With the passing of time, more and more countries have become interested in the world of cryptocurrencies. Some of them have embraced the concept and become leading forces in the matter, such as Malta, Switzerland and Estonia. Other countries, however, have been highly resistant to Bitcoin and have publicly expressed their skepticism for cryptocurrency. Some countries have even enacted outright bans on cryptocurrencies as a whole, introducing legislature punishing traders who choose to get involved with it with fines or imprisonment. As popular and revolutionary as cryptocurrencies are, regulating them has proven difficult for states and governments, and a consensus on how to approach them has not been reached yet.
The following article is a rundown of some of the countries that have the most stringent regulations on cryptocurrencies, countries that, in many cases, have opted to ban them completely.
Countries that have stringent regulations on cryptocurrencies or that have outright banned them.
NOTE: The countries featured below are not the only ones who have forbidden cryptocurrencies. International traders and travelers should also be wary about other countries that have partly or absolutely banned cryptocurrencies, including Ecuador, Indonesia, Lebanon, Lesotho, Macedonia, Namibia, Pakistan, Saudi Arabia, Taiwan, Venezuela, among others.
For information about countries that are particularly welcoming towards cryptocurrencies, we recommend our article on crypto-friendly jurisdictions.
News of a total ban on cryptocurrencies in Algeria first surfaced towards the end of 2017. This became a reality after the 2018 Financial Law of Algeria was passed, wherein article 117 reads: “[t]he purchase, sale, use, and possession of so-called virtual currency are prohibited.”
The same document states that violations to this are punishable by law, citing Bitcoin as a tool that’s reportedly used for drug trafficking, tax evasion, and money laundering as the reason behind the ban.
Bangladesh skepticism towards cryptocurrencies dates back to 2014, when Telegraph reported that officials from the Bangladesh Bank warned that people caught dealing in Bitcoin could be sentenced under the country’s AML laws to periods of up to 12 years in jail. An official notice would be eventually issued by the Central Bank in December of 2017, specifying that the currency does not comply with Bangladesh’s Foreign Exchange Regulation Act of 1947, the Anti Terrorism Act of 2009, and the Money Laundering Prevention act of 2017.
Despite the notice, people still conducted trades in crypto, which eventually led to Bangladeshi banks and financial organizations keeping an even stricter vigil on the matter. Nazmul Islam, Assistant Deputy Commissioner of the Cyber Crime Unit, declared on Feb. 19, 2018 that individual users and traders of Bitcoin would be prosecuted, stating that they “have already located a few bitcoin users, and are on the hunt for more, along with a few web pages which are being checked for authenticity.”
Bolivia stands out as one of the first countries to explicitly ban cryptocurrencies in the world. In resolution N° 044/2014 the Central Bank of Bolivia noted the use of virtual coins, including Bitcoin, Namecoin, Devcoin, Liquidcoin and others in countries around the world, and warned users about these coins. The bank asserted that the currencies don’t belong to any state, claiming that “their use and issuance are not regulated, which may cause losses to their holders.” The document also states that the use of coins that are not issued or regulated by states, countries or economic zones is forbidden.
Lenny Valdivia, from ASFI, Bolivia’s financial regulatory entity, has stated that virtual currencies share attributes with pyramid schemes. This characterization is likely related to a pyramid scheme that was discovered in April of 2017 named Bitcoin-Cash (not to be confused with the cryptocurrency of the same name), which reportedly affected 100,000 Bolivian citizens. The pyramid scheme would further sour the perception that Bolivian authorities had about crypto, leading to the arrest of 60 people that were linked to a training program related to investments in cryptocurrency.
Bitcoin-Cash was a pyramid scheme that offered Bolivian citizens gains of up to 300% only 60 days after an initial investment.
The Central Bank of Bolivia would later double down on their stance by reminding citizens of the illegal status of crypto in Bolivia. Given the country’s troubled history with cryptocurrencies, it is highly unlikely that the Bolivian government will have a change of heart anytime soon. However, some have argued that the pyramid scheme that Bolivian citizens suffered from in 2017 was able to entrap so many Bolivians primarily due to a widespread lack of crypto understanding.
The National Bank of Cambodia first warned users against the use of cryptocurrencies at the tail end of 2017 citing that they were not backed by any financial authority and that their value was not tied to the current economic situation. After observing that some cryptocurrencies such as KH Coin, Suncoin and OneCoin were being traded in Cambodia, a joint statement by the National Bank of Cambodia, the Securities and Exchange Commission of Cambodia, and the General 3-Commissariat of National Police about the legality of cryptocurrencies was released on May 11, 2018. Said statement, in addition to naming some of the risks of investing in cryptocurrencies, proclaims that “the propagation, circulation, buying, selling, trading and settlement of Crypto Currencies without obtaining a license from competent authorities are illegal activities”. The statement goes on to say that entities that still decide to partake in activities such as mobilizing funds and buying or selling cryptocurrencies without obtaining a license will be penalized in accordance with the applicable laws.
