The countries where crypto is illegal (and why?)

In the dynamic landscape of digital finance, the legal status of crypto assets continues to spark heated debates across the globe. While some countries have embraced digital currency, integrating it into their financial systems and even going as far as to adopt Bitcoin as legal tender, others have taken a more cautious stance. In this piece we will discuss the countries where crypto is illegal.

Financial institutions worldwide grapple with the implications of incorporating these digital assets into their operations. Especially considering the potential for cryptocurrency transactions to disrupt traditional financial frameworks. Within the European Union and beyond, concerns about money laundering and terrorist financing loom large, prompting stringent regulatory responses.

As nations navigate the complexities of financial crimes associated with digital currencies, the decision to outlaw crypto in some jurisdictions stems from a need to safeguard their financial systems against these risks. This article explores the countries where crypto remains illegal and delves into the underlying reasons for this resistance, shedding light on the global landscape of digital currency legality.

Although at first thought, such a thing seems to make no sense, there are indeed countries in the world where cryptocurrencies are banned. However, the question arises – why would anyone ban it? Why do cryptocurrencies bother someone when they are very profitable and secure?

First of all, let’s give a short and clear explanation of what cryptocurrencies are and then we’ll proceed about why crypto is illegal in some countries and what a crypto ban means in this case.

The countries where crypto is illegal – brief introduction to Cryptocurrencies

A Cryptocurrency, or just Crypto, represents a specific collection of binary data created to work as a medium of exchange. Records of individual coin ownership are stored in a ledger, a group of numerous accounts in which transactions are recorded. In other words, it is a computerized database that uses strong cryptography to:

• Control the creation of additional coins
• Secure transaction records
• Verify the transfer of coin ownership.

In general, cryptocurrencies are referred to as fiat currencies. A fiat currency is a type of money that isn’t backed up by any commodity or convertible into it. There are crypto schemes that utilize validators to maintain the cryptocurrency itself.

Owners of specific cryptocurrencies, particularly proof-of-stake-model, put up their tokens as collateral. They get authority over the token in proportion to the staked amount in return. Keep in mind that, over time, these token stakes earn additional ownership in the token via newly minted tokens, network fees, or similar reward mechanisms.

Central authorities don’t issue cryptos.

Another crucial thing to remember is that cryptos aren’t issued by central authorities or exist in physical forms, such as paper money. Regularly, cryptocurrencies use decentralized control that’s opposed to CBDC – a central bank digital currency.

Therefore, once a particular cryptocurrency gets issued by one issuer or is created or minted before issuance, it’s commonly considered centralized. On the other hand, when implemented with decentralized control, each crypto functions through distributed ledger technology, most commonly a blockchain that serves as a public financial transaction database.

So once you’ve understood all there’s to know about cryptocurrencies, you probably wonder why some countries ban cryptocurrencies? Which are those countries where crypto is illegal and why?

 

The countries where crypto is illegal

Since the ban applies from country to country, we’d like to present the countries with a specifically fraught relationship with cryptocurrencies. Here’s the list of some of the most significant countries where crypto is illegal:

Algeria

Currently, Algeria prohibits people from using cryptocurrency due to a financial law in 2018 that made cryptos illegal to use, hold, buy or sell virtual currencies.

Bolivia

Since 2014, there has been a complete ban in Bolivia of Bitcoin and other unregulated altcoins usage. The Central Bank of Bolivia has issued a resolution banning it.

China

In China, the Deputy Director of the Financial Consumer Rights Protection Bureau of the PBoC stated that cryptocurrencies are speculative assets. He also warned people to “protect their pockets”.

On September 24, the PBoC outright banned crypto transactions in the country. However, it will be among the first Central Banks in the world to issue its digital currency and have complete control over its transactions.

Colombia

Financial institutions in Colombia are not allowed to facilitate transactions of Bitcoin. In 2014 the Superintendencia Financiera stated that they wouldn’t “protect, invest, broker, or also manage virtual money operations at all.”

Egypt

In 2018, Dar al-Ifta, Egypt’s primary Islamic advisory body, issued a religious decree that classified Bitcoin transactions as “haram.” That means something that Islamic law prohibits.

Indonesia

Among other countries where crypto is illegal in Indonesia, as well. From January 1 in 2018, the central bank of Indonesia issued regulations banning the use of cryptocurrencies in general as means of payment.

