How legal is Bitcoin?
Currently, we did not hear that Bitcoin is flagged as illegal by any by legislation in any jurisdiction. Still, there are some jurisdictions (for example as Argentina) which severely restrict or ban all foreign currency regardless of which type. And at the same time, some other jurisdictions (for instance Thailand) limit the licensing of certain entities such as Bitcoin exchanges.
Bitcoin Legal | Regulators from different jurisdictions are in the process to provide users and businesses with restrictions, laws and rules on how to integrate this new technology with the formal, regulated financial system. The best example for this is a bureau in the United States Treasury Department called the Financial Crimes Enforcement Network (FinCEN), which published non-binding guidance on how it characterizes specific activities regarding virtual currencies.
Link 1: Application of FinCEN’s Regulations to Persons Exchanging, Administering, or Using Virtual Currencies
Is it possible to use Bitcoin for illegal activities?
The basic answer is YES, but this is also somewhat of a trick question as it is like finance for some people to look for an unfair advantage. If you look at the current methods for payment available in today’s financial markets, then Bitcoin is more secure the alternatives like cash or credit cards.
- The advantage of Bitcoin on cash is that it is impossible to counterfeit.
- the advantage of Bitcoin on credit cards is that users are in full control ( no hidden charges)
Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using powerful and useful mechanisms, for example, multiple signatures, encryption and backups.
Of course, there will always people that look and sometimes find a way to manipulate the system, but because people work continuously on improving these aspects on a community level, It will be easier to adjust to fraudulent behaviour
Bitcoin will, in the future, be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being taken home.
Bitcoin Legal Approach to Regulation – Can Bitcoin be regulated?
Here lies the power of Bitcoin
The Bitcoin protocol itself cannot be changed without the approval and cooperation of nearly all its users, who in the end, choose what software they use. Attempting to assign specific and unique rights to a local authority in the rules of the global Bitcoin network is not a practical possibility
Bitcoin can be regulated like any other instrument like, for example, the Dollar.
This is no different than any other tool or resource and can be subjected to various regulations in each country. We might see that some countries will make it very hard to work with Bitcoin. But this will have an economic effect on their domestic business just as if a government refused to do with the British Pounds. Businesses that require this currency or payment method to get an international enterprise which in result will lead to loss of business. Companies looking abroad for solutions and markets shift away for this country.
How does Bitcoin work with taxes?
Bitcoin does not have legal tender status in any jurisdiction as it is not a fiat currency. But where there is money, there are taxes and as such tax liability will arise no matter with format is used. So it is expected that in the future when other taxable services like for example salaries, sales and capital gains will be processed with Bitcoin jurisdictions will write the regulations to have these taxed accordingly.
Is there with Bitcoin consumer protection?
Opposite to cash or any other payment methods, Bitcoin always leaves public proof that a transaction did take place; this, in turn, can be used in a recourse against businesses with fraudulent practices.
People have the total freedom to use their wallet as they see fit; this is for the simple transaction but also for the more complex financial contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of people agree to sign the transaction.
This brings a whole new way of dealing with disputes as a third party can approve or reject a transaction in case of disagreement between the other parties without having control over their money.