This was interpreted as a rather surprising move, as only a few months prior to the joint statement it was reported that Cambodia was looking into releasing their own national cryptocurrency.
Since then, little information has come out from regulatory entities, and there have been no reports of individual traders or businesses being fined or facing jail time for being engaged in crypto-related activities. Back in late August of 2018, Cambodian exchange COINYEX applied for a license to be the first legal cryptocurrency exchange in the country. At press time, the exchange promises on their website that they will start operating in 2019, but no new developments have been made public so far.
China has had a long history of restricting and outlawing cryptocurrencies. It all can be traced back to December of 2013, when the People’s Bank of China (PBOC) issued a notice which prohibited financial and payment institutions from buying or selling Bitcoins or providing Bitcoin-related services. This would be quickly followed up by an order from the Bank which instructed commercial banks and payment companies to close accounts that traded virtual currencies within two weeks.
But China’s hold on crypto would become even tighter in time. In September of 2017, the PBOC, along with six other government regulators, published the Announcement on Preventing Financial Risks from Initial Coin Offerings, which effectively banned ICOs in China. This measure would also limit local exchange platforms, as the set of ICO Rules that were published in the announcement declared that platforms were prohibited from purchasing or selling crypto, and converting legal tenders into cryptocurrencies. This measure would prove to be not very effective, as people still used foreign exchanges to trade crypto, causing China to ban and block access to offshore exchanges as well. Additionally, China also banned news accounts that were related to cryptocurrencies on messaging app WeChat, along with prohibiting hotels and shopping centers in Beijing from hosting cryptocurrency-related events.
The latest development in China’s stranglehold on crypto is the National Development and Reform Commission’s stated intention to ban Bitcoin mining, citing environmental issues as the reason why it should be eliminated. Some community members have downplayed the news, saying that the proposal is nothing more than a list that includes thousands of businesses with the aim to promote the most sustainable ones, wherein mining appears as a business that is “recommended to be eliminated”. This, community members say, means that we are actually many years away from any actual implementation or regulation on the matter, and that the actual impact on mining will be relatively minimal. At press time, the hashrate distribution of Bitcoin mining pools shows that more than 70% of Bitcoin mining takes place in China-based mining pools.
China benefits from being the manufacturer of mining equipment and having cheap electricity prices to be at the forefront of Bitcoin mining.
Despite China’s crackdown on crypto, there is still hope for Chinese crypto enthusiasts. In May of 2018, Chinese president Xi Jingpin publicly endorsed blockchain technology, highlighting its potential for global economies. Recently, Sa Xiao, a council member at the Law Research Association of the Bank of China, stated that holding and occasional p2p trading of Bitcoin was actually legal, despite the government efforts to outlaw cryptocurrencies.
While the Indian government publicly stated that cryptocurrency of any kind was not deemed legal tender in 2017, 2018 was the year where things really took a turn for the worse. It all began with Arun Jaitley’s—India’s Finance minister—budget speech on Feb. 1, where he stated that the government “will do everything to discontinue the use of Bitcoin and other virtual currencies in India”, noting that the country will encourage blockchain technology in payment systems, but that cryptocurrencies will not be recognized as legal coins. Then, a ban on cryptocurrency trades for entities regulated by the Reserve Bank of India was announced in April of 2018, which prohibited financial institutions from dealing with entities that traded in virtual currencies, giving them a period of three months to extract themselves from any dealings that have to do with cryptocurrencies.
Things would worsen yet again when reports of a draft bill that would outright ban cryptocurrencies surfaced in April of 2019, though the Reserve Bank of India denied any knowledge or involvement in the matter. Recently, it has been reported that, as a part of the proposed draft bill, a 10-year jail term was proposed for people who mine, hold and sell cryptocurrencies and fail to comply with the new proposed regulations.
Despite the efforts to ban cryptocurrencies, the Reserve Bank of India has expressed its interest in testing various applications of blockchain technology and integrating them into their regulatory sandbox, which notably excludes cryptocurrencies, crypto trading platforms, and ICOs.
Technology industry groups and startup founders have urged the RBI to include cryptocurrencies in their regulatory sandbox in order to better understand its potential risks.
Just like with many other countries, the efforts to ban and limit cryptocurrencies in India has not been 100% effective, as it is still possible to find India-based trades on p2p trading platforms.
