Cryptocurrencies, with their decentralized features and high market value, are attracting a lot of citizens worldwide. But with technical limitations of Bitcoin and other cryptocurrencies, they are still not fully executed into the legal frameworks of several countries. Several countries have taken their legal steps towards regularization of the transaction of Bitcoins and other cryptocurrencies.
With the rise in market value, several legal practices are also being followed to prevent the usage of cryptocurrencies by citizens for illicit behavior and practices.
Legality of cryptocurrencies
Bitcoin and other cryptocurrencies have several legal aspects concerning several countries. Some countries have made the virtual currency transaction legal while some have banned their usage. Countries like Bangladesh, Iceland, Thailand, China, etc. have banned the usage and operations of cryptocurrencies. Some countries like United Kingdom, Australia, India, Brazil,etc. have no legal rules or laws against the usage of cryptocurrencies and are accessible for all their citizens. While countries like France, Germany, Japan, Finland, etc. allow regulated use of cryptocurrencies limited to tax or other purposes only.
Bitcoin has the highest impact on the legal status of several countries. Some countries have incorporated cryptocurrencies into their financial systems while very few have banned it on purpose. Therefore, it is evident that it has got an excellent potential for growth and incorporation into legal frameworks and became the future global economy.
Taxation Issues of Cryptocurrencies
Due to the pseudo-anonymous property of cryptocurrencies, they are not affected by any bank or political influences. Bitcoins or any virtual currency if used accurately can be helpful in hiding assets and reduce taxation. Cryptocurrencies can also play a key role in bringing vast amounts of foreign currencies to a country. Since bringing in large amounts can result in tax issues, converting them into cryptocurrencies can help a lot in making the money pass border check gates and prevent any tax charges. Countries like the United States have already made Bitcoin an asset instead of currency because of these tax purposes. With such taxpaying benefits, cryptocurrencies can play a significant role in tax relaxation only if it is handled with proper review under the jurisdiction and laws of the country.
Money laundering is a legitimate problem with cryptocurrencies due to its ease of transaction between countries without any outside control. It cannot be easily traced through banks once Bitcoins are used for money laundering and converted into physical currency. On a large scale, money laundering can be hazardous and legal actions can be taken against it. Police forces are also now working out for analyzing transfer of funds through the Bitcoin ledger. Countries like Bangladesh have entirely banned Bitcoins, so if any money laundering cases occur strict actions are taken against it. Money laundering using cryptocurrencies is illegal in all jurisdictions irrespective of the Government.
Other legal issues of cryptocurrencies
Cryptocurrencies have their different respective pros and cons regarding the legal framework of different countries. With illicit and unauthorized usage it can lead to several legal threats and even may result in getting banned from a nation. They have minimal legal protections, unlike any other currencies. If someone is having a significant amount of money in cryptocurrency and if they lose their private key used for encryption or lose their physical device where they stored their Bitcoins, then it would be impossible to make the jurisdiction understand and get any compensation about the loss due to the lack of evidence.
With the dynamic nature of cryptocurrencies, it is obvious that there would also be possibilities of several legitimate and legal threats associated with them. It must be the sole responsibility of the user to understand the genuine concerns before using their cryptocurrency for any purpose to avoid any accidental or intentional illegitimate practice.