Crpyotucrrecy has been making headlines for years, yet relatively few people actually understand what it is, why it exists, and how it works for the benefit of all people.
Recent headlines include how Ukraine depends on cryptocurrency amid an invasion from Russia. And other headlines show Russia depending on bitcoin to help it survive amid sanctions from the West.
This leads many potential investors worldwide to wonder is legal cryptocurrency where they live, and what the implications are for holding it on their balance sheet.
Is crypto legal? Are coins like Ethereum and bitcoin legal to buy, store, and use? For most people, the answer is yes. But it’s more complex than that. Keep reading below to learn all about crypto laws.
What Is Cryptocurrency?
The cryptocurrency industry was born in 2009 when bitcoin was first mined and released into circulation. For a few years, bitcoin lived in obscurity.
But it grew and grew until eventually, it spawned hundreds of other cryptocurrencies. Today, the global crypto market is worth trillions of dollars, so it’s clear that there’s something here.
But what is crypto? It’s a digital currency built first and foremost for the internet. It’s efficient in the modern age, unlike dollars and fiat currencies which were conceived many decades before the internet.
It can move from wallet to wallet with ease. You can transfer it to your neighbor, or send it to someone across the planet. It doesn’t care about borders or governments.
It’s a peer-to-peer currency that doesn’t need a bank or middle man to facilitate transactions.
And it’s decentralized, unlike the US dollar which is centralized and governed by politicians and central bankers, along with financial companies like Visa.
What Does Decentralized Mean?
A decentralized currency is one that is not controlled, managed, overseen, or handled by a single entity. When it comes to bitcoin and other cryptocurrencies, there is no single government that can take control of it.
No central bank can inflate or deflate cryptocurrencies. They can’t just print new crypto as they please like they do with dollars.
And because no one has a hand of control over crypto, it means no one can censor or block transactions.
When it comes to dollars, a bank can decide if they want to approve or reject a specific transaction. When it comes to crypto, there is no authority that has that power.
Cryptocurrencies are decentralized and kept free from the influence of anyone or any entity. It’s kept secure through activities like mining or staking, which involve people worldwide.
And since no one can control it, no one can effectively ban it or make it go away. It simply exists.
Benefits of Using Cryptocurrencies
What are the benefits of using cryptocurrency, a decentralized form of money?
For one, it doesn’t see borders. It can’t be sent around the world, within seconds or minutes, without getting caught up at the border. Go doesn’t have to go through multiple financial institutions before it becomes available in another country.
This makes it possible for people in the US and other wealthier nations to send remittances back to families in developing nations without spending a huge amount of money on fees.
And while the price of crypto fluctuates greatly, it’s subject to price manipulation like the dollar is. The US government can print money when they see fit, inflating our currency and robbing Americans of their hard-earned money.
While the price of crypto can drop, it’s not the result of a politician’s decision.
So instead of becoming a victim of inflation, countless global citizens are exchanging their local currencies for crypto as a method to hedge against rapid inflation.
While the benefits of a decentralized currency are clear, not every government is happy about it.
Where Is Cryptocurrency Legal?
Cryptocurrency is technically legal in most of the world. In the Western world in particular, in countries that lean more towards democracy, cryptocurrency is completely legal.
Of course, there are usually regulations in place, just like with other types of currencies and investment classes. But in most of the world, crypto can be bought, traded, and sold at will.
The Savior; The First Big Step Forward
Most people around the world can buy and hold crypto with relatively few considerations. Their national government may have regulations regarding the tax implications of cryptocurrency, but otherwise, it’s acceptable to buy.
One country has taken things a few. steps forward. Not only is crypto legal in El Salvador, but the government has declared bitcoin as a legal tender. With legal crypto tenders in the nation, anyone can make a purchase using bitcoin.
They can even pay their tax bill to the government using bitcoin. That puts bitcoin on the same level as the US dollar in the country.
This new legislation makes it easier than ever for El Salvadorians to invest in bitcoin, and ideally, fight inflation in their nation with the rising national debt.
Not everyone in El Salvador agreed with this change, and many issues have been raised as a result.
But the national government has also been investing heavily in bitcoin and has plans to use the gains on that investment to continue establishing greater infrastructure in the country.
While many claims that declaring bitcoin to be legal tender will not have a positive impact, numerous other nations are also considering this action. Panama, Cuba, Ukraine, Guatemala, and Paraguay are all considering this bitcoin adoption.
Where Is Crypto Outlawed?
Despite the fact that most people can buy and sell cryptocurrency without hassle, there are some places that are doing their best to outlaw crypto in its entirety.
China is one such place. China used to be the home of most of the world’s bitcoin mining operations due to cheap electricity costs. But recent action by the Chinese government has completely banned cryptocurrency mining in the country, pushing all miners out of China and into places like Kazahkstan.
Not only is China against bitcoin mining, but they seek to eliminate crypto as a whole. China, for those who don’t remember, is a communist country. They seek control in all aspects of society, especially finance.
