Cryptocurrencies’ decentralized nature has its advantages, but its extremely volatile behavior makes many countries wary of adopting this innovation. In fact, decentralization is a concern in itself for many governments.
Despite its risks, cryptocurrencies are legal in most countries worldwide. Few countries outrightly banned cryptocurrency, while many others restricted it on different levels. This article focuses on the countries where crypto is illegal and restricted, the laws and policies behind the prohibitions, and their recent developments (or hopes) for future digital currency adoption.
Read on to learn more.
🔑 Key Takeaways
- Most countries worldwide allow cryptocurrencies, but concerns exist due to their volatile nature and decentralization, prompting some nations to ban or restrict them.
- Countries’ treatment of cryptocurrencies falls into various categories – outright ban, restricted, legal tender status, or absence of specific regulations.
- Concerns about lack of control, stability, money laundering, tax evasion, and consumer protection drive countries to ban digital currencies.
- Non-recognition as legal currency, banking bans, payment bans, crypto-mining prohibitions, and penalties for offenses are the typical restrictions against cryptocurrencies.
- Various countries lack explicit regulations regarding cryptos, indicating a de facto acceptance but an uncertain landscape for investors.
Where is Crypto Illegal, and Why?
China, Algeria, and Nepal are some of the few known countries that outrightly banned cryptocurrencies. The underlying reasons for the prohibitions may vary, but they usually all come down to these points:
- Lack of control and stability. Cryptocurrencies are highly volatile and decentralized, making governments concerned that they would threaten their domestic financial stability.
- Money laundering and financing of criminal or destabilizing activities. Cryptocurrency transactions offer a degree of anonymity suitable for money laundering, funding of terrorism, illegal drug transactions, and other illicit activities.
- Tax evasion. Some governments are concerned that the difficulty of tracing cryptocurrency transactions may increase tax evasion cases.
- Lack of consumer protection and financial fraud. Governments may ban cryptocurrencies to protect their citizens from scams and financial fraud. The chances of falling victim to Ponzi schemes and fraudulent ICOs (Initial Coin Offerings) are too high for states to ignore, not to mention that investing in cryptos is extremely risky.
Countries may also ban cryptocurrencies as they develop Central Bank Digital Currencies (CBDCs). Some governments have started exploring blockchain technology and plan to promote state-supported digital currencies.
The following sections will tackle crypto regulations on different levels – outright ban, heavily or partially restricted, and the controversial legal tender status gained by cryptocurrencies in two countries (El Salvador and the Central African Republic).
| 🎉 Fun Fact Cryptocurrencies are commonly known for their high volatility, but that does not apply to all of them. Stablecoins such as Tether (USDT) are backed by fiat currencies or other valuable assets, making them less susceptible to quick value changes. Tether is currently the third largest cryptocurrency in the world, with a market share of 5.59%. |
Countries Where Crypto is Banned
Taking any or all of the above reasons, some countries decided to ban cryptocurrencies within their jurisdictions completely. It is important to understand what an outright ban commonly entails for these countries, which are as follows:
- The non-recognition of cryptocurrencies as equivalents to fiat currencies. This also means that people are prohibited from using cryptos as payment tools for goods and services.
- The prohibition of banks and other financial institutions from transacting using cryptocurrencies (banking ban).
- The total ban on crypto-mining activities.
- Complete prohibition of ICOs.
- Prohibition of possession and exchange of cryptocurrencies.
- The imposition of relatively heavy penalties for any crypto-related offenses.
Most countries on this list do not impose all the above points. However, imposing at least four of these prohibitions can already be considered a heavy crackdown on cryptocurrencies and, thus, is equivalent to an outright ban.
