In part 4 of our bitcoin We looked at the Basics series to see if bitcoin will fail in the future. In this post we look at the legalities of. on bitcoin.

Bitcoin and the blockchain are fundamentally new technologies that work outside of centralized government, regulation, or legislation. For these reasons, national and corporate attitudes towards Bitcoin and other cryptocurrencies tend to differ between nations – and many countries have only recently announced their intention to fully introduce, regulate, or ban cryptocurrencies.

It is very important that you keep up to date with your country’s policies on cryptocurrencies and familiarize yourself with applicable tax laws and planned regulations in your home country.

Cryptocurrency became increasingly discussed on political channels throughout 2017, and it is likely that this trend will continue. For many central banks and governments, cryptocurrencies are a new reality; one in which they have little control over the transfer of funds and it is relatively impossible to regulate or manage cryptocurrencies by official means.

The political views on Bitcoin

In our current climate, one could argue that three political views about Bitcoin emerged during 2017. These range from strict regulatory views (ban on cryptocurrencies, a thoughtful (wait and see) approach to the general introduction of cryptocurrencies.

Much of the legal space surrounding cryptocurrency not only affects Bitcoin, but also the operation of the blockchain, mining and the so-called Initial Coin Offerings (ICOs).

Are ICOs Legal?

An Initial Coin Offering is a start-up sale that new cryptocurrencies hold as they launch, much like a company that is about to go public and issues shares could do an Initial Public Offering (IPO).

A tougher stance on cryptocurrencies, and especially Bitcoin, tends to have a negative impact on the market. For example, in 2017 China banned multiple Bitcoin exchanges (where Chinese nationals could buy Bitcoin for yuan) and ICOs within its borders – causing the price of Bitcoin per coin to tumble by around $ 1,000 or more.

Russia has also signaled a tough stance on cryptocurrencies under President Vladimir Putin. President Putin has offered to regulate the operation of ICOs and cryptocurrency mining in Russia, which may well mean that investors who own Bitcoin in the country may have to pay taxes on their profits in 2018.

Cryptocurrency Regulations

Some nations have announced their plans to regulate cryptocurrencies and have introduced a national cryptocurrency instead. Russia and Kazakhstan have both announced their intention to use a national cryptocurrency, while the city of Dubai in the United Arab Emirates has announced a new cryptocurrency called emCash that citizens can use for private and government services.

Other nations have chosen a “wait and see” approach to cryptocurrencies. For example, South Africa is currently testing cryptocurrency regulation in “sandbox” (research) environments, while Namibia has yet to regulate cryptocurrency within its borders, but has banned transactions with cryptocurrencies such as Bitcoin as a means of payment.

Bitcoin introduction

After all, some countries have embraced cryptocurrencies like Bitcoin and offered their support not only for Bitcoin mining but also for other business environments created by ICOs. Taiwan and Japan are perhaps best known for signaling their interest in cryptocurrencies during the course of 2017.

Basically, cryptocurrencies like Bitcoin pose an immense challenge for governments, central banks and the current currency system; one that is incredibly difficult to regulate payments or enforce contracts (agreements) where cryptocurrency is the tender in question.

Quite simply, Bitcoin traces trading back to a time before central banks appeared and housed gold or offered paper money. All trades performed are peer-to-peer and operate with a certain degree of anonymity, while Bitcoin’s ledger – the blockchain – is publicly available on thousands of computers around the world.

Many nations see this as a threat to anti money laundering efforts, and the fact that Bitcoin has historically been closely linked to fraudulent hacker collectives or online black markets has made some governments particularly suspicious of the technology, either Bitcoin or the Blockchain is generally the basis.

The benefits of Bitcoin

Bitcoin has some advantages over the current use of fiat currencies by governments and central banks. Bitcoin’s blockchain cannot be modified or “hacked”, and Bitcoins cannot be fraudulently issued or created. The fact that there will only ever be 21 million bitcoins also means that bitcoin is what is known as a deflationary currency, as its value does not decrease over time.

However, it can be assumed that Bitcoin will dissolve some of the controls central banks have exerted over the parties to the transaction for decades and return that control to people around the world. a position that complicates the authority and ability of any government to regulate trade effectively.

While Bitcoin is not inherently malicious, nations around the world are likely to have different attitudes about cryptocurrency for years to come.

In part six of our Bitcoin Basics series, we unpack how Bitcoin works as money.

Is Bitcoin Legal? first appeared on Coin Insider.

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