When bitcoin was created in 2009, it was supposed to act as a peer-to- peer cash system, but it has taken on a different form. To earn bitcoin, a person has to act as a miner, which involves them using their computer’s energy to maintain the blockchain. Bitcoin would, therefore, act as the reward for this computing power. As more people started to be interested in bitcoin’s operation, they started to trade it like a financial asset, for example, a stock.
This is when Bitcoin really became a phenomenon, and it is now among the top Google searches worldwide. For more information on how the Bitcoin has emerged, we advise you to take a look at how Investor explains the history of bitcoin in their infographic.
The authorities are also divided on their perception of Bitcoin, with some embracing its applications, many still skeptical and a small portion who want nothing to do about it. In fact, these may be the ideal classifications through which to study bitcoin’s legal status.
COUNTRIES EMBRACING BITCOIN
A few countries have accepted bitcoin and have decided to actually create laws that govern Bitcoin transactions. The first country to completely accept bitcoin was Japan. Starting on the 1st of April, Bitcoin was considered a legal form of payment in Japan, with several public institutions accepting it as currency. The laws governing banking have yet to change, but these are also being considered in order to make bitcoin even more usable.
India seems to be next in line to legalizing bitcoin, now that the government has agreed to regulate bitcoin. The Indian government has agreed that regulating bitcoin could be beneficial and is currently creating the laws to do so. The Reserve Bank of India is also considering using the blockchain technology in banking.
These are those countries with set laws regarding bitcoin, although they don’t take it as an actual currency as Japan does. Most countries around the world fall into this category. In the US, for example, the CFTC has classified bitcoin as a commodity while the US Treasury Department sees it as a money service business (MSB). None of these financial regulators consider it as a currency, but it should still be reported on tax returns.
In Europe, nearly all of the countries have bitcoin regulations, which are mainly supposed to minimize financial crimes like money laundering, but not to legalize its use as currency. The same trend can be observed in the Americas from Canada and Greenland all the way down to Argentina.
To the east, Asia and countries in Oceania also have some form of regulation regarding bitcoin and other cryptocurrencies, again, just to prevent financial crimes. Bitcoin regulation has always been contentious in Russia, but the country’s central bank has finally put in place regulations that consider the cryptocurrency as an asset.
COUNTRIES WHERE BITCOIN IS BANNED
Only a few countries, six to be exact, have completely banned Bitcoin, claiming it is very close to being a currency. One notable example is Iceland, which has the largest bitcoin mines worldwide but residents are not allowed to buy bitcoins. Surprisingly, one can own bitcoins by mining, but not buy bitcoins from a foreign exchange. This is an attempt to prevent capital flight out of Iceland. The other five countries in this category are Bolivia, Ecuador, Bangladesh, Kyrgyzstan, and Vietnam.
FUTURE CHANGES IN REGULATION
It is unlikely that Bitcoin becomes widely accepted as a currency any time soon. Its decentralized nature makes it difficult to regulate, taking away the central banks’ authority. In Satoshi Nakamoto’s 2008 paper that created blockchain and subsequently bitcoin, this was the main advantage of cryptocurrency, but they won’t relinquish their control over money supply. There are lots of arguments for either side of legalizing bitcoin, but we cannot tell what will happen in the future, merely wait and watch as the events unfold.
There are lots of arguments for either side of legalizing bitcoin, but we cannot tell what will happen in the future, merely wait and watch as the events unfold.