Which countries have banned cryptocurrency?

07.03.2022
Which countries have banned cryptocurrency?

Countries that banned cryptocurrency

The rapid development of new technologies, new types of virtual tokens, all make the governments pass new laws, regulating the legal status of cryptocurrency. There is consensus among financial regulators, although the conversations are going on the highest level with no breaks. For now, each country has its code of conduct, regulating the interaction between cryptocurrencies and traditional fiat instruments. The attitude to bitcoin is various,  the only stable thing is a growing interest in virtual coins of ordinary people and business structures.

The main reasons why legal problems of cryptocurrency appear

Despite the dozens of advanced technologies used to create virtual money – obvious progress, Central Banks are very cautious about the introduction of cryptocurrencies into everyday life. The main idea of all digital currencies – is complete decentralization. No banks or other financial institutions can participate in the emission or regulation of the issue of virtual coins. The most complex mathematical calculations are used to create bitcoins according to predetermined algorithms, so no government takes part in this.

There are over 1000 tokens now, they are successfully realized through crypto exchanges, freely move between countries with help of cross-border transfers, smashing government bans. Absolute anonymity of senders and recipients, inability to govern emission, ignoring tax laws, naturally, makes many government organizations want to ban the issue and circulation of virtual money as soon as possible.

The governments of all countries are trying to establish at least partial control over cryptocurrencies, and this makes sense. Cryptocurrencies are a perfect tool for tax evasion, financing of criminal entities, terrorists, gun and drugs trade. Due to the full anonymity of the transactions, law enforcement cannot effectively fight prohibited activities, corruption, criminal schemes. On the other hand, an investor, putting their money in any cryptocurrency, can easily become a crime victim as there are no laws protecting their interests.

A Central Bank of any country sees dozens and hundreds of millions of dollars flowing away from the budget, and of course, they try to order or ban virtual capital turnover. Today millions of people use cryptocurrency to pay for goods or services. Virtual coins, invested in startups, drive forward scientific or technological research. It is very important that existing and new cryptocurrencies legally participate in financial transactions, based on clear, simple general rules.

Mining generates enormous profits, consuming a vast amount of electricity, and not bringing any income to the state. Naturally, governmental organizations are always looking for ways to keep it under control. Each country chooses its model of relationships between cryptocurrencies and the state.

Countries loyal to bitcoin

Each country that followed the path of legalizing crypto was taking it differently, as it is very complicated to provide by law the status of virtual money. Sometimes the use of cryptocurrencies is only possible as a form of product or means of exchange. In some states, it is a legal financial asset. In others, everyone can work with virtual tokens with no limitations. And there are ones, where only legal entities are allowed to. 

With the help of various opinions and approaches, in the end, clear rules for the operation of crypto markets will certainly be developed. In one form or another, the use of cryptocurrencies is allowed in the following countries:

  • The USA;
  • Japan;
  • Great Britain;
  • Canada;
  • Estonia;
  • Australia;
  • Denmark;
  • Finland;
  • the Netherlands;
  • Sweden;
  • South Korea.

All of the above states can boast of a well-functioning economy, a well-established legal system, therefore they strive to find additional opportunities for their growth in new instruments, and not use the ban, so as not to lose the monopoly on issuing money. So far, there are no countries where bitcoins have completely replaced fiat currency. Among the post-Soviet states, Belarus was the first to legalize the circulation of cryptocurrency.

Venezuela is an example of an attempt to use the crypto market to replace a fiat currency completely depreciated due to sanctions. The local Central Bank, with the help of El Petro, does not leave attempts to replace the dive-bombed bolivar with cryptocurrencies. Using cryptocurrency, the state pays wages, pegging prices in the country to El Petro. However, most experts are sure that such experiments will not give the desired result.

Countries that decided to “wait and see” on cryptocurrency

Many countries are very skeptical about the idea of ​​virtual money because they are not backed by anything tangible. The Central Bank of many countries does not completely ban it but also does not give legal status for use. The wait-and-see attitude is aimed at getting the maximum information from the experience of the industry pioneers. At the same time, financiers are trying to understand how deep the influence of cryptocurrencies is on the dynamics of the development of the financial sector. Nobody wants to expose the economy to potential risks. Although in this case, you can be at the tail of the rapidly developing crypto train. The list of such countries includes:

  • Russia;
  • Germany;
  • Czechia;
  • Ukraine;
  • Singapore;
  • Switzerland;
  • Turkey;
  • Spain;
  • Israel;
  • New Zealand and some others.