Cryptocurrency is decentralized, meaning that no government can interfere, control, inflate, deflate, or confiscate crypto. The Chinese government doesn’t want its citizens to have access to something they cannot control.
They have tried banning crypto 12 times and counting. The first restrictions were put on banks, preventing banks from conducting transactions with crypto services.
For example, in China, you cannot send money from your bank account to a cryptocurrency exchange. Likewise, all crypto exchanges have been forced to stop operating in the country.
Other countries, primarily in the Middle East and Asia, such as Egypt, Iraq, Algeria, and Bangladesh, have also banned the use of cryptocurrency. These are mostly countries where very low democratic practices and values are in place.
Do Crypto Bans Actually Work?
A government can ban cryptocurrency in theory. And their bans can make it difficult for citizens to conduct crypto transactions. But it’s very hard to actually enforce a full crypto ban.
Even if they can’t use exchanges in their home country, they can use a virtual private network (VPN) to access exchanges in other nations.
The biggest limitation is that residents in these countries cannot send money from their bank accounts to a crypto exchange in order to buy crypto. But there are other ways around this limitation as well, making it possible for anyone who wants to continue buying, holding, and transferring crypto to do so.
Of course, if caught, they may face fines or other punishment. But with proper internet hygiene, residents can still use crypto as they please.
A Ban on the Internet
To actually ban the use of cryptocurrency, a government would need to ban the internet in its entirety. Or at least, they would need to severely limit the free use of the internet.
Even in countries where full bans are in place, millions are still buying and using cryptocurrency. In Pakistan, where a ban exists, crypto users are growing at an alarming rate.
Crypto is solving the exact problems that these types of governments are creating.
In fact, if a government or bank chooses to put limitations or bans on crypto, it actually accomplishes the opposite of what it intends. If someone wants to block your access to crypto, that action highlights the importance of a decentralized cryptocurrency where no one can block your access to financial freedom.
So banning or limiting cryptocurrency is the greatest advertisement for cryptocurrency that there is.
Cryptocurrency Regulations in the US
What about here in the US? What’s the state of crypto here on home soil?
Many US investors and crypto enthusiasts fear that the central banks and the SEC will try to limit or ban cryptocurrencies.
But after the latest conversations at the SEC, it’s clear that crypto is here to stay. The US wants to remain at the forefront of technology and finance, and they know that crypto is central to that.
While a few short years ago, executives at major US financial institutions mocked bitcoin and other cryptocurrencies, they are now promoting it, and even offering it, on their websites.
Investors want exposure to crypto, and the big players in the finance world are giving in. Here in the US, it’s easier than ever to invest in crypto.
Of course, there are plenty of regulations regarding crypto. Currently, investment gains are treated the same as other assets like stocks.
Anything held longer than a year is subject to long-term capital gains tax, and anything held less than a year is subject to higher short-term gains tax.
Using Crypto in the US
Crypto isn’t legal to sell here in the US. So not paying your tax bill.
However, you can do plenty of shopping with crypto. Many retailers accept crypto as a form of payment. Even Tesla allowed people to buy their cars using bitcoin.
Most people prefer to buy crypto as an investment, hoping to beat inflation and ideally see impressive gains. And with inflation rates at an all-time high right now, people are dumping their dollars and stacking crypto.
Even people who get paid in cash just visit a crypto ATM and buy bitcoin for cash on the spot. there are Byte Federal Bitcoin ATMs nationwidemaking bitcoin accessible to nearly every American.
For those who want to put their crypto to work, they are moving it into Defi. Decentralized finance is the world decentralized application where investors can earn tons of interest by staking their crypto.
While it comes with higher risks than putting money in a bank account, the monthly interest rates can be astronomical compared to what a bank will pay you.
Defi is currently the wild west of the crypto world, and it’s likely we can see more regulations coming into this space in the future.
Crypto Limitations in the US
There are still plenty of things you can’t do with crypto in the US. For example, you can’t buy crypto with a credit card.
In theory, you can. But most banks, like Chase, block these transactions to “protect their customers.”
While banks know that crypto is the future of money, they are very reluctant to relinquish control.
Dealing with taxes on crypto is another big issue. Currently, there are countless opportunities to trigger taxable events with your crypto. If you swap one crypto for another, you trigger a taxable event.
Many times, if you send or receive crypto, you might trigger an event as well. This makes it a mess to try and calculate how much you might owe come tax time.
There are some software tools available to help with this process, but it can be tricky for daily users and traders to put it all together.
The Crypto Snowball Has Already Begun
So where is cryptocurrency legal? It’s currently legal in most of the US. It’s extra-legal in El Salvador. And in the near future, we could see more nations adopt bitcoin as a legal tender, further reducing the number of countries that might try to restrict the use of crypto.
Looking for more updates on crypto ad emerging technology? Be sure to visit our blog today to keep reading.
www.stephilareine.com
George is Digismak’s reported cum editor with 13 years of experience in Journalism