That said, here are the countries where cryptocurrency is illegal or outrightly banned.
| Country | Holding/Exchange Ban | Banking Ban | Payment Ban | Mining Ban | ICO Ban | Penalty |
|---|---|---|---|---|---|---|
| China | No | Yes | Yes | Yes | Yes | 10 years imprisonment and up to 500K yuan of fines (for ICO ban offenders). |
| Algeria | Yes | Yes | Yes | Yes | Yes | No info. |
| Bangladesh | No | Yes | Yes | Yes | Yes | No info, but arrests confirmed. |
| Morocco | Yes (implied) | Yes | Yes | Yes (implied) | Yes (implied) | No info. |
| Nepal | Yes | Yes | Yes | Yes (implied) | Yes (implied) | No info, but arrests confirmed. |
| Afghanistan | Yes | Yes | Yes | Yes | Yes | No info, but arrests confirmed. |
| Egypt | Yes (implied) | Yes | Yes | Yes (implied) | Yes (implied) | Imprisonment and 1-10 million EGP of fines. |
| Bolivia | No | Yes | Yes | Yes (implied) | Yes (implied) | No info, but arrests confirmed. |
China: Cryptocurrency Ban and Blockchain Adoption
China has a dual relationship with cryptocurrencies. The government is wary that cryptos may damage its existing financial system, but at the same time, it recognizes the benefits of this technology.
The “Notice” and “Announcement” from PBoC
The initial regulation, reflecting China’s earliest signs of wariness to cryptocurrencies, happened in 2013 when the PBoC and four other government bodies issued the joint notice, “Notice on Preventing Bitcoin Risks.” The notice clarifies that Bitcoin is not currency and should not be used as currency. It also prohibits financial institutions from handling crypto transactions.
As one of the first countries to embrace cryptos, the total ban on digital currencies in China did not happen overnight. Another major blow to cryptocurrencies happened in 2017 when seven government bodies, led by the People’s Bank of China (PBoC), issued a joint “Announcement on Preventing Financial Risks from ICOs,” reiterating that ICOs are unauthorized and illegal fundraising activities.
The announcement completely prevented new tokens from emerging within China’s jurisdiction. A Supreme People’s Court ruling in 2022 specified the penalties for offenders illegally conducting ICOs, ranging from up to 10 years in prison and fines of up to 500,000 yuan ($70,000).
All crypto exchanges and trading platforms were effectively banned in September 2017. It must be noted that the “Notice” and “Announcement” by the PBoC and others are only departmental rules (or norms) reflecting China’s views and attitude to cryptocurrencies.
Total Ban on Crypto-Mining and Underground Mining
China was once the world’s leading crypto-mining hub, with the largest 60-70% share until 2020. This number started to dwindle when the State Council extended the crackdown on crypto-related activities from trading to mining. All crypto-mining activities ceased in July and August 2021.
Surprisingly, China resumed registering crypto-mining activities at 22.3% in September 2021. Miners spoofing Chinese IP addresses was one thing, but the number indicates that significant underground mining activities began flourishing despite the ban.
Cryptocurrency as Commodity and Property
Despite the existing regulations, it is not illegal to possess cryptocurrencies in China. This was clarified by the Beijing Arbitration Commission (BAC) in 2020, which recognizes crypto as a virtual commodity.
The Shenzhen Court of International Arbitration also concluded that though Bitcoin is not legal tender, this status does not prevent it from being protected by law as property. This also means that cryptocurrencies are also covered by the contract laws as property, given the transactions involved did not treat cryptos as legal currencies.
The Digital Yuan
Aside from the financial, environmental, and consumer risks as grounds for China’s ban on cryptocurrencies, the country is also opening the door for a state-backed digital currency. The plan for developing the digital yuan or e-CNY was included in China’s 14th five-year plan.
Chinese President Xi Jinping stated that the country must embrace blockchain technology without the volatility and risks involving popular cryptocurrencies.
Algeria: Enforcing Finance Law of 2018
Cryptocurrency is illegal in Algeria, as stated in the country’s Finance Law of 2018 (FL2018). According to Article 117 of the FL18, the prohibition covers the “purchase, sale, use and possession of virtual currencies.”
