Are VPNs Legal For Trading Crypto? What You Need to Know
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Virtual private networks (VPNs) provide a secure tunnel for internet traffic and can even allow you to connect from another region. Using a VPN provides enhanced security and privacy, but are VPNs legal for crypto?
While VPNs are legal in most countries, there are some additional considerations when using a VPN for crypto trades. In this guide, we’ll discuss whether using a VPN is allowed, as well as some situations in which a virtual private network helps and some in which it won’t help at all. Let’s dig into the details.
Summary: Are VPNs Legal For Crypto?
Yes, VPNs are legal for crypto in most countries. Many crypto traders use VPNs for privacy because they allow internet traffic to pass through an encrypted tunnel, preventing internet service providers or public WiFi hotspot providers from seeing the traffic. Using a VPN may also allow you to access crypto exchanges or decentralized finance (DeFi) platforms that may not be available in your country.
However, using a VPN may be against the platform’s terms and conditions, so it’s important to familiarize yourself with the rules of the trading platform before you make any trades. You’ll also need to check local laws before trading crypto. While cryptocurrency trading is legal in most of the world, several countries have enacted bans and restrictions.
What Is a VPN?
A VPN, also known as a virtual private network, is a service that allows you to use the internet with an encrypted connection that masks your real location and IP (internet protocol) address. The internet protocol address acts as a unique identifier assigned to each device connected to a network. This allows internet service providers (ISPs) to know which devices are active and which sites or services they visit.
A VPN acts as a man-in-the-middle and encrypts the connection so that ISPs can’t see the activity. VPNs also allow you to access internet services using a different IP address that masks your true location.
In some cases, traffic on public Wifi networks may not be encrypted, making a VPN a must-have tool for any online activity.
Where Are VPNs Illegal or Restricted?
Is using a VPN to trade crypto illegal? In most cases, no. Most countries allow VPN usage. However, according to NordVPN, one of the leading VPN service providers, virtual private networks aren’t allowed or are restricted in several countries, including China, Russia, India, and Egypt. In cases where VPN use is limited to approved providers, the governments in these countries may have access to traffic logs.
Where Are VPNs Illegal?
Several countries make VPNs illegal.
- North Korea
- Belarus
- Turkmenistan
- Iraq
- Oman
Belarus also bans usage of the Onion Router (TOR) network, a worldwide network of servers that obscures the user’s location when accessing websites.
Where Are VPNs Restricted?
While not illegal in all cases, several countries restrict VPN usage. Use of VPNs may be limited to government-approved providers and approved activities.
- China
- Russia
- India
- Egypt
- Türkiye
- United Arab Emirates
- Iran
- Uganda
Why Do Some Crypto Platforms Block VPNs?
Even if VPNs are legal in your country, some crypto platforms block access through VPNs or even TOR. In most cases, they do this to prevent people from regions they don’t serve from accessing the platform. In recent years, regulatory agencies have pursued several popular crypto exchanges for allegedly selling unregistered securities or violating other local laws.
For example, US federal prosecutors charged the popular Kucoin exchange with violating US anti-money laundering laws by failing to follow Know Your Customer (KYC) identity verification requirements. A number of worldwide exchanges don’t support US customers due to the litigious actions of the US Securities and Exchange Commission (SEC) and fear of prosecution by the US Department of Justice. Similarly, most large crypto exchanges don’t support people in OFAC-sanctioned countries.
Some exchanges ban traffic from known VPN IP addresses as an initial step to prevent people from unsupported countries from accessing the platform. Unfortunately, these defensive moves may also affect local users in some cases because platforms don’t have a reliable way to filter local users using a VPN versus someone from a prohibited country.
How Are VPNs Used For Crypto?
The good news is that VPNs are allowed in most countries and serve a valuable purpose in crypto trading and cryptocurrency transactions. A VPN can help you bypass geo-restrictions, but be wary of the platform’s terms and conditions. Some prohibit VPN usage to bypass geographic restrictions. You can also use a VPN to enhance privacy or to use public WiFi securely when making crypto transactions.
1. Bypassing Geo-Restrictions
Some exchanges and decentralized finance platforms restrict access from specific regions. Users from the US are greeted with this message when trying to access PlutusDAO, a protocol that aggregates governance tokens and pays a yield for staking.
1inch, a popular decentralized app (dApp) for comparing swap prices at decentralized exchanges (DEXs), blocks US IP addresses.
Similarly, Binance.com, the world’s largest centralized crypto exchange by trading volume, blocks access from the US, Canada, and other unsupported countries.
