The Internal Revenue Service (IRS), the United States government, considers Bitcoin property and not currency. It is therefore subject to capital gains taxes. The IRS issued guidance in 2013 stating that Bitcoin and other virtual currencies would be treated as property for tax purposes. The IRS also issued guidance in 2017 stating that Bitcoin and other virtual currencies would be subject to reporting requirements for transactions exceeding 10,000 dollars.
Bitcoin and other cryptocurrency may be subject to additional taxes. These include capital gains tax. Each country may have a different tax treatment for Bitcoin and other cryptocurrency.
Although there are tax implications, Bitcoin can be used in the United States. The Department of the Treasury’s Financial Crimes Enforcement Network, FinCEN (Department of the Treasury) issued guidance in 2014 stating that users and businesses using virtual currencies are not subject to the Bank Secrecy (BSA) as long as they do not transmit money.
The legal status of Bitcoin or other cryptocurrencies in other countries can differ. China and some other countries have placed restrictions on Bitcoin and other cryptocurrency use. The Chinese government closed down cryptocurrency exchanges and banned initial coin offerings (ICOs). The Chinese government has since relaxed their stance on cryptocurrency and it is now legal in China to purchase and sell Bitcoin.
Russia and other countries have placed restrictions on Bitcoin and other cryptocurrency use. The Russian government passed a law in 2019 that makes it illegal to use cryptocurrency as a payment method.
Other countries, however, have adopted a more permissive attitude to Bitcoin and other cryptocurrency. The Financial Conduct Authority (UK) issued guidance in 2014 stating that it would not regulate Bitcoin or other cryptocurrencies. The Australian government also indicated that they do not consider Bitcoin or other cryptocurrencies to constitute money and does not regulate them.
The legal status of Bitcoin and other cryptocurrency can vary from one country to the next. It is legal in some countries to use, buy and sell Bitcoin and other cryptocurrency. In other countries it is illegal or subjected to restrictions. Before investing in Bitcoin and other cryptocurrencies, it is important that you are aware of all the laws in your area.