The law defines cryptocurrencies as “a currency used by Internet users across the Web. It is characterized by the absence of physical support such as coins, tickets, payments by check or credit card.”
Penalties and the Reasons for the Ban
Algeria’s Finance Law of 2018 stipulated that “any violation of this provision [ban on cryptocurrencies] is punishable in accordance with the laws and regulations in force.” The specifics of any possible penalty were not explicitly indicated and no notable case has been published since the law’s enactment.
Despite the lack of details in the said provision, the explanatory memorandum of the Finance Law of 2018 described virtual currencies as alternative currencies not regulated by a central body and, as such, could be used in transactions relating to drug trafficking, money laundering, and tax evasion. This clearly shows Algeria’s firm stance against cryptocurrencies.
Bangladesh: Crypto Ban and its Blockchain Strategy
Like China, cryptocurrencies are illegal in Bangladesh, but the country is eager to explore and adopt blockchain technology. There are a lot of questions regarding the validity of Bangladesh’s ban on cryptocurrency, as there is no known law prohibiting digital currencies in the country except references to old existing laws.
Questions arose when the Bangladesh Bank (BB) stated that possession and transaction of cryptocurrencies are not crimes. The Foreign Exchange Policy Department of the BB made this clarification in response to an inquiry by the police’s Criminal Investigation Department (CID) in 2022.
The “Cautionary Notice” from the Bangladesh Bank
The Bangladesh Bank first warned against Bitcoin in 2014, emphasizing that transacting with artificial currencies may violate laws such as the Foreign Exchange Regulation Act of 1947 and the Money Laundering Prevention Act of 2012.
The BB issued another “Cautionary Notice” in December 2017, reiterating that cryptocurrencies are not legal currencies issued by any country. The notice also reminded citizens to stop supporting and advertising all transactions with cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Ripple. It also added the Anti-Terrorism Act of 2019, another law crypto use could violate.
It is important to note that the “notice” did not automatically criminalize the possession and exchange of cryptocurrencies. This is because a criminal offense must actively violate the three laws mentioned – Foreign Exchange Regulation, Money Laundering Prevention, and Anti-Terrorism. Simply possessing and exchanging cryptos do not automatically violate these laws.
Despite this shortcoming in enforcing an actual law, the “notice” reflects Bangladesh’s attitude toward cryptocurrencies. Throughout June 2021, Rapid Action Battalion (RAB) members arrested some individuals from the capital for trading cryptos. There were other reports of arrests, but no verified reports of convictions have been published so far.
National Blockchain Strategy
Bangladesh’s view on blockchain technology differs completely from its treatment of popular cryptocurrencies. In 2020, the government of Bangladesh published an official document titled National Blockchain Strategy: Pathway to be a Blockchain-enabled Nation.
The document outlined the country’s strategies for adopting blockchain technology across many government endeavors not limited to the financial sector. It made clear that blockchain is not synonymous with cryptocurrencies and can offer a lot of benefits to the country.
Morocco: The 4th Largest Crypto-holder in Africa
As early as 2017, the Moroccan government banned cryptocurrency transactions due to their “infringement of exchange regulations.” Unexpectedly, the crypto market continued flourishing in the country, recording a Bitcoin trading volume of $6 million in 2021. Morocco also became the fastest-growing crypto market in North Africa, with a growth rate of 3.1% in 2022 from 2.4% in 2021.
Cryptocurrencies are still banned in Morocco, but maybe not for long.
Crypto Draft Law
Due to the increasing crypto use in North Africa, the Moroccan government has reconsidered its digital currency policy.
Bank Al-Maghrib (BAM), Morocco’s central bank, started working with the IMF and World Bank to formulate industry regulations on cryptocurrencies. In June 2023, BAM Governor Abdellatif Jouahiri announced the development of a draft crypto law to regulate the country’s digital currency market.
