Developed countries, such as Canada, the United Kingdom, Japan, and the United States decided to adopt and male Bitcoin legal back in February 2020. Considering the changes happening in the market, the legality of Bitcoin varies depending on the country. China is one of the few countries that restricted the said form of cryptocurrency without banning those who are storing bitcoin tokens. Aside from that, India also banned its banks from dealing with cryptocurrencies like bitcoins. Also, the legality of Bitcoin in India is still unclear. Overall, it is important to do your research about the legal status of Bitcoin in your country before investing.
In countries where Bitcoin is legal, the said form of cryptocurrency receives the same laws that are applicable to other assets. Tax laws are usually an aspect that gives trouble to most individuals. When it comes to tax purposes, Bitcoin and other forms of cryptocurrencies are considered property instead of currency.
Key Takeaways
- February 2020 is the time when most developed countries, such as Canada, the United Kingdom, Japan, and the United States have set Bitcoin as a legal asset.
- Prior to investing in Bitcoin, it is important to take a look at its legal state in your area.
- In the United States, the IRS set some guidelines that will increase the interest of some taxpayers.
- If you are looking for a digital asset that is completely anonymous, Bitcoin might not be for you.
IRS Guidance for Taxpayers in the United States
As we mentioned above, the IRS issued guidelines regarding Bitcoin, which may increase the interest of some taxpayers in the United States. IRS Agency developed the IRS Notice 2014-21 back in 2014. This notice is consisting of reliable information regarding the virtual currency’s tax treatment.
IRS uses the term virtual currency to refer the digital money. As of 2020, IRS developed a new tax form. Here, it requires all taxpayers to confirm if they were engaging in any transaction of virtual currencies back in 2019. Visit novinite.com to get more information.
Regulatory and Legal Issues of Virtual Currencies
Bitcoin and other similar forms of digital money are considered deregulated marketplace. This means that Bitcoin does not have a centralized issuing authority. The addresses used in performing Bitcoin transactions do not need SSNs (Social Security Numbers), or other personal details of the sender or receiver, such as their bank accounts exist in the United States. In connection to that, it had caused the growth of problems and issues regarding the Bitcoin uses for illicit activities.
For the past years until now, Bitcoin’s alleged anonymity has caused to various illicit purposes. Drug traffickers are one of the known persons who are using it. Drug traffickers are using the Silk Road market and other similar websites to perform illegal activities. This is a site example where dark web users are allowed to purchase recreational drugs without being caught by the officers. The entire transactions happening in the Silk Road involve Bitcoin tokens. The good thing is that back in 2013 October. The FBI shut down the site completely.
On the other hand, you may notice a lot of drawbacks in Bitcoin if you are looking for anonymity. For Bitcoin monitors all the transactions, they are using a ledger that will set the transaction data in public. When a Bitcoin user joined one bitcoin address, he or she can access different transactions made with that address. Other competitive alternatives of Bitcoin include Zcash and Monero. The two mentioned forms of digital money offer better privacy protection than Bitcoin.
To sum it up, the legality of Bitcoin in different countries will depend from state to state. So, if you are planning to invest in Bitcoin, make sure to do your research about its legal status first.