (EU) has followed all developments in the cryptocurrency, but until now it had not issued any official decision on its acceptance, legality or regulation. In the absence of any type of central guidance, European Union countries have started to make their own stances on Bitcoins. Few nations are allowing Bitcoins whereas others are either issuing warnings or still undecided. In Finland, Bitcoin is treated as a commodity, not as currency. Germany is also open to Bitcoin, and it is considered legal.
Bitcoin is still in its early stages, as many countries are still not sure what to do about its legality.