Countries That Say Yes to Bitcoin
Bitcoin can be used anonymously to conduct transactions between any account holders, anywhere and anytime across the globe, which makes it attractive to criminals and terror organizations. They may use bitcoin to buy or sell illegal goods like drugs or weapons. However, that trend has shifted lately, as criminals move away from bitcoin for fear of being tracked.4Most countries have not clearly determined the legality of bitcoin, preferring instead to take a wait-and-see approach. Some countries have indirectly assented to the legal use of bitcoin by enacting some regulatory oversight. However, as of June 2021, El Salvador is the only country that recognizes bitcoin as legal tender.5
The United States
The United States has taken a generally positive stance toward bitcoin, though several government agencies work to prevent or reduce bitcoin use for illegal transactions. Prominent businesses like Dish Network (DISH), Microsoft, Subway, and Overstock (OSTK) welcome payment in bitcoin.67 The digital currency has also made its way to the U.S. derivatives markets—adding to its legitimacy.8The U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has been issuing guidance on bitcoin since 2013. The Treasury has defined bitcoin not as currency, but as a money services business (MSB). This places it under the Bank Secrecy Act, which requires exchanges and payment processors to adhere to certain responsibilities like reporting, registration, and record keeping.9
In addition, bitcoin is categorized as property for taxation purposes by the Internal Revenue Service (IRS).10
Canada
Like its southern neighbor, the U.S., Canada maintains a generally bitcoin-friendly stance while also ensuring the cryptocurrency is not used for money laundering. Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA).11This means bitcoin transactions are viewed as barter transactions, and the income generated is treated as business income. The taxation also depends on whether the individual has a buying-selling business or is only concerned with investing.12
Canada considers bitcoin exchanges to be money service businesses. This brings them under the purview of the anti-money laundering (AML) laws. Bitcoin exchanges need to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), report any suspicious transactions, abide by the compliance plans, and even keep certain records.13 In addition, some major Canadian banks have banned the use of their credit or debit cards for bitcoin transactions.
Australia
Similar to Canada, Australia considers bitcoin neither money nor a foreign currency, with the Australian Taxation Office (ATO) ruling it an asset for capital gains tax purposes.The European Union
On Oct. 22, 2015, the European Court of Justice (ECJ) ruled that buying and selling digital currencies is considered a supply of services and that this is exempt from value-added tax (VAT) in all European Union (EU) member states. Additionally, some individual EU countries have also developed their own bitcoin stances.14In Finland, the Central Board of Taxes (CBT) has given bitcoin a VAT exempt status by classifying it as a financial service. Bitcoin is treated as a commodity in Finland and not as a currency.
The Federal Public Service Finance of Belgium has also made bitcoin exempt from VAT. In Cyprus, bitcoin is not controlled or regulated either.15
The Financial Conduct Authority (FCA) in the United Kingdom has a pro-bitcoin stance and wants the regulatory environment to be supportive of the digital currency. Bitcoin is under certain tax regulations in the U.K.16
The National Revenue Agency (NRA) of Bulgaria has also brought bitcoin under its existing tax laws.15 Germany is open to bitcoin, where it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.17