The draft law is welcome news for many Moroccan crypto enthusiasts. Until this bill is enacted, the initial crypto ban remains in effect.
Nepal: A Ban on Crypto in All Aspects
Cryptocurrencies are illegal in Nepal. The Nepal Rastra Bank (NRB) issued a notice in August 2017 declaring that all “transactions related to or regarding Bitcoins are illegal.” In October 2017, Central Investigation Bureau (CIB) members of Nepal Police arrested seven people allegedly running Bitcoin exchange platforms in different parts of the country.
The primary legal frameworks the ban was based on were the Foreign Exchange Regulation Act of 2019 (1962) and the Nepal Rastra Bank Act. Crypto enthusiasts and some critics found the basis of the ban faulty for the following reasons:
- The notice only mentioned Bitcoin, leaving all other cryptocurrencies unpunishable.
- Appealing to the foreign exchange policy as a basis of the prohibition reflects the widespread confusion regarding cryptocurrencies. Cryptos are decentralized digital currencies traded through peer-to-peer transactions; they are not issued or regulated by any country, so they do not fall into the category of foreign currencies.
Despite these criticisms, the government of Nepal remained firm in its stand, citing the country’s specific economic situation (import-based and remittance-dependent) as unsuitable for highly volatile and decentralized digital currencies.
Amendments to the NRB Act and the Nepalese CBDC
In August 2022, the NRB announced its plan to develop a Central Bank Digital Currency (CBDC) and is continuously collaborating with other countries and international institutions for this end.
In a recent Forkast interview, NRB Spokesperson Gunakar Bhatta said the development is still in the initial phase of the study. The NRB is also calling for amendments to the Nepal Rastra Bank Act to make way for the issuance of digital currencies in the country.
Bhatta stated that the country’s stand against cryptocurrencies remains, and there is no plan to adopt other cryptocurrencies like stablecoins.
Afghanistan: Crypto Ban Amidst High Crypto Adoption
Cryptocurrencies are illegal in Afghanistan. After the Taliban’s takeover, the government has started to crack down on cryptocurrency exchange platforms in the country. The prohibition was made public through a notice issued by Afghanistan’s central bank, Da Afghanistan Bank (DAB), in May 2022.
The following are the reasons for Afghanistan’s ban on cryptocurrencies:
- The government deemed cryptocurrencies fraudulent and full of scams.
- Being a new technology, people are unfamiliar with digital currencies.
- Crypto’s high volatility has the quality of a gamble, which is forbidden (Haram) under Islamic Law.
- To prevent dollar outflows.
There is currently no law officializing the country’s ban on cryptocurrency, aside from the central bank notice issued in 2022. Despite the lack of official regulation, 13 people were arrested by the members of the criminal investigations department of the Herat police in August 2022. More than 20 crypto-related businesses were also shut down in the city.
High Crypto Adoption
Due to the sanctions received by the country after the Taliban takeover, money transfer services became extremely expensive and inconvenient, so many Afghans relied on crypto-transfers to receive remittances. According to a report by Chainalysis in 2021, Afghanistan was the 20th among 154 countries in the Global Crypto Adoption Index.
Egypt: Cryptan Ban and the Possibility of Licensing
Dar Al-Ifta, Egypt’s primary Islamic legislator, decreed that commercial transactions in Bitcoin are forbidden under Islamic Law. The religious legislative body stated that cryptocurrencies could damage the country’s financial system and national security.
Even though the religious decree (“fatwa”) is considered a legal opinion, thus non-binding, it still reflects the country’s attitude towards cryptocurrencies. This stand was further solidified by a warning issued by the Central Bank of Egypt (CBE) against all crypto-related transactions.
CBE Law or the Law No. 194 of 2020
This law replaces the Law No. 88 of 2003 as Egypt’s central bank law. Amendments introduced in the new law aim to regulate banking activities further and keep up with international standards. Law No. 194 also deals with “Fintech,” cryptocurrencies, and e-payments.
