Is Bitcoin Legal?

Is Bitcoin Legal?

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The question is not as straightforward as you would imagine a finance question to be. A better question is, where is bitcoin legal. The fact is, depending on where you are, cryptocurrency like bitcoin is treated differently.

To further complicate matters, countries can’t agree with how to handle this form of currency. It’s really out of the government’s hands when it comes to person-to-person transactions, and as such, its popularity has skyrocketed in recent years.

This leads to questions about its legality.

Bottom line, bitcoin is new and mostly unregulated. You must first consider where you plan on trading or using bitcoin, and whether or not it is a financially secure option for you.

As with most financial investment decisions, it’s personal and comes with some level of risk.

Where is Bitcoin Legal?

Countries can’t agree on how to handle bitcoin, so it has become a little confusing.  In the U.S. it is considered legal and it is treated as property, but that’s not the same around the world.

Some countries, like El Salvador, consider it money and accept its use for goods and commodity purchases. While others, like the U.S., don’t consider it currency, but classify it as a different type of commodity, like property.

Currently, about 51%, of the world’s countries or regions consider cryptocurrency legal and it is unregulated, 3% consider it legal, but regulate its use, and 3% consider it illegal.

It is important to read the specific regulations for your country before considering trading or mining bitcoin.

Is Bitcoin Safe?

So, you’ve found your country and you know it is legal to trade bitcoin, but is bitcoin safe to trade? A good gauge of safety in financial investments is to look to your financial leaders. In the case of the United States, there are mixed messages.

Hester Peirce, Commissioner of the U.S. Securities and Exchange Commission calls for regulators to focus more on how to include cryptocurrency into our financial system rather than regulate it to suppress its use. Says Peirce, this change in focus is “a much better way for regulators than to get to know the technology and to get to know this asset class.”

On the other hand, Jerome Powell, Chair of the U.S. Federal Reserve considers stores of crypto coins as “highly volatile” and considers them “more of an asset for speculation.”  He bases this on the fact that currency’s basic function is to hold value and since cryptocurrency isn’t able to do that, it shouldn’t be considered as a currency.

This leads directly to the next question.

Do I Have to Include Bitcoin on My Taxes?

In the U.S. cryptocurrency, like bitcoin, has become of increasing interest to the IRS. So much so, that it has released regulations for how to deal with it on your taxes.

Bitcoin is considered as property in the U.S. and as such the rules that apply to the property are now also applied to bitcoin trade.

For specific regulations on this, refer to Publication 544, Sales and Other Dispositions of Assets from the IRS website.

Conclusion

The basic answer to whether or not bitcoin is legal really depends on where you are.  In the U.S. it is considered legal but is treated as property for tax purposes. Other countries have their own regulations or ban its use altogether. 

As to whether bitcoin is safe, consider it like any other financial investment where there is calculated risk involved and look to your leaders for guidance.

Jason Conor
Jason Conor author check sign Pro Investor

Chief Editor of the CheckItsReal site and is responsible for ensuring all the content on our site is accurate, relevant, and helpful. I am a cryptocurrency writer. I have been following the crypto space since early 2017, and I have written extensively about it. My work has appeared in some of the most respected publications in the space.