There has been a lot of negative press surrounding the legality of Bitcoin and other cryptocurrencies; stories abound of how it is used by criminal organisations, how its anonymity is used to avoid taxes, and also details of how Bitcoin has been used in ransomware attacks.
Considering these stories, a lot of governments have made moves to regulate cryptocurrency payments. Their aim is to ensure the safety of citizens while also protecting their own financial interests. However, there is conflicting information, changing regulatory stances, and a lot of FUD (a marketing and trading term that means Fear, Uncertainty, and Doubt) surrounding the legality of using any anonymous cryptocurrency.
The actual legality of anonymous cryptocurrency payments varies by region, but regulation tends to concentrate on the use of exchanges to buy and sell crypto currencies. Sending money to and from wallets, is legal, at the time of writing, in most jurisdictions. Any coins that are used for trading or conducting business should be reported for tax purposes, however.
• China - China is one country where sentiment appears to have dramatically changed. Tax breaks and cheaper electricity were once offered to Bitcoin miners, but the government has recently withdrawn these benefits and they are cracking down on the use of exchanges. They continue to insist that they have no plans to ban the use of cryptocurrencies, however.
• Europe - Europe, including the UK, has taken a reserved approach to regulation of cryptocurrencies. The European Central Bank (ECB) wants tighter control over the movement of these currencies. A representative for the ECB has also said that the market is not established enough to be regulated, somewhat contradicting their stance. The European Union has hinted that they encourage innovation, which means that they are unlikely to make it illegal, but it seems likely that they will continue to learn more about its use, and may eventually introduce more restrictive regulations.
• UK - Despite the UK’s existing membership of the EU, they are in the process of withdrawing from EU oversight, and the Financial Conduct Authority has said that cryptocurrencies are a commodity, which means that they are highly likely to introduce regulations following observation.
• Japan - Japan is noteworthy, because it was the first country to declare Bitcoin as legal tender. While this sounds like a positive move, it also means that the government is able to introduce strict rules and regulations surrounding its use. Using cryptocurrencies remains legal in Japan but exchanges are forced to follow anti-money laundering rules, and they have gone so far as also introducing know-your-customer laws.
• South Korea - South Korea has arguably taken the strongest stance against cryptocurrencies. In early 2018 they banned anonymous accounts and are also considering a major crackdown on exchanges used to trade them. Some reports have also suggested that they are currently negotiating a method of joint oversight along with authorities in China and Japan.
• U.S. - The U.S. has one of the most difficult and contradictory approaches to regulation and oversight, because of their fragmented method of government and regulation. Problems have arisen because lawmakers operate on both a state and federal level. The Securities Exchange Commission has designated cryptocurrencies as securities, which gives them oversight over crypto investment funds, while The Commodities Futures Trading Commission has designated them as a commodity and they have overseen several actions taken against bitcoin related schemes. The Uniform Law Commission has drawn up draft proposals, which some states are considering adopting, but eyes remain firmly on federal government for an overarching approach to the use of blockchain payments.
As you can see, laws and regulations do vary according to country and jurisdiction. Some have taken the approach of letting the industry develop before legislating while others have already introduced legislation and have even made the anonymous use of exchanges illegal. Other countries, like Zimbabwe, have gone so far as to state that bitcoin is not actually legal but have, so far, failed to clarify their exact position.
For now, however, making payments using anonymous cryptocurrencies remains largely legal, especially with transactions sent directly to crypto wallets. You should check the laws that govern the use of cryptocurrency within your jurisdiction and exercise caution when using this form of digital currency or ensure that you use a truly anonymous coin.
