Cryptocurrencies, especially bitcoin, are considered legal in the United States, Japan, the United Kingdom, and several other developed countries. However, the legal status of bitcoin varies dramatically in emerging markets. For example, though China didn’t criminalize the possession of bitcoins, the government did restrict its usage. Similarly, the overall status of cryptocurrencies in India is unclear, but it has banned banks from dealing in bitcoin. In general, it is essential to look at cryptocurrency laws in specific countries when learning more about cryptocurrencies and how to use them in Bookmaker. Let’s see if investing in cryptocurrency is legal.
Even in countries where bitcoin is legal, laws that apply to other assets also apply to bitcoin. Tax law is one such area where most people are likely to run into trouble. When it comes to tax purposes, bitcoin isn’t treated as a currency. Instead, it is considered a property. Nevertheless, the are exceptions. For instance, El Salvador became the first county to recognize bitcoin as a legal tender in June 2021.
Is Bitcoin Legal in America?
Back in 2014, the Internal Revenue Service (IRS) of the US grew much interested in bitcoin, thereby issuing various guidelines. Notice 2014-21 was issued at this time which gave more information about taxation on different virtual currencies. In 2020, the IRS also published a new tax form that mandated taxpayers to report their indulgence in virtual currency transactions in 2019.
In the United States, the Commodities Futures Trading Commission regulated virtual currencies as commodities. Similarly, the Securities and Exchange Commission also demands US citizens to register any virtual currency trading in the country. It can be clearly seen here that the IRS treats bitcoin as property. Hence, users are asked to track their profits and losses on the virtual currency.
Furthermore, the Consumer Financial Protection Bureau (CFPB) released a consumer advisory in 2014, warning the citizens about the risks of virtual currencies. It revolved around hackers, scammers, and generally losing cryptocurrency due to losing private keys and weak regulations.
Bitcoin operates on a public ledger that keeps a record of all the transactions. Meaning, you can link an address with an individual to view all their transactions and crypto balance. This literally takes away a significant part of user privacy, thereby reducing the possibility of illegal activities.
Nevertheless, people usually launder money using bitcoin, and this is so common that there even exists a website name bitlaunder.com. Of course, Bitcoin isn’t entirely anonymous, but its pseudo-anonymity makes it so hard for the government to detect financial crimes like money laundering.
There actually exist algorithmic methods that can make the entire network anonymous, making it hard to know the value of Bitcoins that are transacted. You wouldn’t be able to even link the public address to an individual. Such software solutions and programs further result in illegal activities involving virtual currencies.
However, bitcoin’s decentralization can be thought of as both advantageous and disadvantageous. As cryptocurrencies are decentralized, people can quickly move assets from one country to another. This being a concern, a few nations have already banned cryptocurrencies.
Cryptocurrencies are quite different from traditional currency. However, it is also safer in many ways. For example, hackers can’t exploit your bank account or credit card details and gain access to your cryptocurrency.
How to Use Bitcoin?
If you want to purchase or trade bitcoin, you can head over to online exchanges like Binance or Zipmex. Zipmex is currently one of the leading crypto exchanges in America. Though it is a global exchange, it also offers local support and the lowest prices. When it comes to using bitcoin, you can use it to purchase commodities, gamble, or bet at the leading sportsbooks.
Should You Pay Tax on Bitcoin?
Cryptocurrencies, as the name suggests, uses a cryptographic encryption system—no central bank prints it. Instead, cryptocurrencies are generated through a process called mining involving powerful hardware or computers. You can either mine cryptocurrencies or buy them from exchanges.
Bitcoins are decentralized, and it isn’t any less leading than physical currencies like the US dollar or Euro. In the very beginning, bitcoins were used for transactions to avoid tax obligations. After that, however, the governments caught on, realizing bitcoins can be used for illegal purposes.
A lot of tax authorities have tried to bring bitcoin under the tax radar. Through combined efforts, it was titled an asset or intangible property, and it is treated in the same manner by the US Internal Revenue Service (IRS) and other countries.
Currently, the following bitcoin transactions are considered taxable:
- Selling bitcoins you mined to a third party.
- Selling bitcoins you purchased from someone.
- Using bitcoins you mined or bought from someone to purchase goods or services.
Transacting bitcoins, you mined are considered taxable as personal or business income, while bitcoins that were purchased from someone are taxed as investments in an asset. Additionally, if bitcoins are held for less than a year, you will be subject to a short-term capital gains tax. On the other hand, holding bitcoins for more than a year will make you subject to long-term capital gains.