The new CBE law prohibits the issuing, dealing, and promoting of cryptocurrencies without an applicable license from the central bank. This was a welcome development for some as it allowed crypto-trading companies to be licensed. However, no license to deal with crypto has ever been issued since the law’s enactment.
According to its Fourth Warning Statement, the CBE’s position against cryptocurrencies remains. Law No. 194 also penalizes unauthorized crypto-related activities with imprisonment and a fine of no less than 1 million or not exceeding 10 million Egyptian Pounds (EGP).
Bolivia: Enduring Crypto Ban Despite Changing Regimes
Banco Central de Bolivia (BCB) banned cryptocurrencies in Bolivia as early as 2014. An official statement from the BCB warned that “crypto-assets are not a legal tender in [Bolivia], as well as their commercialization and [purchase], because they [incur] potential risks of economic losses to their operators and holders.”
Based on the BCB statement, the country does not explicitly ban the possession and individual exchanges of cryptocurrencies. However, it closes all the doors for all crypto-related businesses in the country.
Against Cryptocurrency Promotion
Bolivian authorities arrested 60 individuals who were conducting “cryptocurrency investment training” in 2017, according to a statement by the country’s financial authority ASFI (“Financial Regulatory Authority”). This shows the country’s zero tolerance for any kind of promotion of cryptocurrencies.
Bolivia’s ban on cryptocurrencies did not change even after its former president Evo Morales resigned in 2019 and the one-year interim government from the opposition.
Countries Where Crypto is Restricted
Listed here are the countries with a few restrictive regulations on cryptocurrencies but generally do not completely hinder or criminalize their activities. In fact, some of them are even showing positive adoption rates despite the restrictions.
The countries in this list may not have the most favorable legal environment for cryptocurrencies but are still far from a total ban.
| Country | Holding/Exchange Ban | Banking Ban | Payment Ban | Mining Ban | ICO Ban | Penalty |
|---|---|---|---|---|---|---|
| Taiwan | No | No | Yes | No | No | No info |
| Indonesia | No | No | Yes | No | No | No info |
| Jordan | No | Yes | Yes | No | Yes (implied) | No info |
| Qatar | No | Yes | Yes (implied) | No | No | No info |
| North Macedonia | No | Yes | Yes | No | Yes (implied) | No info |
| Turkiye | No | No | Yes | No | No | No info |
| Argentina | No | Yes | Yes | No | No | No info |
| Kosovo | No | No | Yes | Yes | No | No info |
| Nigeria | No | Yes | Yes | No | No | No info |
| Colombia | No | Yes | Yes | No | No | No info |
| Iraq | No | Yes | Yes | No | No | No info |
The countries above usually impose banking bans as a protective measure against crypto volatility but generally allow citizens to possess digital currencies. Kosovo completely banned crypto-mining equipment to deal with an ongoing energy crisis.
Some restrictions are placed to protect the citizens or hinder money laundering and terrorist financing activities. As a common regulatory practice, governments also require virtual assets service providers (VASPs) to impose strict anti-money laundering and KYC (“Know Your Customer”) policies in exchange for a license to operate.
| 💡 Did You Know? There are around 22,932 cryptocurrencies worldwide as of March 2023, but not all are active or valued. Some tokens were even used for scams or fraudulent fund-raising activities, contributing to cryptocurrencies’ negative reputation in many countries. |
Countries Where Crypto is a Legal Tender
On the other end of the pole, some governments boldly declared cryptocurrencies as legal tender, allowing them to circulate freely like an official currency. Such countries are El Salvador and the Central African Republic.
El Salvador: Bitcoin Renaissance Emerging
Cryptocurrency is currently the center of El Salvador’s social and economic program, with the leadership of the country’s president, Nayib Bukele. El Salvador became the first country to country to adopt Bitcoin as a legal tender in 2021 and continued to pursue the same policy direction in the following years.
