The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[218] Because of its decentralized nature and its trading on online exchanges located in many countries, regulation of bitcoin has been difficult. However, the use of bitcoin can be criminalized, and shutting down exchanges and the peer-to-peer economy in a given country would constitute a de facto ban.[229]
According to the Library of Congress, an "absolute ban" on trading or using cryptocurrencies applies in nine countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, Vietnam, and the United Arab Emirates. An "implicit ban" applies in another 42 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.[230] On 22 October 2015, the European Court of Justice ruled that bitcoin transactions would be exempt from Value Added Tax.[231]
The U.S. Commodity Futures Trading Commission has issued four "Customer Advisories" for bitcoin and related investments.[232] A July 2018 warning emphasized that trading in any cryptocurrency is often speculative, and there is a risk of theft from hacking, and fraud.[233] In May 2014 the U.S. Securities and Exchange Commission warned that investments involving bitcoin might have high rates of fraud, and that investors might be solicited on social media sites.[234] An earlier "Investor Alert" warned about the use of bitcoin in Ponzi schemes.[235]
The European Banking Authority issued a warning in 2013 focusing on the lack of regulation of bitcoin, the chance that exchanges would be hacked, the volatility of bitcoin's price, and general fraud.[236] FINRA and the North American Securities Administrators Association have both issued investor alerts about bitcoin.[237][238]
An official investigation into bitcoin traders was reported in May 2018.[239] The U.S. Justice Department launched an investigation into possible price manipulation, including the techniques of spoofing and wash trades.[240][241][242]
The U.S. federal investigation was prompted by concerns of possible manipulation during futures settlement dates. The final settlement price of CME bitcoin futures is determined by prices on four exchanges, Bitstamp, Coinbase, itBit and Kraken. Following the first delivery date in January 2018, the CME requested extensive detailed trading information but several of the exchanges refused to provide it and later provided only limited data. The Commodity Futures Trading Commission then subpoenaed the data from the exchanges.[243][244]
State and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating "bitcoin scams" and ICOs in 40 jurisdictions.[245]
Academic research published in the Journal of Monetary Economics concluded that price manipulation occurred during the Mt Gox bitcoin theft and that the market remains vulnerable to manipulation.[246] The history of hacks, fraud and theft involving bitcoin dates back to at least 2011.[247]
Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of the Tether cryptocurrency and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.[248][249]
J.L. van der Velde, CEO of both Bitfinex and Tether, denied the claims of price manipulation: "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex."[250]
See also: Legality of cryptocurrency by country or territory and Bitcoin in El Salvador
In June 2021, the Legislative Assembly of El Salvador voted legislation to make bitcoin legal tender in El Salvador, alongside the US dollar.[j][258][254][259] The law took effect on 7 September, making El Salvador the first country to do so.[260][261][8] The implementation of the law has been met with protests[262] and calls to make the currency optional, not compulsory.[263] According to a survey by the Central American University, the majority of Salvadorans disagreed with using cryptocurrency as a legal tender,[264][265] and a survey by the Center for Citizen Studies (CEC) showed that 91% of the country prefers the dollar over bitcoin.[266] As of October 2021, the country's government was exploring mining bitcoin with geothermal power and issuing bonds tied to bitcoin.[267] According to a survey done by the Central American University 100 days after the Bitcoin Law came into force: 34.8% of the population has no confidence in bitcoin, 35.3% has little confidence, 13.2% has some confidence, and 14.1% has a lot of confidence. 56.6% of respondents have downloaded the government bitcoin wallet; among them 62.9% has never used it or only once whereas 36.3% uses bitcoin at least once a month.[268][269] In 2022, the International Monetary Fund (IMF) urged El Salvador to reverse its decision after bitcoin lost half its value in two months. The IMF also warned that it would be difficult to get a loan from the institution.[270] According to one report in 2022, 80% of businesses refused to accept bitcoin despite being legally required to.[271]
In April 2022, the Central African Republic (CAR) adopted Bitcoin as legal tender alongside the CFA franc. After El Salvador, CAR is the second country to do so.[173][9]
Ukraine is accepting donations in cryptocurrency, including bitcoin, to fund the resistance against the Russian invasion.[272][273][274][275][276] According to the officials, 40% of the Ukraine's military suppliers are willing to accept cryptocurrencies without converting them into euros or dollars.[277] In March 2022, Ukraine has passed a law that creates a legal framework for the cryptocurrency industry in the country,[278] including judicial protection of the right to own virtual assets.[279] In the same month, a cryptocurrency exchange was integrated into the Ukrainian e-governance service Diia.[280]
Iran announced pending regulations that would require bitcoin miners in Iran to sell bitcoin to the Central Bank of Iran, and the central bank would use it for imports.[281] Iran, as of October 2020, had issued over 1,000 bitcoin mining licenses.[281] The Iranian government initially took a stance against cryptocurrency, but later changed it after seeing that digital currency could be used to circumvent sanctions.[282] The US Office of Foreign Assets Control listed two Iranians and their bitcoin addresses as part of its Specially Designated Nationals and Blocked Persons List for their role in the 2018 Atlanta cyberattack whose ransom was paid in bitcoin.[283]
Some constituent states accept tax payments in bitcoin, including Colorado (US)[284] and Zug (Switzerland).