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Is Bitcoin Legal? Countries That Allow or Ban Crypto

Features Lead

Elena Bozhkova

Features Lead

Elena Bozhkova

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Elena is the Features Lead at Cryptonews.com. With a Master's degree in science journalism from City University, London, she is passionate about exploring complex topics in the world of technology.

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Last updated:

September 10, 2024

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Bitcoin allows you to make anonymous transactions with anyone around the world, and this has raised concerns for many governments. While some countries see cryptocurrency as an exciting financial innovation and have set up regulations to support its growth, others have placed strict restrictions or banned its use. Read on to discover the legal status of Bitcoin in your country.

Is Bitcoin Legal in the US?

Yes, Bitcoin is legal in the United States. Although no federal law has declared it illegal, regulations can vary by state. Also, different government agencies have their interpretations of what Bitcoin is, which affects how they regulate and treat the digital currency.

Securities and Exchange Commission (SEC): The SEC views Bitcoin as a commodity and most other cryptocurrencies as securities.
Internal Revenue Service (IRS): The IRS treats Bitcoin as property for tax purposes. This means that Bitcoin transactions are subject to capital gains tax. Investors must report profits from Bitcoin, including mining and trading, on their yearly tax returns.
Commodity Futures Trading Commission (CFTC): The CFTC regards Bitcoin as a commodity. The CFTC’s jurisdiction covers futures and derivatives trading on Bitcoin, aiming to protect market participants from fraud and manipulative trading practices.
Financial Crimes Enforcement Network (FinCEN): FinCEN does not view Bitcoin as a legal tender but as a “convertible currency” that can be used in transactions.

Bitcoin Legal Status in Europe

Bitcoin is legal in the European Union. The EU adopted the Markets in Crypto-assets Regulation (MiCA) in June 2023. It outlines how crypto-assets should be managed and regulated across the EU and specifies the rules for crypto services.

Under MiCA, Bitcoin is recognized as a “crypto-asset.” This term describes digital representations of value or rights, which can be stored and transferred electronically using digital ledger technology (DLT).

MiCA is being rolled out in stages. Titles III and IV of the regulation, which cover key operational and regulatory aspects for crypto-assets, became enforceable starting June 30, 2024. The remaining titles (I, II, V, VI, and VII) will come into effect in December 2024.

While MiCA sets basic rules for cryptocurrencies in the EU, it doesn’t force all member countries to regulate them the same way. Each country can still decide on extra rules as long as these rules don’t go against MiCA’s standards. This approach allows countries to address their unique challenges and concerns about cryptocurrencies.

Cryptocurrency Legal Status in the UK

Bitcoin is legal in the United Kingdom. According to the Financial Conduct Authority (FCA), approximately 10% of adults in the UK owned cryptocurrencies as of August 2022. Residents of the UK can freely buy, sell, and trade Bitcoin and other cryptocurrencies through licensed crypto exchanges.

Source: Financial Conduct Authority’s report

The UK’s FCA is responsible for issuing licenses to crypto exchanges that comply with local regulations. This ensures that all operational exchanges meet certain standards for safety and transparency.

In April 2022, the UK government announced plans to turn the country into a global hub for cryptocurrency investments and technology. In 2023, they updated the Financial Services and Markets Act to include digital assets more clearly. This update lets the government specify which cryptocurrency activities need regulation to ensure they are carried out safely and openly.

Bitcoin in Canada

In Canada, the Canadian Revenue Agency recognizes Bitcoin as a crypto-asset, which means that any profits made from Bitcoin transactions are taxable. Depending on how Bitcoin was used in the transaction, these profits are categorized as business income or capital gains.

Cryptocurrency exchanges are treated like money service businesses, which means they have to follow strict rules similar to those of banks. They must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and follow laws that prevent money laundering and terrorist financing. This includes reporting any suspicious transactions, sticking to specific plans to stay compliant, and keeping detailed records.

Although cryptocurrencies are popular and widely traded in Canada, they are not considered legal tender like the Canadian dollar.

Countries Where Bitcoin Is Prohibited

Country	Cryptocurrency ban
Afghanistan	The Taliban banned crypto in Afghanistan in August 2022.
Algeria	The purchase, sale, use, and possession of cryptocurrency are prohibited.
Bangladesh	In 2017, the Central Bank of Bangladesh warned that cryptocurrencies are illegal.
China	Crypto trading and mining have been banned in China since 2021, but investors still operate in a grey area.
Egypt	Cryptocurrencies are prohibited, but several major exchanges operate in the country.
Ghana	The Bank of Ghana (BOG) has banned the transaction of crypto assets in the country.
Iraq	The Central Bank of Iraq prohibited crypto in 2017.
Kuwait	Kuwait has banned the use of crypto for payments or investments to combat money laundering.
Libya	Libyan authorities banned Bitcoin mining in the country.
Morocco	Crypto is banned, but the government is working on a crypto regulation bill.
Myanmar	The Central Bank of Myanmar announced that cryptocurrencies “are not designated as legal currencies, and financial institutions are not allowed to sell/buy them using personal Facebook accounts and web pages.”
Nepal	Any form of virtual currency is prohibited.
Republic of Congo	Crypto is banned
Saudi Arabia	The government restricted banks from assisting with any crypto-related transactions.
Sierra Leone	In 2029, Sierra Leone’s central bank prohibited two crypto firms. It also refused to grant licenses to companies that accept deposits for crypto investment or trading.
Tunisia	Tunisia has banned cryptocurrency since 2018.

Conclusion

In conclusion, Bitcoin’s legality significantly depends on your location. In the United States, for example, while federal law does not prohibit Bitcoin, its regulatory treatment varies by key federal agencies. Europe largely accepts Bitcoin under the new MiCA regulation. It allows EU member states to implement their own additional rules. The UK has previously announced plans to support cryptocurrency innovation and has developed its own regulations. Meanwhile, some countries completely ban Bitcoin or lack clear regulations on cryptocurrency.