In January 2023, El Salvador enacted the Digital Assets Law to regulate other crypto-assets besides those declared legal tender (e.g., Bitcoin). IMF warned the country of the risks involving its controversial policy. Still, the nation has also recently gained much attention due to its technology, tourism, and Bitcoin-focused growth strategy.
Central African Republic: Reversing the Legal Tender Decision
It is still worth mentioning CAR for being the second country to declare cryptocurrency as a legal tender. This decision may have been too ahead of time, especially with the country’s limited internet infrastructure and slow crypto adoption among its citizens.
In August 2022, CAR’s Constitutional Court ruled against the sale of citizenship, e-residence, and land in exchange for crypto investments as part of its adoption program.
The Central African Republic recently repealed its law declaring Bitcoin as legal tender. In March 2023, the Parliament declared that Bitcoin is no longer a legal tender but a benchmark cryptocurrency. Also, businesses are no longer obligated to accept Bitcoin as payment.
| 🎉Fun Fact Around 80% of central banks worldwide plan to create a CBDC to utilize blockchain technology without the volatility of popular cryptocurrencies. Implementing state-backed digital currencies is also one of the common reasons why some governments ban or restrict crypto use in their countries. |
Countries Where No Known Law/Regulation Exists Regarding Crypto
Despite its worldwide popularity, some countries still have not enacted a law or issued regulations regarding cryptocurrencies. One common reason is crypto’s low adoption rate in these jurisdictions, and governments have not deemed it necessary to address its use in a national policy.
Here are the countries with no known law or regulation regarding cryptocurrencies at the time of writing:
- Côte d’Ivoire
- Democratic Republic of the Congo
- Equatorial Guinea
- Eritrea
- Eswatini
- Guatemala
- Guinea
- Guinea-Bissau
- Guyana
- Haiti
- Liberia
- Malawi
- Mali
- Moldova
- Nicaragua
- Niger
- Paraguay
- South Sudan
- Tajikistan
- Togo
- Turkmenistan
- Uruguay
- Yemen
- Zambia
- Zimbabwe
The non-existence of laws or regulations against cryptocurrency may mean it is de facto legal but is also an uncertain situation. An explicit acceptance or prohibition may be better as it will give investors a clear understanding of the country’s views and attitudes regarding crypto use – better than being surprised by a sudden policy adoption.
| ✅ Pro tip If unsure of your resident country’s digital currency policies, use a VPN when engaging with crypto trade. This will hide your activities online (except for the fact that you are using a VPN) and will also protect you from potential cyberattacks. |
Wrapping-Up
History shows us that technological innovation is always ahead of legislation. It is not unusual for some countries not to immediately adopt cryptocurrencies, and quick adoption may not always be the best solution.
Crypto investors must clearly grasp their resident country’s cryptocurrency laws and regulations and the changing political and social climate that drives those rules. This is especially true as a sudden change in crypto policy may cost everything for this fairly new technology.
FAQs on Cryptocurrency Legality
Is crypto legal in Russia?
Holding and exchanging cryptocurrencies are legal in Russia. However, Russian authorities clarified that digital currencies are not legal tender.
Is crypto illegal in the Philippines?
No, crypto is legal in the Philippines. Like in most countries, crypto does not have a legal tender status in the Philippines, and VASPs must also apply for certification to operate.
Is crypto legal in Saudi Arabia?
Cryptocurrency has a quasi-legal status in Saudi Arabia due to SAMA’s (Saudi Arabia’s Central Bank) warning that trading cryptos is risky and illegal, offering no protection for potential user losses. The central bank notice did not clearly specify penalties.
By Artem Minaev
Artem is a management consultant with a strong background in marketing and branding. As a valuable member of the core team at TechJury.net, he holds the position of Chief Growth Officer, leveraging his expertise to drive the growth and success of the website.