Legalization of cryptocurrency: current status

The principle of decentralization underlying cryptographic payment systems allows to make an important step toward globalization of trade operations in the near future. But leaving the geographical frames...

Depending on the country’s legislation digital currency today can be a legal means of payment or a kind of a good or taxable property or to be banned. In some countries the status of cryptocurrencies is not defined yet.

Centralize or ban?

The topic of state regulation of the market of cryptocurrencies was raised in several countries after the steep rise of popularity of the Bitcoin system in 2013-2014. Several approaches to this challenge have been around for awhile. But there is no final solution.

An increased interest to cryptocurrencies from the dark market is one of the reasons making authorities vigilant about this market. Deals with cryptocurrencies cannot be controlled by the state and can be conducted for illegal drugs and gun turnover.

Another argument against legalization is the possibility to use cryptocurrencies for the sponsorship of terror and money-laundering. An increased risk for market participants is also sometimes cited as an additional reason for negative attitude to cryptocurrencies.

It’s difficult to decide

Operations with cryptocurrencies are totally banned in Bangladesh, Bolivia, Kirgizia and Ecuador. In the same time Kirgizia is planning to issue its own national cryptocurrency backed by the golden reserve.

In Russia cryptocurrencies are not officially banned but their status is not legally set. In 2014 it was offered to ban them and to criminalize operations with them. But after that the state declared its commitment to legalize cryptocurrencies in 2018. Currently the issue is seriously discussed, the Ministry of Communication and the Ministry of Finance are working on draft legislation. A special working group is created in the state Parliament.

Russia is gradually building a positive attitude to cryptocurrencies as an investment instrument but in the same time you could hear the recent idea of the Ministry of Finance to ban the bitcoins trade for private persons. The Ministry of Communication was also doubting the possibility of a full legalization of cryptocurrencies due to foreign encryption algorithms. This statement is very provocative because the majority of popular cryptocurrencies is based on open algorithms in the public domain.

Not all countries are afraid of coins

But there are some countries which are not afraid that coins are passing by. Japan and Switzerland are the most progressive countries in terms of their attitude to cryptocurrencies.

Bitcoin was accepted as an official payment method in Japan in 2017. In 2014 the Federal Council of Switzerland decided there is no need to introduce additional legislative measures concerning cryptocurrencies, they will be regulated as foreign currencies. Starting from 2016 Bitcoin is accepted as payment for utility services in the Swiss city of Zug.

Another popular approach is to accept cryptocurrencies as an art of taxable belongings. USA, Germany and Great Britain came up to this solution.

Chinese private persons can legally use cryptocurrencies as a kind of a good. In the same time any operations with cryptocurrencies are forbidden for financial companies.

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So generally cryptocurrencies are treated like inalienable modern financial instrument in the majority of the countries. The legalization issue comes down to the need to set the rule of the use of this financial instrument. Many countries are also interested not only in a direct use of cryptocurrencies but also in blockchain implementation for state management matters.

Cryptographic payment systems and the technologies related to them will indeed take a more and more important place in our lives. And the state policy regarding their legalization directly depends on the focus of the exact country on its innovative development.