Are Cryptocurrencies Legal?

The legal status of cryptocurrencies varies significantly from country to country. In some places, they’re treated as commodities or investment assets and are taxed, while in others, governments either ignore them or outright ban them. In many countries, central banks and regulators emphasize that cryptocurrencies aren’t considered legal tender. However, in the vast majority of countries, the term “cryptocurrency” is simply absent from their legal codes.

However, with over 600 million crypto users worldwide as of 2024, a statistic recently highlighted by Max Krupyshev, CEO of CryptoProcessing.com, the question of legality is becoming more pressing for many.

Legal Status of Cryptocurrencies

Issues like taxation, anti-money laundering measures, capital raising, and licensing of crypto companies all push regulators to establish clear legal frameworks. But not every country has jumped on this bandwagon. Generally, government policies on crypto can be split into three main categories:

1. Regulation. Some countries are actively working on creating and establishing regulatory frameworks for the crypto sector. El Salvador, for example, made Bitcoin legal tender in September 2021, and the EU has begun rolling out comprehensive crypto legislation since 2023.
2. Neglect. Other countries take a hands-off approach or partially regulate digital assets using existing laws or regional initiatives. The U.S. is a prime example, where legal ambiguity around crypto regulation persists.
3. Prohibition or strict limitations. A few countries have imposed outright bans or significant restrictions on cryptocurrencies, with penalties for violating these laws. China, for instance, banned all crypto transactions in 2021.

There are various services that track the regulatory status of cryptocurrencies across different nations, with the Cryptocurrency Regulation Tracker by Atlantic Council and Proelium Law providing relevant data.

Least Crypto-Friendly Countries

Several countries have implemented outright bans on the use of cryptocurrencies for both businesses and individuals. As of July 2024, these include China, Nepal, Bangladesh, Tunisia, Algeria, Morocco, Egypt, Saudi Arabia, Afghanistan, and Pakistan.

Some nations have chosen to impose partial restrictions on crypto transactions. For example:

1. Qatar prohibited crypto transactions in 2018, making the use and trading of crypto illegal within the country, although Qatari citizens are allowed to trade abroad.
2. Vietnam banned the use of BTC as a payment method in 2018, with violations incurring a fine of 200 million Vietnamese dong (~$8,700). However, buying, storing, and trading crypto on exchanges remains unregulated.
3. Turkey prohibited crypto for payments on April 16 2021, but owning and investing in crypto remains legal.

Other countries also have partial restrictions:

• Singapore — cryptocurrencies are recognized as property but aren’t allowed for payments;
• the United Kingdom — the trading of crypto derivatives is banned;
• South Korea — the use of privacy-oriented cryptocurrencies has been prohibited; more info on these assets can be found in a separate report by CP Media.

According to CoinGecko, by the end of 2023, 22 countries had imposed complete bans on cryptocurrencies, while 25 countries had partial bans on specific uses of crypto. It’s important to note that the regulatory landscape for digital assets is constantly evolving.

Most Crypto-Friendly Countries

Some countries not only embrace cryptocurrencies but also create favorable conditions for blockchain projects and innovation. These nations offer tax breaks, develop financial infrastructures, and establish clear legal frameworks, allowing Web3 companies to plan long-term, attract investments, and grow.

Some of the most crypto-friendly countries include:

1. El Salvador. As previously mentioned, El Salvador became a pioneer in crypto adoption, launching a series of ambitious Bitcoin-related projects starting in 2021.
2. Switzerland. Home to the Crypto Valley project, which offers reduced taxes, government support for startups and ICOs, and blockchain infrastructure development. The initiative is based in the canton of Zug, but the Swiss government plans to expand it, positioning the country as the “first crypto nation.” Major companies like Ethereum, Tezos, and Shapeshift have set up headquarters in Switzerland. The “Plan ₿” project in Lugano, supported by Tether, is also noteworthy.
3. Japan. In April 2017, Japan recognized cryptocurrencies as legal tender, putting them on equal footing with fiat currencies. The country has ambitious plans to gradually move its documentation processes and governance onto blockchain technology. Japanese authorities are working to create a “welcoming atmosphere” for crypto businesses.
4. UAE. In 2022, the UAE began developing conditions to create a global crypto hub and has since ramped up its efforts, optimizing regulations across special economic zones, individual emirates, and the country as a whole.
5. Hong Kong. While mainland China enforces strict crypto bans, Chinese authorities are working to establish a global crypto hub in Hong Kong, which operates as a special administrative region of China.
6. Estonia. Estonia has transparent crypto legislation and plans to move all government services onto blockchain technology. The country’s eHealth system, which is part of a decentralized network, is already up and running.
7. Malta. Traditionally an offshore zone, Malta opened its doors to crypto organizations in 2018. The country plans to use blockchain technology to optimize its transportation network and create the world’s first decentralized bank.

There are plenty more crypto-friendly countries out there. Various research studies offer a glimpse into the leaders in this race, aiming for objectivity. For instance, Coincub regularly publishes rankings of such nations.

In recent years, more and more countries have been competing to be recognized as the most crypto-friendly jurisdictions, as the potential for growth in the industry becomes increasingly clear. This trend extends to individual cities and special economic zones, where local authorities are eager to attract investments, businesses, tourists, and digital nomads.

As the crypto industry rapidly evolves, the question of legality often takes a backseat. Interestingly, some countries that have partially or entirely banned cryptocurrencies on an official level still frequently appear among the leaders in independent rankings of crypto adoption.