Morocco used to allow the use of Bitcoin, but in November of 2017, Morocco’s Foreign Exchange Office, the Ministry of Finance and Bank Al-Maghrib stated that the use of cryptocurrencies was a violation of foreign exchange regulations, meaning that such activities would be met with criminal penalties. Specifically, the statement claimed that “penalties and fines will apply to anyone engaging in transactions with foreign countries that do not go through authorized intermediaries or in foreign currencies not listed by Bank Al-Maghrib.” An additional statement would be jointly issued on Nov. 21 by Bank Al-Maghrib, the Ministry of Economy and Finance, and the Moroccan Capital Market Authority, which warned users that virtual currencies were highly volatile, lacked a legal framework for the protection of its users, and were used in illegal activities such as money laundering and terrorist financing.
This happened just after Moroccan digital services company MTDS stated it would start to accept payments in Bitcoin. Moroccan crypto traders, however, responded to the ban by arguing that the country should embrace the potential of blockchain-based currencies to help “broaden access to digital financial services”. After the ban was announced, cryptocurrency trading continued in Morocco, but to this day the use of cryptocurrencies can lead to penalties and fines. There are no exchanges or ICOs located in Morocco, and so far 14 ICOs have banned Morocco citizens from participating.
Bitcoin and cryptocurrencies are considered illegal in Nepal. An official notice was published on Aug. 13, 2017 by Nepal Rastra Bank, which detailed that “all transactions related to or regarding Bitcoins are illegal.” This notice had immediate repercussions in Nepal, as it was the direct cause for the cease of operations of Bitsewa, Nepal’s first Bitcoin trading platform.
A couple of months after the Nepal Rastra Bank notice, 7 cryptocurrency exchange operators were arrested for trading Bitcoins without proper authorization on Oct. 7, 2017.
Despite the ban on cryptocurrencies, Nepal has seen the development of blockchain-based applications such as Sikka, a platform where NGOs or aid agencies can easily upload and distribute tokens (which are not cryptocurrencies, as their values are assigned by the NGO or aid agency) to rural workers, who can then transfer the tokens through SMS to receive cash or other goods.
Nepal is one of many countries where cryptocurrencies are banned, but blockchain-based applications that don’t include virtual currencies have been adopted.
In October of 2017, the State Bank of Vietnam (SBV) published a document that stated that Bitcoin and other cryptocurrencies were considered illegal payment methods, with the issuance, supply and use of Bitcoin being subject to punishment ranging from 150-200M VND (roughly $6,500-$8,500 at press time). The use of digital currencies as a form of payment is prohibited in the country, although they are not banned as virtual goods or assets. In April of 2018, the SBV and Vietnamese regulators called for companies to not engage in transactions involving cryptocurrencies and to obey AML regulations. In June of the same year, the Ministry of Finance proposed to suspend the import of cryptocurrency mining equipment, after the country’s biggest incidence of crypto fraud took place, where more than 32,000 people were affected and more than $600M was stolen by alleged cryptocurrency startups Ifan and Pincoin. The Ministry of Industry and Trade expressed its concerns regarding the suspension, stating it would affect different businesses who also make use of the same hardware equipment.
Despite classifying Bitcoin as an illegal payment method, Vietnam has been actively working on creating regulations for crypto, and last November the Ministry of Justice submitted a report containing a review and an assessment of crypto legislation, in which the pros and cons of using cryptocurrencies were evaluated.
Even though paying with Bitcoin or any cryptocurrency is illegal in the country, Vietnam’s FPT University started accepting Bitcoin for tuition payments from foreign students in October of 2017.
Currently, no limitations have been imposed with regards to cryptocurrency exchanges. Bitcoin Vietnam and VBTC are two of the exchanges that are currently working without any limitations in Vietnam and on March 22, 2019, news of a regulated crypto exchange to be opened in Vietnam in association with Swiss company KRONN Ventures AG surfaced. This would be Vietnam’s first authorized crypto exchange.
The volatility of cryptocurrencies, and especially the fact that they are not regulated by any state, have scared many countries out of the idea of adopting them as a form of payment. However, the relationship between countries and cryptocurrencies has been just as volatile, with new regulations being enforced and lifted regularly. Though some countries have changed their mind about Bitcoin for the worse, the current trend is that countries that are not open to the idea of cryptocurrencies are slowly becoming more tolerant. At the very least, many countries that are not crypto-friendly are starting to adopt applications of blockchain technology, which could serve as an entryway for cryptocurrencies in the future.
Despite this trend, the present volatility means that countries can start enforcing new regulations, and traders might start being prosecuted for engaging in crypto-related activities. Even when p2p trading and mining still takes place in countries where it’s being outlawed, international traders and travelers who use crypto should be wary if they want to use virtual currencies abroad. While this article provides a general picture of the countries in which one should be wary of conducting crypto-related financial activity, it is always advisable to conduct proper research about a country’s legal status regarding crypto before potentially putting oneself at risk.
Thanks for reading,
The COIN360 Editorial Team