Is Bitcoin Legal?

Over the last few years, bitcoin's popularity as an asset with investment value that can also be used for transactions has been on the increase. However, despite the increased adoption of bitcoin, you would find that some people are still sceptical about the currency's legality. Although several people are familiar with and interested in bitcoin, there is still some distrust in their minds, especially regarding the specific laws of certain countries. This begs the question, “is bitcoin legal?”

As bitcoin adoption increases, people are more convinced now more than ever that bitcoin is here to stay. However, what seems to discourage many from pursuing this golden opportunity is trust. There is still a lot of uncertainty about bitcoin's legal status even after a decade of its existence.

Why is this?

Fiat currencies such as dollars, pounds, euros and others are created and controlled by a central authority, the central bank. They have the law's backing, which means citizens can buy, sell, or keep the currency. If anyone tries to create or falsify the currency, they would be convicted. However, bitcoin isn’t like fiat currencies, and legislative policies about bitcoin are still fluid.

Bitcoin is the first cryptocurrency to exist, and it is founded on an entirely new idea. Bitcoin isn’t controlled by a central authority but by millions of its users from across the globe. However, since the government isn’t in control of digital currencies, their legal status isn’t as clear-cut as fiat currencies.

Another reason why people may be sceptical about the legality of bitcoin is its anonymity features. Although all transactions are publicly recorded on the blockchain, a bitcoin user's identity can remain completely anonymous. This is because the records displayed on the blockchain contain only the amount transferred and the public keys used.

The truth is that bitcoin’s legality is dependent on what you are doing with it, although it may also be dependent on where you are in the world. Even though it has existed for over a decade, Bitcoin is still a relatively new technology and financial instrument, and the government is just trying to get the hang of it. This is why to date, most governing authorities are yet to define it in legal terms.

As bitcoin’s popularity increases, central banks, tax regulators, law enforcement agencies strive to fit it within their legal frameworks and existing regulations. However, although several reservations have been expressed over its decentralised nature, bitcoin isn’t illegal. It is only natural for the government to be sceptical about a financial instrument they cannot fully control.

Bitcoin is legal to buy, sell and hold. However, what you choose to use bitcoin for may affect its legality. Bitcoin is characterised by its anonymity feature, which makes it prone to use for fraudulent crimes. Several concerns about this were voiced out after the closure of the black market, Silk Road. The black market operated with bitcoin; in fact, it was the only currency accepted there. This is why the government may be sceptical about the use of bitcoin as it may promote tax evasion, money laundering, among other fraudulent crimes. However, this doesn’t affect bitcoin’s legality.

In fact, at the end of the first quarter of 2020, countries like U.S.A, United Kingdom, Japan, among other developed countries, legalised bitcoin use. Even though countries like China may have heavily restricted bitcoin, holding bitcoin isn’t a crime. In fact, in March 2021, Chinese company Meitu announced that its subsidiary Miracle Vision had purchased more bitcoin and ether. The company noted that it now has about 16,000 ETH valued at $28.4million and 386.086 BTC valued at $21.6 million. With its recent addition, the company has in its possession cryptocurrencies valued at over $90million.

However, bitcoin's overall legal status in India is unclear as the Indian government recently banned its banks from dealing in bitcoins. However, although bitcoin is accepted in almost all counties, you should take a look at bitcoin laws in your countries. This is because even though some countries may legalise bitcoin, there may be policies in place you need to take note of. For instance, some countries like the U.S.A. implement tax regulations on bitcoin. It is considered an asset and is treated more as a property rather than a legal tender.

Bitcoin is legal to use, buy, sell, and hold. You can use bitcoin from just about buying a gadget to paying for your house or car. Bitcoin is now accepted as payment by notable financial institutions like Microsoft, Tesla, PayPal, and Expedia. However, it is vital that you check for bitcoin laws specific to your country. Many countries are still working on regulating cryptocurrency to fit into their financial structures. However, it is best to always use bitcoin for appropriate purposes.