Is Bitcoin Legal?
The question is not as straightforward as you would imagine a finance question to be. A better question is, where is bitcoin legal. The fact is, depending on where you are, cryptocurrency like bitcoin is treated differently.
To further complicate matters, countries can’t agree on how to handle this form of currency. It’s really out of the government’s hands when it comes to person-to-person transactions, and as such, its popularity has skyrocketed in recent years.
This leads to questions about its legality.
Bottom line is, Bitcoin is new and mostly unregulated. You must first consider where you plan on trading or using bitcoin, and whether or not it is a financially secure option for you.
As with most financial investment decisions, it’s personal and comes with some level of risk.
Where is Bitcoin Legal?
Countries can’t agree on how to handle bitcoin, so it has become a little confusing. In the U.S. it is considered legal and it is treated as property, but that’s not the same around the world.
Some countries, like El Salvador, consider it money and accept its use for goods and commodity purchases. While others, like the U.S., don’t consider it currency, but classify it as a different type of commodity, like property.
Currently, about 51%, of the world’s countries or regions consider cryptocurrency legal and it is unregulated, 3% consider it legal, but regulate its use, and 3% consider it illegal.
It is important to read the specific regulations for your country before considering trading or mining bitcoin.
Is Bitcoin Legal in US?
As of this writing, yes, you can consider bitcoin legal tender in the United States. It is completely legal to buy, sell, and purchase goods and services with bitcoin, so long as the retailer or service provider accepts cryptocurrency.
Securities and Exchange Commission
On top of the IRS and CFTC, the Securities and Exchange Commission takes a starring role in bitcoin security. Their priority is to direct the usage of blockchain assets as securities and to help protect investors on certain bitcoin investments going public or not. They have the power to approve or reject applications for bitcoin ETFs.
Internal Revenue Service
The IRS does consider bitcoin as a property, and as such, will expect you to pay taxes on your bitcoin purchases and sales like any other piece of property in the nation. To do this, you’ll likely want to work with your tax professional, as you need to file Form 1040 to declare virtual currency transactions to the government.
Commodity Futures Trading Commission
When it comes to bitcoin regulation, the Commodity Futures Trading Commission, or CFTC, handles all bitcoin ETFs on the market today.
However, their number one goal is generally monitoring the futures market of crypto, allowing investors to speculate prices without buying into a commodity, like bitcoin. Though they do offer investor protection, too.
Financial Crimes Enforcement Network
When you want to buy goods with bitcoin, you’re usually free to do so within the confines of the law. That being said, it is the Financial Crimes Enforcement Network that handles any wrongdoing when it comes to the misuse of crypto services and currencies, like with fraud or terrorism funding methodology.
Like most other forms of currency on the market today, there are risks of bitcoin that users must consider. But unlike with federal currency, the Federal Reserve does not wholly regulate the sale and usage of cryptocurrency. The government has previously stated they want to include more regulation for bitcoin and coins like it, though.
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority, or FINRA, does make an effort to notify investors of cryptocurrency-related scams and risks via its website. However, they do not take a significant role in regulating or policing cryptocurrency transactions as a whole. So, think twice when buying crypto online!
Office of the Controller of the Currency
The OCC, or Office of the Controller of the Currency, oversees the entire federal banking system in the United States. In 2021, the OCC began offering crypto-related services to national banks and federal savings organizations, including crypto custody. But first, these banks had to prove they could control crypto adequately.
Is Bitcoin Legal in Australia?
At the time of this writing, all forms of digital currencies and cryptocurrencies are completely legal to buy, sell, and trade in Australia. Furthermore, when it comes to rules, regulations, and laws overseeing cryptocurrency in the country, Australia is one of the more progressive nations in the world. They’ve accepted digital currency wholeheartedly as a new wave of technology and innovation.
That being said, the legal status of all forms of crypto is subject to the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 in Australia, and the government will use all its power to stop such funding in its tracks.
Is Bitcoin Legal in UK?
It is entirely legal to buy and sell bitcoin in the UK, and you have a few options to accomplish this goal as a budding investor. We’ve previously published a rundown on the top p2p exchange services and brokerage firms capable of handling bitcoin transactions with nominal fee structures involved. Many of these are readily available within the UK for users to take advantage of, too.
Furthermore, it’s important to note that, unlike in some regions, the UK does not regulate the amount of bitcoin purchased or sold. You can buy and sell to your heart’s content without worry of government intervention.
Is Bitcoin Legal in Canada?
In any province throughout Canada, it is entirely legal to buy, sell, and trade bitcoin and other cryptocurrencies, like Ethereum. The Canadian government has previously accepted crypto as a legitimate investment source and asset, allowing its citizens to buy and sell at their leisure.
That being said, many still question whether it is legal to hold a digital currency wallet and trade crypto regularly. Yes, it is entirely legal to own a digital wallet and work as a day trader for crypto in Canada!
You even have a few Canadian crypto platforms to choose from, including CoinSmart, where Canadians can buy crypto with ease!
Is Bitcoin Safe?
So, you’ve found your country and you know it is legal to trade bitcoin, but is bitcoin safe to trade? A good gauge of safety in financial investments is to look to your financial leaders. In the case of the United States, there are mixed messages.
Hester Peirce, Commissioner of the U.S. Securities and Exchange Commission calls for regulators to focus more on how to include cryptocurrency into our financial system rather than regulate it to suppress its use. Says Peirce, this change in focus is “a much better way for regulators than to get to know the technology and to get to know this asset class.”
On the other hand, Jerome Powell, Chair of the U.S. Federal Reserve considers stores of crypto coins as “highly volatile” and considers them “more of an asset for speculation.” He bases this on the fact that currency’s basic function is to hold value and since cryptocurrency isn’t able to do that, it shouldn’t be considered a currency.
This leads directly to the next question.
Do I Have to Include Bitcoin on My Taxes?
In the U.S. cryptocurrency, like bitcoin, has become of increasing interest to the IRS. So much so, that it has released regulations for how to deal with it on your taxes.
Bitcoin is considered property in the U.S. and as such the rules that apply to the property are now also applied to bitcoin trade. So, yes, unfortunately, there is tax on bitcoins.
For specific regulations on this, refer to Publication 544, Sales and Other Dispositions of Assets from the IRS website.
The basic answer to whether or not bitcoin is legal really depends on where you are. In the U.S. it is considered legal but is treated as property for tax purposes. Other countries have their own regulations or ban its use altogether.
As to whether bitcoin is safe, consider it like any other financial investment where there is calculated risk involved and look to your leaders for guidance.