The rise of cryptocurrencies over the last decade has unequivocally changed people’s views on financial transactions. However, crypto legality and regulation continues to be a topic of debate in many countries. For one reason or another, some governments make a stance against using BTC or other coins, even going all the way and making it illegal.
This article focuses on the following questions:
- Where is Bitcoin banned?
- What are the reasons?
- What implications do these bans have for traders and investors?
Why Some Countries Are Banning Cryptocurrencies
Bitcoin, as well as other forms of crypto, is allowed as a trading instrument and payment method in most countries – albeit with Bitcoin regulations in place. For places that aren’t as keen on crypto, we can point out five main concerns:
- Maintaining control of the financial system. Crypto makes it hard to maintain the financial stability of the existing banking system.
- All middlemen are scared of losing money. Banks are a major source of revenue generation, and without banking fees, for example, all interested parties will face losses.
- Untraceable transfers. Some governments are fearful that crypto provides users with almost total anonymity. For transparency, we should note that Bitcoin has been abused by criminal groups.
- Risk of gullible people losing their money. Bitcoin wallet keys can’t be reset or restored like a regular bank account can be. Also, if people send money to scammers, they won’t be able to claim it back.
- “Threat” to the global economy. Cryptocurrencies shift in global investments, separate transactions from the dollar, boost overseas transactions, and stop high reliance on fiat money. For some, it’s considered to be a threat.
Where Bitcoin Is Banned: 10 Countries Where BTC and Crypto Are Illegal
What countries have banned cryptocurrency? Before we go on to the list, we should clarify that some countries have an absolute ban, while others have imposed an implicit ban. We’ll be looking at both categories.
China banned all transactions and related activities, where Bitcoin is used as a medium of exchange. The reason is that cryptocurrencies aren’t recognized as legal tender in the country. The only exceptions are the cases where crypto falls under property rights as a valuable, scarce, and disposable entity.
The Chinese government is famous for its “blockchain, not Bitcoin” Stance. In other words, it's not hindering blockchain development, but it does strictly regulate BTC and bans it as a payment method.
2. Saudi Arabia and the UAE
Saudi Arabia is fearful of the negative consequences and high trading risks that are not under government supervision. For this reason, the Saudi Arabian Monetary Authority deemed all virtual currency illegal in the kingdom. They also added that no parties or individuals are licensed for such activities.
As for Bitcoin laws in UAE, the government strongly supports blockchain. That said, the country does prohibit all transactions in virtual currency.
Pakistan prohibits any dealings in Bitcoin. Moreover, the State Bank of Pakistan hasn’t authorized any individual or entity to issue, sell, purchase, or exchange any virtual currencies and coins.
All banks, microfinance entities, payment system operators, and service providers are strongly advised to refrain from dealing with crypto. If such transaction does happen, it must be reported immediately.
4. Bolivia, Columbia, and Ecuador
Cryptocurrency regulations are strict to varying degrees in Bolivia, Columbia, and Ecuador, but are unwelcoming overall.
The Bolivian Central Bank officially banned any currency or coins not issued or regulated by the government a while ago – in 2014. In Columbia, virtual currencies aren't recognized as currencies. Meaning, it can't be used as payment, but it can be held by individuals. The Central Bank of Ecuador states that financial dealings with crypto are unauthorized.
Nepal is one of the countries that have banned Bitcoin without any exceptions. Under the 2019 Foreign Exchange Regulation Act, BTC, and altcoins are declared as illegal forms of financial tender. Since then, there have even been arrests for mining and exchange operations.
Cryptocurrencies and crypto exchanges were previously prohibited under Islamic Law in Egypt. But in 2019, the complete ban was lifted and replaced by a new regulation requiring licensing from the Central Bank of Egypt. In more recent news, issuing and trading in crypto can only be done without breaching any Sharia Law or Fatwa.
This means that while not technically illegal, dealings in crypto might actually breach Islamic rules – religious leaders were concerned that cryptocurrency might encourage fraudulent activities.
Thailand’s attempts for Bitcoin regulation resulted in major inconveniences for the crypto industry. The Thai Securities and Exchange Commission (SEC) is the responsible body that registers and approves coins and their operators.
While it’s more flexible than a complete ban, it means that most digital currencies aren’t allowed in the country. Without due approval from the SEC, those attempting to sell tokens will face stiff penalties or even jail time.
Back in 2017, Indonesia's central bank issued a new cryptocurrency regulation prohibiting the use of BTC and altcoins. This ban was introduced due to the unwanted impacts on the local economy.
An important thing to note is that it implies not using crypto in payment systems and other activities. In other words, you can still hold crypto but not pay with it.
Lithuania has the strictest cryptocurrency law in the EU. The government is preparing a bill to ban cryptocurrency services provided by companies based outside Lithuania. As for Lithuanian companies, they will have to adopt comprehensive know your customer (KYC) and anti-money laundering procedures.
A Finance Ministry official also added that Lithuania would be the first to impose the FATF (Financial Action Task Force) recommendations not only for crypto-fiat transactions but also for crypto-to-crypto ones.
Algeria has had a total ban on cryptocurrencies since 2018. The 2018 Finance Bill declared any usage and ownership as illegal in the country. While the bill doesn’t list other coins, it defines Bitcoin as a so-called "virtual currency,” so altcoins also fall under this definition.
One of the reasons is that crypto lacks any physical support like banknotes, coins, bank cards, or payments by check.
Will cryptocurrency be banned in other countries? It’s hard to tell. If anything, more countries are getting more crypto-friendly. The best thing you can do is to check regulations in your specific countries as rules may change pretty unexpectedly.