Legal status of cryptocurrencies in the world: nonsense or legal innovation?

The legal leapfrog that has developed against the backdrop of futile attempts by regulatory authorities to regulate the “unregulated” cannot but attract attention. But in fact, all this excitement and hype, artificially inflated by state regulators around bitcoin and altcoins, can best be described in the words of Kozma Prutkov, “No one will embrace the immensity.”

In the case of Bitcoin we are talking about a supranational unit. If we define a particular monetary unit, we can usually identify it by a specific territory, country or issuing authority. And cryptocurrencies do not fit into the reality regarding monetary regulation, because they do not have a single center of issue and, accordingly, they are not subject to standard regulation, because it is not known to whom to write letters. 

Let's try to understand the peculiarities of the legal status of cryptocurrencies in the modern world. 

In general, the emergence of such quasi-money as bitcoin is only a natural and long-overdue embodiment of the ever-growing public demand for anonymity on the Internet and the decentralization of the circulation of means of payment there. 

Moreover, a well-thought-out mathematical model of bitcoin served as a catalyst for a kind of Brownian movement among adherents of Blockchain technology and became an excellent launching pad for the creation of such altcoins as Etherium, Dash, LiteCoin, etc.

Of course, in conditions of a wild, by modern standards, surge in popularity and promotion of Blockchain to the masses, the legal regulation of cryptocurrencies is rather nonsense and an attempt to catch up with progress, which inexorably outstrips the development of existing state institutions. As a result, over the past 5 years of this kind of “crypto fever”, no legislation in the world has yet formed a full-fledged and holistic regulatory framework that would take into account all the nuances of restrictions on identifying participants in financial transactions. And the legal position of the same bitcoin varies greatly. 

At the same time, the opinions of different states regarding the legal concept of cryptocurrencies are divided, but in general they fall into the following two groups:

1. Countries that have decided to develop a regulatory framework with the aim of actively introducing cryptocurrency into the economy. Or at least not prohibiting its use: Australia, Belgium, Brazil, Canada, Colombia, Croatia, Czech Republic, Cyprus, Denmark, France, Germany, Hong Kong, Israel, Italy, Japan, Ukraine, New Zealand, Norway, Poland, Singapore, Slovenia, South Korea, Spain, Switzerland, Sweden, Turkey, Great Britain, United States, etc.

2.. Countries that consider cryptocurrency illegal and are trying to ban or limit its use: Bangladesh, Bolivia, China, Ecuador, Iceland, Indonesia, Kyrgyzstan, Lebanon, Russia, Thailand, Vietnam, etc.

Despite the fact that most countries allow bitcoin transactions, they still do not have a uniform definition of both the cryptocurrencies themselves and the legal status of bitcoin. 

If we analyze the national legislation of most countries that are in one way or another trying to legalize the circulation of cryptocurrencies at the national level, then the legal regime of “coins” can be conditionally divided into the following categories:

- “commodity”or “investment asset”(USA);

- “monetary unit of account”(Germany) or an analogue "foreign currency" (Switzerland);

-  "legal tender"with purchase tax (Japan);

On October 22, 2015, the European Court of Justice (ECJ) ruled that transactions exchanging bitcoins for fiat currencies are exempt from VAT. The court decision clarifies that the VAT law applies to the supply of goods and provision of services. Bitcoin transactions were classified aspayment transactions involving currencies, coins and banknotesand are therefore not subject to VAT. The court recommended that all EU member states exclude cryptocurrencies from the list of assets subject to taxation.

In some countries, such as China, transactions with cryptocurrencies are prohibited for banks, but allowed for individuals, despite the fact that China is the leader in the field of mining due to the presence of the largest production capacity.

To summarize, we can safely say that cryptocurrencies are a breakthrough that has left all legislators far away behind. Is bitcoin legal? It all depends on the specific country. Some agreed to give bitcoin a chance, applying already existing laws to regulate it, which depend on the definition of the concept of cryptocurrency in each individual country. Others preferred to ban bitcoin, even trying to create a special bill for this purpose. 

Be that as it may, one thing is certain - it is impossible to eradicate cryptocurrency, due to its decentralization.. So there is certainly plenty of time for people to experience all the benefits of cryptocurrency, even if its legal status remains uncertain.