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The Legalities of Bitcoin

Is Bitcoin legal? To the best of our knowledge, Bitcoin has not been made illegal by legislation in any jurisdiction. Additionally, regulators from various jurisdictions have taken steps to provide individuals and businesses with rules on how to integrate this new technology into businesses and other activities. For example, the United States' FinCEN has issued non-binding and non-determinative guidance on how it characterizes certain activities involving virtual currencies. Useful resources: • Virtual Currency Schemes - European Central Bank • Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies • Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity What about Bitcoin and taxes? Bitcoin is not a fiat currency with legal tender status in any jurisdiction. But often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains or some other form of tax liability to arise with Bitcoin. Since all transactions are public record and stored permanently, it is a bad idea to attempt to use Bitcoin to evade taxes. Does Bitcoin encourage illegal activities like money laundering? Bitcoin is a censorship-resistant technology. However, it is not anonymous and the use of Bitcoin leaves extensive and permanent public records. The Federal Bureau of Investigation concluded on page two of the report Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity that ‘The FBI assesses with low confidence, based on current user and vendor acceptance, that malicious actors will exploit Bitcoin to launder money.’


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