Countries Which Allow Cryptocurrency As Legal Payment Method
The legality of crypto and tokens is an always debated, ongoing discussion on both local and global levels. Their legality has become more and more important as their use and acceptance have grown worldwide.
Right now, only two countries in the world believe that Bitcoin can be a legitimate legal tender (El Salvador and the Central African Republic) but that number is set to change.
The regulations and legislation that surround cryptocurrencies are vastly different from one country to another. Sometimes, even within different regions. This can make it incredibly complex for you, the crypto user, to navigate the legal landscape.
That’s why it’s a must that you to get a better understanding of the legal environment surrounding cryptocurrencies on a local and global scale.
Countries Where People Can Legally Use Bitcoin
The main concern for governments and central banks regarding cryptocurrencies is that people can use them to settle transactions between any accounts worldwide, whether they are anonymous or not.
Centralized authorities have already introduced regulations such as know-your-customer (KYC) and anti-money laundering (AML) processes to help solve the main problems standing between crypto and wider adoption.
Countries are rushing to become compliant and implement regulations that allow them to take advantage of the growth and potential of cryptocurrencies.
Here are a few of those countries and their stances on Bitcoin and crypto as a whole.
El Salvador is one of the first two countries in the world that have accepted Bitcoin as legal tender. The Congress of El Salvador approved a bill by President Bukele back in 2021. The bill officially announced that the cryptocurrency will become a legal form of value exchange and made it possible for everyday citizens to purchase goods and services with crypto.
The Central African Republic
Only two countries in the world that believe Bitcoin to be a genuine legal tender. The first is El Salvador. The second is the Central African Republic. It adopted Bitcoin as a legal tender in the second quarter of 2022.
The United States
In the United States, individuals and businesses that store or exchange Bitcoin, fall under the category of an “MSB.” This is also known as a money services business. All MSBs are subject to the Bank Secrecy Act.
With that said, the Treasury has defined Bitcoin as an exchangable currency and one that can act as a substitute for a real currency.
Additional regulations are in place for investigating suspected illicit activities or financial misconduct connected to specific cryptocurrencies, but everyday people and businesses can use cryptocurrencies as payments.
To learn more about how businesses can hold crypto, explore this article on B2BinPay.
The European Union
The EU believes that tokens are a class of assets and does not consider their use illegal.
The European Union has a complex stance on cryptocurrencies, but many EU countries have taken steps to make them more accessible. Some countries, such as Belgium, Finland, and Bulgaria, have introduced legislation on the use of cryptocurrencies.
The European Banking Authority has warned about the risks associated with cryptocurrencies and is not in control of crypto asset activities. In 2022, the EU proposed legislation on the regulation of crypto assets.
In Canada, cryptocurrencies are considered a commodity for tax purposes. Exchanges are considered to be money service businesses.
The Canadian government has strict laws and regulations in place to prevent money laundering and terrorist financing through the use of crypto. As long as users follow these laws and guidelines, they are free to use and trade cryptocurrencies in Canada.
Israel is open to the use of cryptocurrencies, with many crypto ATMs and merchants throughout the country accepting Bitcoin as payment. Tax authorities in Israel do not currently consider Bitcoin to be a currency, security, or asset. However, a 25% capital gains tax is owed when a seller sells Bitcoin.
Australia’s stance is similar to that of Canada. Australian authorities consider cryptocurrencies to be digital assets with a value that can be taxed.
If someone were to buy, sell, gift, or even convert crypto into a fiat currency so they can use it for purchases, they trigger a capital gains event. However, if you tend to hold your crypto so you can make gains on its value, you won’t owe tax in most situations.
In Australia, you’re also required to keep records of the transactions you make, although wallets and exchanges do that for you.
Countries Where Bitcoin Can Be Used Freely
Other countries have also allowed cryptocurrencies to be used in transactions and are working on some form of regulation that allows crypto to become a part of the financial system. Some examples are:
India’s stance on cryptocurrencies is complex and has evolved as time goes on. The Finance Minister pledged to eliminate the use of Bitcoin and other virtual currencies for illegal purposes in India, while supporting blockchain technology in payment systems.
