The Legal Status Of Cryptographic Currencies

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The legal status of cryptographic currencies (in particular, of bitcoin, the first decentralized cryptocurrency) varies substantially from country to country as is expected. While some countries have explicitly allowed their use and trade making them effectively legal, others have banned or severely restricted it, making it hard or impossible in some cases to obtain or use the currency. Some countries that allow or tolerate cryptocurrencies have chosen to treat them as foreign currencies, sometimes with status of legal tender which will possibly be taxed as the years go by, while others have denied their currency status but consider them as a valuable property like gold and other precious metals. Many central banks, even in countries that officially allow their use, have issued warnings to the public about their risks. This is happening because cryptocurrencies have a very volatile nature in terms of price and most of them have a limited life span. Further analysis on each country follows.

Australia

The Australian government is flat out hostile about crypto currencies

Austria

Austria has no issues with its people using digital currencies. Taxation information is not available at this point.

Bangladesh

Bangladesh’s Central Bank warned against dealing in altcoin, saying anybody caught using the virtual currency could be jailed under the country’s strict anti-money laundering laws.

Belgium

The government has decided to take a hands-off approach to the currency. Belgium’s finance minister has publicly stated that he sees no problem with the currency and that the national bank would have no objections to it. The country’s money laundering agency has also not released any guidelines or warnings against the currency.

Bolivia

The Central Bank of Bolivia released a statement that stated that cryptocurrency is not allowed in Bolivia. They explicitly ban the bitcoin (among other kinds of cryptocurrency) and allow only the trade with the national currency (bolivianos) and U.S. dollars. The Bank thinks the cryptocurrency will permit enterprises to evade taxes, they also think that cryptocurrency is dangerous for the economy, since it is not regulated by anyone.

Brazil

The Brazilian tax authority requires bitcoin holders in Brazil to file capital gains on their tax returns. Like the IRS, Brazil is refraining from call it a currency, but instead requires people to file capital gains like any other security. Gains (and losses) will be filed annually with tax returns.

Bulgaria

The Bulgarian National Revenue Agency issued a statement concerning the taxing of bitcoin. For the purpose of applying laws governing income taxes bitcoin is considered a financial instrument. The taxable income is determined by the sum of the profits from transactions with bitcoin decreased by the sum ot losses from transactions with bitcoin. The profit or loss from a transaction is calculated based on the comparison between the sale price and the aquistion price of bitcoin.

Canada

The Canada Revenue Agency issued a statement clarifying the tax treatment of bitcoin. The statement is a brief outline which states that tax rules apply when bitcoin is used to pay for goods and services in the same way the rules apply for barter transactions.

China

China Central Bank barred financial institutions from handling bitcoin transactions, moving to regulate the virtual currency. The People’s Bank of China said financial institutions and payment companies can’t give pricing in bitcoin, buy and sell the virtual currency or insure Bitcoin-linked products. Trading bitcoins by individuals is however legal in China.

Colombia

The Superintendencia Financiera de Colombia (SFC), the government body responsible for overseeing financial systems in Colombia, stated that “The bitcoin is an asset that has no equivalent statutory legal tender in Colombia since it was not recognized as currency in the country”, and made it clear that “supervised (financial) entities are not authorized to guard, invest or mediate these instruments (bitcoins).” Additionally it is for people to know and accept the risks inherent in their operations with ‘virtual currency’ risks”. Risks associated with market volatility and price.

Denmark

Denmark’s Financial Supervisory Authority (FSA) has issued a statement that says that doing business with bitcoin does not fall under its regulatory authority and therefore FSA does not currently prevent anyone from opening such businesses. The Danish Tax Board, the nation’s top tax authority, declared that personal profits and losses from bitcoin trading would not be taxed, although bitcoin trading businesses would be taxed.

Ecuador

The National Assembly of Ecuador banned bitcoins including other decentralized digital/crypto currencies. Due to the establishment of a new, state-run currency. This is true innovation. If countries can create their own coins and manage them accordingly they can be freed from national debt and have more prosperity for their people.

Finland

Finland issued a regulatory guide to bitcoin in September 2013, which imposed capital gains tax on bitcoins, and taxes bitcoins produced by mining as earned income.

This is because the courts classified bitcoins as a payment instrument, whereas most countries treat their use as an unregulated method for the exchange of goods, or even as a crime.

Germany

The German Finance Ministry announced that bitcoin is now essentially a “unit of account” and can be used for the purpose of tax and trading in the country. It is not classified as a foreign currency or e–money but stands as “private money” which can be used in “multilateral clearing circles”, according to the ministry.

Hong Kong

The chief executive of  Monetary Authority (HKMA) said that bitcoins is only a virtual commodity. He also decided that bitcoins will not be regulated by HKMA. However, the authority will be closely watching the usage of bitcoins locally and its development overseas. They can do this by monitoring the blockchain and transactions users make through this open ledger.

Iceland

The Icelandic Central Bank confirmed that “it is prohibited to engage in foreign exchange trading with the electronic currency bitcoin, according to the Icelandic Foreign Exchange Act”.

India

The consolidated legal position in the month of August 2014 is that the legality of bitcoin is in doubt in India. The Reserve Bank of India has cautioned users of virtual currencies of various legal risks. They believe that Bitcoin and other altcoin can be used for neferious transactions and funding terror operations.