Iran

In Iran, the Central Bank prohibits trading cryptocurrency mined overseas. However, they encourage Bitcoin mining in the Iranian country with incentives. It is somewhat a complex relationship of Bitcoin and other currencies with Iran. Around 4.5% of the world’s Bitcoin mining takes place in Iran. It means that revenues are over $1 billion.

So, for the cryptocurrency industry to flourish in Iran, the country has offered licensed miners’ cheap energy. However, Iran requires all mined cryptocurrencies to be sold to the Iranian Central bank in exchange.

India

Prime minister of India, Narendra Modi, stated that he wanted to ensure cryptocurrencies “doesn’t end up in wrong hands which can spoil our youth.” That’s why he criminalized the possession, issuance, mining, trading and transference of crypto assets.

On November 23, 2021, the government of India announced its mission to introduce a new bill to the Parliament of India that will establish a new central-backed digital currency and ban almost all cryptocurrencies.

Iraq

Although Iraqi authorities have tried to ban cryptocurrencies and block their exclusive use, it’s no secret that cryptocurrencies are becoming unbelievably popular in Iraq. In 2017 the Iraqi Central bank issued a statement prohibiting their use.

The Ministry of Interior of the regional government in Kurdistan, in early 2021, issued guidance to stop money exchanges and brokerages handling cryptos.

Nepal

As of August 2017, the Rastra Bank declared Bitcoin to be illegal in Nepal. That declaration made Nepal on the list of the countries where crypto became forbidden in general.

North Macedonia

North Macedonia happens to be the only European country at this moment to have an official ban on cryptos such as Ethereum, Bitcoin, etc.

Russia

In Russia, cryptocurrencies are legal. However, there’s been an ongoing conflict waging against its use. The country passed its first laws intending to regulate cryptocurrencies in July 2020, which designated cryptos as property liable to taxation for the first time.

The law came into force in January 2021, and it also bans Russian civil servants from owning cryptocurrencies in general. Vladimir Putin, the president of Russia, has often linked cryptos with criminal activity, calling for closer attention to cross-border cryptocurrency transactions.

The prosecutor general announced new proposed legislation in July. This particular legislation will allow the police of Russia to confiscate cryptocurrencies deemed illegally obtained, inferring their use in corruption.

Turkey

Many people turned to cryptocurrencies since the Turkish lira plummeted in value. On April 16 in 2021, the Turkish Central Bank issued a regulation banning the entire use of cryptocurrencies to purchase goods and services, directly or indirectly.

The day after, Recep Tayyip Erdogan, Turkish president, issued a decree that cryptocurrency exchanges to a list of firms subject to terrorism financing rules and anti-money laundering.

Vietnam

In Vietnam, their State Bank has declared that the supply, use, and issuance of Bitcoin and other alternative coins are illegal as a means of payment. They are subject to fines from 5,600 EUR (150 million VND) to 7,445 EUR (200 million VND).

Nonetheless, the Vietnamese government doesn’t ban Bitcoin trading nor hold them as assets.

Countries with implicit crypto bans

Besides these countries, we’d like to present you with other countries with implicit crypto bans on specific cryptocurrencies usage. So, among 42 countries, there are:

• Bahrain
• Burundi
• Cameroon
• The Central African Republic
• Gabon
• Georgia
• Guyana
• Kuwait
• Lesotho
• Libya
• Macao
• Maldives
• Vietnam
• Zimbabwe

Countries with absolute cryptocurrencies ban

• Algeria
• Bangladesh
• China
• Egypt
• Iraq
• Morocco
• Nepal
• Qatar
• Tunisia

So now that you’ve got to know all the countries where crypto is illegal, it’s time to conclude and find out the most common reasons for their ban.

Conclusion: Why are cryptocurrencies illegal in some countries?

As we have had the opportunity to see, these countries belong to countries where crypto is illegal for its decentralized nature and wary of its volatility. Some countries go even further, accusing cryptocurrencies of being a threat to their current monetary systems, while other countries are concerned about their use to support the following activities:

• Money laundering
• Trafficking
• Terrorism

Despite that, Bitcoin and other cryptocurrencies are welcomed in many other countries of the European Union, in Australia, Canada, the United States, etc.