The Reserve Bank of India (RBI) had initially imposed a ban on the sale and purchase of cryptocurrencies for entities under its regulation, but this ban was later lifted.
In Japan, the use of Bitcoin is legal but it is considered a form of property stored on a virtual device, not a legal tender.
The Japanese government issued a cabinet decision in 2014 recognizing Bitcoin as neither money nor a bond, making it illegal for banks and securities firms to transact in cryptocurrencies.
However, this ruling also emphasized the pure absence of laws that categorically forbid people or organizations from receiving crypto in exchange for their goods or services, and businesses that exchange cryptocurrencies must be registered and follow certain regulations since April 2018.
Bitcoin has been legal in Mexico since 2017. The country has plans to regulate it as a virtual asset by the FinTech Law.
In Singapore, the regulatory authorities have stated that whether or not businesses choose to accept cryptocurrencies is their own commercial decision, but they have also warned users of the potential dangers of using Bitcoin.
Saudi Arabia has warned financial institutions about the potential dangers of using Bitcoin and the government does not guarantee protection or rights to companies that operate with it. It is considered legal but subject to a banking ban.
In the United Arab Emirates, the Central Bank does not yet recognize cryptocurrencies as a form of payment, but is developing a new regulation for many retail payment services which may introduce the idea of tokens being used for payments.
Other countries where cryptocurrency is legal include: Angola, Costa Rica, Ecuador, Lebanon, Turkey, Iran, Argentina, Brazil, Pakistan, Chile, South Korea, Malaysia, the Philippines, Thailand, Vietnam, New Zealand, and more.
Countries Where Crypto Cannot Be Freely and Openly Used (Or Is Under a Banking Ban)
In its November 2021 update, the Library of Congress identified 42 nations with implicit prohibitions on specific cryptocurrency uses.
It mentions a few of the following nations:
- The Maldives
Countries With Total Bans on Cryptocurrency
Corporations that accept cryptocurrencies as payment
In the last few years, many massive corporations have also started accepting Bitcoin and other tokens as a form of payment.
This is worth mentioning because major corporations may operate outside the regulations of a local jurisdiction, yet they still promote the mainstream acceptance of cryptocurrencies and push for their adoption.
Some of these corporations, including Microsoft, Overstock, and Paypal, have all had a friendly stance on Bitcoin. Others, such as Tesla and MicroStrategy have invested significant sums of money into cryptocurrencies, showing their confidence in the potential of cryptocurrencies.
The level of adoption by these major conglomerates can help hasten the adoption of cryptocurrencies and the development of regulations on a local level.
If you’d like to learn how businesses can accept crypto payments, read this article on B2BinPay.
Benefits of Accepting Cryptocurrencies as Legal Tender
More investment and innovation in the country
Legalizing cryptocurrencies as a means of payment may entice companies and entrepreneurs in the area of finance and technology to invest and develop in the nation.
Job creation and economic expansion may be the natural result from this. By accepting cryptocurrencies as a legitimate payment option, the government is demonstrating to the market that it is receptive to cutting-edge concepts and emerging technologies.
As a result, businesses and entrepreneurs in the finance and technology sectors may find it easier to innovate and make investments.
Decentralization and transparency
Crypto transactions are recorded on a public ledger, resulting in transparent and immutable financial activity. This means that everyone can see any transaction that has taken place, and those transactions cannot be tampered with. This enhanced transparency can reduce corruption and money laundering.
Additionally, decentralization may improve financial stability and reduce the need for centralized intermediaries in the financial system.
Improved financial inclusion for the unbanked populations
Cryptocurrencies allow people to send funds quickly and easily, making them a viable option for those who are either unbanked or underbanked. This increased financial participation will ultimately empower new communities to start creating and trading value.
Ultimately, only two countries in the world right now accept Bitcoin and other cryptocurrencies as legal tender.
However, that number is pretty much guaranteed to grow. Currently, online pools for which country will be next to accept Bitcoin as legal tender are growing in popularity, with countries like Paraguay and the United States leading the community vote.
Legalizing cryptocurrencies as a method of payment can bring both significant benefits and significant risks to some countries. Only time will tell which countries can successfully deal with the challenges and leverage the potential of cryptocurrencies.