The peer-to-peer digital currency Bitcoin (BTC) made its debut in 2009 and with it ushered in a new era of cryptocurrency. While tax authorities, enforcement agencies, and regulators globally are still debating best practices, one important question: is Bitcoin legal or illegal? The answer depends on the countries and activity of the user.

Bitcoins have not been issued, endorsed, or regulated by any central bank yet. Instead, they are created through a computer-generated process known as mining. In addition to being a crypto unrelated to any government, it is a peer-to-peer payment system since it does not exist in a physical form. As such, it provides a convenient way to conduct cross-border transactions with no exchange rate fees. It also enables owners to remain anonymous.

Users have greater ability to buy goods and services with Bitcoin directly at online retailers, pull cash out of Bitcoin ATMs, and use Bitcoin at some brick-and-mortar stores. The currency is being traded on various exchanges, and virtual currency-related ventures and ICOs draw interest from across the investment spectrum. While Bitcoin seems at glance to be a well-established virtual currency system, there are still no uniform international laws that regulate Bitcoin.

Countries That Bitcoin Is Legal

Bitcoin can be used anonymously to conduct transactions between any holders, anywhere and anytime across the world, which seems a good way to criminals and terror organizations. They may use Bitcoin to buy or sell illegal goods such as drugs or weapons. Most countries have not clearly determined the legality of Bitcoin, preferring instead to take a wait-and-see method. Some countries have indirectly assented to the legal use of Bitcoin by enacting some regulatory oversight. However, Bitcoin is never legally acceptable as a substitute for a country’s legal tender.

The United States

The United States has taken a generally positive stance toward BTC, though several government agencies work to prevent or reduce Bitcoin use for illegal transactions. Prominent businesses such as Dish Network (DISH), the Microsoft Store, sandwich retailer Subway, and Overstock.com (OSTK) welcome payment in Bitcoin. The flagship cryptocurrency has also made its way to the U.S. derivatives markets, which speaks about its increasingly legitimate presence.6

The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has been issuing guidance on cryptocurrency since 2013. The Treasury has defined Bitcoin not as currency, but as a money services business (MSB). This places it under the Bank Secrecy Act, which needs exchanges and payment processors to adhere to certain responsibilities like reporting, registration, and record keeping. Moreover, Bitcoin is categorized as property for taxation purposes by the Internal Revenue Service (IRS).


Like its neighbor, the United States, Canada maintains a generally Bitcoin-friendly approach while also ensuring the cryptocurrency is not used for money laundering. Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA). This means that Bitcoin transactions are viewed as barter transactions, and the income gained is considered as business income. The taxation also depends on whether the individual has a buying-selling business or is only concerned with investing.

Canada considers BTC exchanges to be money service businesses. This brings them under the purview of the anti-money laundering (AML) laws. Bitcoin exchanges must register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), report any suspicious transactions, abide by the compliance plans, and even keep specific records. Additionally, some major Canadian banks have banned the use of their credit or debit cards for Bitcoin transactions.


Like Canada, Australia considers Bitcoin neither money nor a foreign currency, with the Australian Taxation Office (ATO) ruling it an asset for capital gains tax purposes.

The European Union

On Oct. 22, 2015, the European Court of Justice (ECJ) ruled that buying and selling cryptocurrencies is considered a supply of services, and that this is exempt from value-added tax (VAT) in all European Union (EU) member states. Moreover, some individual EU countries have also developed their own Bitcoin stances.

In Finland, the Central Board of Taxes (CBT) has given Bitcoin a VAT exempt status by considering it as a financial service. Bitcoin is treated as a commodity in Finland and not as a currency. The Federal Public Service Finance of Belgium has also made Bitcoin exempt from VAT. In Cyprus, Bitcoin is not controlled or regulated either. The Financial Conduct Authority (FCA) in the United Kingdom (U.K.) has a pro-Bitcoin stance and asks the regulatory environment to be supportive of the digital currency. Bitcoin is under certain tax regulations in the U.K. The National Revenue Agency (NRA) of Bulgaria has also brought Bitcoin under its existing tax laws. Germany approves Bitcoin; it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.

Countries That Bitcoin Is Not Legal

While Bitcoin is welcomed in many countries, a few countries are wary because of its volatility, decentralized nature, perceived threat to current monetary systems, and links to illicit activities including drug trafficking and money laundering. Some nations have outright banned the digital currency, while others have tried to cut off any support from the banking and financial system essential for its trading and use.


Bitcoin is essentially banned in China. All banks and other financial institutions such as payment processors are prohibited from transacting or dealing in BTC. Cryptocurrency exchanges are banned too.


Bitcoin is not regulated in Russia, though its use as payment for goods or services is considered illegal.


Vietnam’s government and its state bank maintain that BTC is not a legitimate payment method, though it is not regulated as an investment.

Bolivia, Columbia, and Ecuador

El Banco Central de Bolivia has banned the use of Bitcoin and other cryptos. Columbia does not allow Bitcoin use or investment. Bitcoin and other cryptocurrencies were banned in Ecuador by a majority vote in the national assembly.

Other countries

Although Bitcoin is now almost 10 years old, many countries still do not state if Bitcoin is legal or illegal, and they do not have explicit systems that restrict, regulate, or ban the cryptocurrency. The decentralized and anonymous nature of cryptocurrency has challenged many governments on how to allow legal use while preventing criminal transactions. Many countries are still analyzing ways to regulate the cryptocurrency. Overall, Bitcoin remains in a legal gray area for most part of the world.