Bitcoin and various altcoins have brought in a new era of exotic digital currency which has disconcerted many at the monetary decision-making levels. Bitcoin legality has periodically been brought into question.
While legislators in few countries like U.S and Japan have been gung-ho about the potential use of the Bitcoins, other countries like Jordan have banned its use and Thailand had initially termed it as illegal back in 2013.
Should Bitcoin Be a Currency?
Bitcoin certainly transcends the requirements to become a pliable currency: durability, malleability, portability, homogeneity, and divisibility.
The few places it lacks which will become a bone of contention for its survival are:
- General acceptability: owing to fear of mainstream currencies becoming peripheral,
- Cognoscibility: open arm acceptability by central banks as an alternative payment, and
- Stability of value: as it retains value uniformly across the world, its own value might fluctuate
The biggest obstacle in its usability and acceptability is the anonymity of the user who can hide behind high computing power and generate and trade digital money. You cannot control its generation as high-security protocols cannot be as of now targeted towards generation and usage by anti-social elements.
Let us examine various thoughts of central banks so far on the legality and intended use of bitcoins. Countries are still coming to terms with this new phenomenon and how to handle its repercussions.
Bitcoin Legality in the United States and Canada
The U.S gave it the status of legal tender in 2013 as a “decentralized virtual currency.”
The Commodity Futures Trading Commission (CFTC) views Bitcoin as a commodity per its clarification in 2015 and Internal Revenue Service (IRS) is ready to tax it as a property.
In April 2017, the Securities and Exchange Commission (SEC) agreed to review the decision for rejecting the Bitcoin ETF as proposed by Cameron and Tyler Winklevoss. The U.S has country-wide regulation on virtual and money transmission laws which translates into little or not-too-friendly regulation for bitcoin trading.
South Carolina and Montana are two states with no money transmission laws. Thirteen states have clearly defined positions. That leaves 37 states with areas of concern. Some of the noteworthy states which might be considered “Bitcoin-unfriendly” are New York, Washington, Connecticut, and Hawaii. On the other side, states like Texas, Tennessee, South Carolina, and Kansas are increasingly supportive of the custodial exchange of Bitcoin. If you live in the United States (or anywhere!), do your own research to follow the latest regulations.
Canada categorizes it as an “intangible” and has brought it under the regulation of anti-money laundering and counter-terrorist financing laws.
Bitcoin Legality in the United Kingdom
Bank of England very effectively states on its website how the interesting concept and usage of bitcoin are currently not seen as posing a material threat to the monetary and financial stability of the country but they continue to monitor the developments.
Bank of England conducted a proof of concept study of the wide ranging applications of distributed ledger technology with PwC and looks forward to carrying out the theoretical understanding later to working solutions. The UK announced favourable tax treatment to virtual currencies has made it a fertile place for bitcoin start-ups.
Bitcoin Legality in Europe
The European Parliament passed a legislation in March 2017 to regulate digital currencies by collecting more data on the processing and usage to remove the anonymity angle.
The path has been paved for each country to build a DLT and altcoin regulation in their respective countries to allow trust and wide-spread usability. It aims to build a central database of all Bitcoin users for identification and wallet addresses which would be accessible to FIUs and have a process for self-declaration for use of virtual currency.
Digital currencies do not have a legal status as a currency but custodian wallet providers have been added in this definition to make it obligatory to report suspicious transactions.
Bitcoin Legality in Asia
By far, Japan outweighs all trades for Bitcoin compared to any country in the world. It has been working have its Banking Act include accounting changes through its telecom technologies. It included an ordinance regarding digital currencies. It is treated as a payment method but not a legal tender. Digital currency is differentiated as compared to “electronic money” as it does not have a specific issuer.
The Monetary Authority of Singapore (MAS) requires all companies that utilize payments of Bitcoins to obtain a license and divide the payment activities into several categories for explanations. It requires digital currency exchanges for overseeing companies that would provide money transmission and conversion services.
Similarly, Philippines has notified all transmission companies to be treated as remittance companies. This all would entail these companies to comply with setting up rules of minimum capital, registration, regulatory reports and compliance laws of Know-your-customer (KYC) and Anti-money laundering (AML).
At the other end of the spectrum, highly conservative approach of Hong Kong keeps bitcoins outside the monitoring of Hong Kong Monetary Authority terming it as considerable risky for consumers. Bitcoin is not even recognized as a means of payment by official structures. Though China is pro-digital currency, it is keeping an arm’s length distance.
This article was originally written in August 2017. Remember to always do your own research before making any legal decisions with your Bitcoin or other cryptocurrencies.