Many Central Banks of these countries recognize bitcoins as financial assets, but do not give them official status. Mining, crypto exchanges, companies using crypto coins are taxed, but the fees are different since there is no single system for working with virtual money. Government agencies cannot influence the development of the crypto market, which had its way, greatly irritating the monitoring institutions.

Where Bitcoin is completely banned

There are two main reasons leading to a partial or complete ban of cryptocurrencies.

  1. Restrictions are imposed for religious or domestic economic reasons. Authoritarian regimes cannot allow the absence of total control in the regulation of the domestic financial market.
  2. There is a real threat to the national economy.

A list of countries with cryptocurrency ban to one degree or another includes:

  • Nepal. The authorities are very strict about the regulation of the domestic financial market. Some local crypto enthusiasts were given lengthy jail terms. There is a total ban on any actions with virtual coins.
  • Bolivia. The authorities introduced a complete ban on any use of cryptocurrencies in 2014. Everything that is not controlled by the state, declared financial pyramids, is a fraud and is strictly punished by government agencies.
  • Bangladesh. All transactions using cryptocurrencies have been illegal since 2014. The main reason is tax evasion, money laundering, financing of criminal organizations. Violators of the law can spend 12 years behind bars.
  • Indonesia. There are plans for a complete mining ban and the use of virtual coins for mutual settlements or transfers. The state seeks to support the Indonesian rupiah in this way. Financial institutions plan full control of FinTech startups.
  • Ecuador. The National Assembly has banned the circulation of any crypto coins other than those officially created by the state. Naturally, with this approach, no decentralization and anonymity are foreseen. All virtual coins from raiders caught trading crypto assets are confiscated.

 

Three more countries are looking weird on the list, where financial institutions actively fight the crypto market, as their financial market is rapidly developing.

  1. China. While there is no total ban, however, banks cannot conduct any operations with crypto, and launching new ICOs is impossible. A complete ban on mining and trading led to an instant collapse of one of the largest crypto markets.
  2. Vietnam. Since the attitude towards violators of prohibitions on the circulation of crypto coins is the most loyal, here you can use or extract virtual money without any problems.
  3. Iceland. After the financial crisis of 2008, when the local economy was hit hard, the attitude towards virtual coins is very strict due to their high volatility. However, this does not prevent the emergence of numerous mining farms on the state territory.

For religious reasons, the circulation of Bitcoin is prohibited in:

  • Pakistan;
  • Afghanistan;
  • Morocco;
  • Algeria.

The authorities indicate that such money has a speculative nature, has no internal value, therefore the prophet does not approve of their existence.

How the market is developing in Russia

There is no consensus between market enthusiasts, experts, and monitoring authorities. Several attempts have been made to completely ban any use of cryptocurrencies, but for now, these legislative initiatives have found no support in the Ministry of Finance. The officials want total control over the financial flows. They are afraid that the unverified value of virtual money and high volatility serves as a tool to create fraud schemes, corruption, tax evasion, financing organized crime. On the other side blockchain and smart contracts, with no doubt, have the potential for the development of many areas of activity.

Studying interviews of people with power, financiers, experts, gives no clue about the direction the government takes in crypto market development. Certainly, we need clear interaction rules between blockchain enthusiasts and monitoring authorities, but there is no consensus either. If the total ban will be introduced, the mining industry will just move to another place, and the government will lose a source of decent income and fall behind, far behind the development of innovative technologies.

For now, the law adopted in 2021 is in force, which defines the concepts of blockchain, transactions with crypto coins, smart contracts, tokens, etc. It regulates smart contracts, crypto assets, and the issuance of tokens. You can freely exchange virtual coins on crypto exchanges for another crypto or foreign currency, rubles. All transactions are carried out only through operators approved by the central bank. A wallet for working on the exchange must be opened by a client who has confirmed their identity.

Undoubtedly, work on the legislative framework will continue to optimize all processes. This is not easy and requires full consensus among all market participants. Everyone tries to ensure that their interests are taken into account as much as possible, but the truth, as always, lies somewhere in the middle. It will be great if they take the positive experience of other countries as a basis. We would like to get clear rules of the game on the crypto market as soon as possible, but this is the situation when it is better to double-check to be sure.

One cannot deny that the future lies in the development and promotion of crypto coins. Most emerging projects are tied to the blockchain. Some countries are actively developing cryptocurrency ATM networks or will allow futures trading for cryptocurrencies. Investors, where crypto coins are recognized as property, pay taxes on capital gains. Taking the best practices of other countries, the Russian Federation can use crypto assets to strengthen its financial and economic power.

 

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