Bitcoin Regulation Around the World

12 Aug, 2021 · 3 min read

The new infrastructure bill in the US triggered the discussion around Bitcoin regulation and legal status around the world. The bill passed by the Senate includes a provision to augment crypto tax collection to fund infrastructure development in the country while significantly raising challenges for operators to comply.

The US has one of the most developed tax codes worldwide regarding cryptocurrency, providing clarity on the tax obligations for traders and businesses. On the other side, it increases the compliance and tax reporting requirements of anyone dealing with crypto.

As crypto matures into a new fully-developed asset class, it is natural that new regulation will come into place in most countries, following some of the most developed tax regimes (i.e., US, UK). Bitcoin and crypto have come a long way from several government attempts to restrict it, questions about its legal status, and even bans.

Today, we explore the different types of Bitcoin and crypto regulation around the world.

Where is Bitcoin legal?

In most developed countries, Bitcoin is legal. However, its legal status can differ between several classifications, which have implications on its taxation regime. For example, Bitcoin has been considered a barter good, currency, legal tender, property, or commodity. In the US, for tax purposes, Bitcoin and all other cryptocurrencies are considered property, having a similar code to stocks.

There are several countries where Bitcoin is legal, but there are restrictions for traders and businesses with the local banking system. Countries’ central banks worldwide have issued bans and restrictions for financial institutions to deal with crypto businesses (i.e., exchanges). Some examples are Nigeria, Qatar, China, Saudi Arabia, or Russia.

Moreover, if you plan to open a crypto business, there are several additional requirements you need to follow. Some examples are obligatory registration procedures, tax reporting, or formal communication. You should consult with a crypto-focused lawyer and tax firm before jumping on the opportunity.

Where is Bitcoin regulated as illegal?

Since Bitcoin’s inception, many countries have tried to ban crypto, with directives from Central Banks and governments to make it illegal. Today, countries as Morocco, Algeria, Egypt, Bolivia, and Nepal still consider crypto illegal. Moreover, there are also countries where Bitcoin and crypto are legal to trade but not as payment methods.

Bitcoin regulation to pay attention to around the world?

Once you are aware of the legal status of crypto and Bitcoin in your country, you have to investigate the tax regime that applies. With CoinTracking, you can check the regulation and tax information for several countries. Moreover, you can check our list of 100+ crypto tax firms worldwide, which can help you.

But, what to look for in Bitcoin regulation?

From a tax perspective, the first thing is to understand if your country only taxes crypto to FIAT trades (i.e., Bitcoin to Euros; Bitcoin to USD). The second step is to evaluate the type of tax you’ll encounter. Will your crypto trading profits add to your total income, or will you pay capital gains on each trade? This distinction can severely impact the tax rates and also the crypto tax reporting requirements.

The tracking complexity can also increase if crypto-to-crypto trades are taxable in your country as in the US. You can diminish the challenge of assessing each trade’s cost basis using crypto tax software that automatically registers it.

Sign-up to CoinTracking today!

As crypto is an ever-changing ecosystem, the tax regime can be behind emerging protocols’ advancements and their respective taxation setting. Operations such as staking rewards, airdrops, earning crypto interest, receiving compensation in crypto for your job, NFTs, or DeFi could lack official guidance. If you’re performing advanced operations, please consult with a crypto tax expert in your country.

On the bright side, there could be tax benefits if you hold your investment in the long term. Check this article with several countries where if you hold your crypto for longer than 12 months, your tax bill could be much less or even zero.

The most Bitcoin friendly country worldwide: El Salvador

El Salvador may be the most crypto-friendly country due to its recent adoption of Bitcoin as legal tender, becoming the first country in the world to have that status applied to Bitcoin regulation. What does this mean?

Consumers and businesses in El Salvador will now be able to run their daily lives only using Bitcoin if they wish to, without any need to convert to US dollars. In El Salvador, two currencies (USD and BTC) are now the legal means of payment. Some international authorities challenged the decision, but government officials and the crypto community are rallying to turn this measure into a success.

The decision could improve the business relationship between the US and El Salvador while attracting crypto entrepreneurs to set up operations in the country. Moreover, since most El Salvadorians are unbanked, Bitcoin could help the underserved community while making remittances for emigrants much faster and cheaper.

What countries will follow El Salvador’s Bitcoin regulation?

In recent weeks, many South American countries hinted at similar initiatives after El Salvador’s decision. For example, senators in Paraguay, Argentina, and Panama announced they would start working on similar bills to regulate crypto while creating more business opportunities around digital assets.

Once the results of El Salvador’s adoption emerge, more countries will look at similar Bitcoin regulations, as opposed to restrictions.

Find out more information about Bitcoin regulation

CoinTracking can help you comply with Bitcoin tax regulation worldwide:

  1. Import (API & CSV) your trades from 110+ exchanges/wallets.
  2. DeFi (e.g., Uniswap/1inch) imports.
  3. Import your Binance Chain and Binance Smart Chain transactions.
  4. 25+ advanced reports, including which coins offer you a tax-free rate.
  5. Have your Capital Gains automatically calculated
  6. 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
  7. Generate fully-compliant Tax Reports in your country.

If you need personalized help reviewing your trades or preparing your US tax returns, check out our CoinTracking Full Service. A team of crypto tax experts led by Sharon Yip, who helped us with this article, provides assistance for CT Full Service.

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. Additionally, you should conduct your own research or consult with a professional financial advisor when investing.

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Moritz Nold: Crypto Tax Manager
Crypto Tax Manager
Tax Expert, Webinar-Host, Content Creator, Crypto Enthusiast and Investor. Interested in everything regarding the crypto space.
Tax Expert, Webinar-Host, Content Creator, Crypto Enthusiast and Investor. Interested in everything regarding the crypto space.


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