As a technical matter, you can often bypass these restrictions using a VPN. However, you might not be able to use the platform anyway if the platform enforces KYC identity verification and you don’t have a government-issued ID from a supported county.
You might also be violating the platform’s terms and conditions. Possible risks include frozen funds or account termination. If you use a VPN to access restricted crypto platforms, be aware of the risks.
2. Enhancing Privacy and Anonymity
A VPN shines in protecting your anonymity. Cryptocurrency wallets use wallet addresses as a pseudonymous identity. However, that doesn’t make you anonymous. Websites, wallet apps, and blockchain nodes may collect your IP address, making it possible to match a wallet address to a specific person in some cases.
Using a VPN gives these web apps, wallets, and nodes a different IP address while also shielding your activity from your ISP.
3. Using Public WiFi Networks Securely
Sometimes, the free WiFi at your favorite coffee shop isn’t really the coffee shop’s internet connection. It might be someone else in the shop or nearby broadcasting a similar access point name. This “man-in-the-middle” can watch your traffic as you connect to crypto exchanges or decentralized platforms.
A VPN allows you to visit crypto sites through an encrypted tunnel. Even if you are on a network run by a snoop or hacker, they can’t watch your traffic.
How to Choose a VPN For Crypto Trading
Due to the amount of money at stake, you’ll want to use a reputable VPN provider when trading crypto. Things to consider include privacy (do they save logs), speed, the number of servers, and cost. Some of the best VPNs for crypto trading only cost $2 or $3 per month.
Privacy
Some VPNs have a no-logging policy, which better protects the privacy of users. In a situation where a government agency or law enforcement requested user logs, there would be nothing to share.
Connection Speed
Crypto trading sometimes hinges on split-second timing. Connection speed and uptime matters. Look for a VPN provider that offers acceptable speeds and offers a large server network. A larger number of servers helps distribute the traffic. You can choose a server with less usage to help ensure faster speeds.
Number of Servers and Supported Locations
The number of servers and countries the VPN provider serves can also play a crucial role in your decision. For example, if the exchange you want to use is in Germany, you may need to use a VPN location in Germany or another country supported by the exchange. Consider choosing a VPN provider with a vast worldwide network. This gives you more flexibility if you need to use additional exchanges.
Device and OS Support
Plan around the devices you already own as well as devices you expect to use in the future. Some VPN providers may only support specific OS platforms or versions. Look for a VPN provider that supports multiple devices so you can connect on the go or with additional devices at home or at work.
Security Features
Look for a provider with connection protocols and additional features like adware and malware blocking. Advanced users may also need port forwarding support as well as a kill switch that helps prevent your real IP address from being revealed if you lose your secure VPN connection.
Cost
Although many VPN providers charge less than $5 per month, the cost of a pricier option can add up over the course of a year. You may also find several free options. However, free VPNs often aren’t as safe, and their IP addresses are usually well-known. This makes them less effective for bypassing geo-restrictions. Free VPNs may also log traffic, sell your data, or inject ads. Much like other “free” services, the price may be costlier than it seems. Consider spending investing in a reputable paid VPN provider.
Conclusion
Are VPNs legal for crypto trading? The short answer is yes. However, several countries restrict the use of VPNs, and a handful prohibit their use for crypto and other purposes. Some crypto platforms also ban access from known IP addresses for VPN providers. Lastly, you’ll also want to consider the terms and conditions for the crypto platforms you use before using VPNs for crypto trading. Some platforms explicitly prohibit the use of VPNs to bypass geographic restrictions.
FAQs
Can you use a VPN for crypto?
Yes, in most cases, you can use a VPN for crypto, and it’s wise to do so when possible. However, some platforms ban known VPNs, preventing access with specific VPN providers.
Can Binance detect VPNs?
Yes. Binance can detect VPNs from known providers.
Can Coinbase detect VPNs?
Yes. Coinbase can detect VPNs and uses a device confirmation process if you’re using a new IP address or if you have cleared your cookies. Expect a confirmation email to verify that it’s you accessing your account.
Can you use a VPN to access restricted exchanges?
Technically, yes. You can often use a VPN to access restricted exchanges. However, doing so may be in violation of the exchange’s terms and conditions or local laws.
Are VPNs illegal for crypto anywhere?
Yes. Several countries ban the use of VPNs, including Iraq, North Korea, Belarus, Turkmenistan, and Oman.
References
- US charges KuCoin crypto exchange with anti-money laundering failures (reuters.com)
- Sanctions Programs and Country Information (ofac.treasury.gov)
- Browse Privately. (torproject.org)
- Public Wi-Fi: Be Very Paranoid (bloomberg.com)
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