Indonesia

Bank Indonesia (BI) said that bitcoin is a potential payment method but could potentially be used in scams and money laundering operations. Since it is not regulated by banks, it has its associated risks. The central bank of Indonesia is currently studying bitcoin and they have no plans to issue regulations on it.

On 6 February 2014, Bank Indonesia is stating that bitcoin and other virtual currencies are not currencies or legal tender in Indonesia. The people are urged to exercise caution towards Bitcoin and other virtual currencies. All risks regarding ownership or use of Bitcoin are borne by the owner or user of Bitcoin and other virtual currencies.

Israel

The Israeli Tax Authority is said to be considering a tax on bitcoin, but no statements have been made until today.

China

The current Banking Act and Financial Instruments and Exchange Law, prohibiting banks and securities companies to deal bitcoins. The decision also acknowledges that there is no laws to unconditionally prohibit individuals or legal entities to receive bitcoins in exchange of goods or services. Taxes may be applicable to bitcoins. So it not very clear what the legal status of altcoins is.

Jordan

The Central Bank of Jordan prohibits banks, currency exchanges, financial companies, and payment service companies from dealing in bitcoins or other digital currencies.

Kyrgyzstan

The Central bank of Kyrgyzstan prohibits bitcoin operations.

Lebanon

The Bank of Lebanon issued a warning against purchasing, keeping or using digital currencies, citing volatility, potential losses, and other risks.

Lithuania

Bank of Lithuania released a warning in 31 January 2014 that bitcoin is not recognized as legal tender in Lithuania and that bitcoin users should be aware of high risks that comes with the usage of it.

Malaysia

Bank Negara Malaysia (BNM) met with local bitcoin proponents to learn more about the currency but did not comment at the time. BNM issued a statement that pointed out that bitcoin is not recognised as legal tender in Malaysia. The central bank will not regulate bitcoin operations at the moment and users should aware of the risks associated with bitcoin usage.

Norway

The Norwegian Tax Administration stated that they don’t define bitcoin as money but regard it as an asset. Profits are subjected to wealth tax. In business, use of bitcoin falls under the sales tax regulation.

Philipinnes

Bangko Sentral of Philipinnes (BSP) issued a statement on risks associated with bitcoin trading and usage. Bitcoin exchanges are not regulated by BSP at the moment. BSP will be monitoring the possibility of bitcoin usage in money laundering and other illegal purposes.

Poland

Poland made a first official announcement stating bitcoin is “not illegal”. The announcement was made by Szymon Woźniak of the Ministry of Finance but further also clarified that while not Illegal, bitcoin cannot be considered legal as a form of tender, as yet.

Russia

The Bank of Russia issued a statement on bitcoin usage in which it was characterized as money substitute banned for emission in Russia. The Bank warned against potential illegal usage of such substitutes, including money laundering and financing terrorist activities. It also stated that exchanging money substitutes for any hard currency would be regarded suspicious.

Singapore

The Monetary Authority of Singapore (MAS) warned users of the risks associated with using bitcoin stating “If bitcoin ceases to operate, there may not be an identifiable party responsible for refunding their money”. It also stated that bitcoin transactions may be treated as a barter exchange if it is used as a payment method for real goods and services. Businesses that deal with bitcoin currency exchanges will be taxed based on their sales of bitcoins.

United States

There are no final rules at the U.S. state level yet. In March, the New York State Department of Financial Services led by superintendent Benjamin Lawsky had officially invited bitcoin exchanges to apply with them, and on 17 July it published draft regulations for virtual currency businesses. Businesses would have to provide transaction receipts, disclosures about risks, policies to handle customer complaints, maintain a cybersecurity program, hire a compliance officer and verify details about their customers to follow anti-money-laundering rules, per FinCEN.

United Kingdom

Bitcoin is treated as ‘private money’. When bitcoin is exchanged for sterling or for foreign currencies, such as euro or dollar, no VAT will be due on the value of the bitcoins themselves. However, in all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for bitcoin or other similar cryptocurrency. Profits and losses on cryptocurrencies are subject to capital gains tax.

Turkey

Bitcoin is not regulated as it is not considered to be electronic money according to the law.

Thailand

Bitcoin cannot be used as a way of converting foreign currencies in the nation. Bank of Thailand says it has no plans to expand the laws to regulate bitcoin.

Switzerland

A proposal was put forth by 45 members of the Swiss Parliament for digital sustainability (Pardigli), that calls on the Swiss government to evaluate the opportunities for utilization of bitcoin by the country’s financial sector.

Vietnam

The State Bank of Vietnam released a warning statement on 28 February 2014 which states that the use of virtual currency bitcoin and other similar means of payment is not legally recognized and protected, according to the current law on currency and banking in Vietnam, and that investment in such the currencies was potentially very risky. As we can see here risk is a major factor in Vietnams position on altcoins.

My personal opinion is that all countries needs to accept bitcoin and altcoins and allow their citizens to use it as they see fit. Lets allow the people and the markets to decide which coins they want to use with no regulations.

coinmaker

Blockchain enthusiast. Mining 24/7, trading altcoins, leasing hashing power and searching for Sasquatch

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