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Author Topic: List of Legal and Illegal Nations.  (Read 2550 times)
kparcell
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July 21, 2011, 06:25:51 PM
 #1

Can anyone name one nation that has declared this type of exchange system either legal or illegal?

In the US, there are laws defining money and regulating its use.  Bitcoin is a money in the US by definition if it is used as money (almost anything can be used as money), but I believe it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.  Bitcom neglects obvious questions in its FAQ section, such as "What is the value of a bitcoin?" (and "Where are bitcoins illegal?", etc.) and thus it can not be legally used as money in the US.

So, I'm interested in collecting useful data on these issues, beginning with a list of nations that have declared bitcoins legal or illegal.

Anyone?

Please post links to government websites that state their nations' legal opinions on bitcoins.

Thanks!

P.s. I'll check back and answer questions and compile the list from your posts of legal and illegal nations (if any) directly below this sentence.

Banned in China:  http://english.mofcom.gov.cn/aarticle/newsrelease/commonnews/200906/20090606364208.html
(Phillipsjk notes below that China has banned the use of virtual currency (in general) for the purchase of real goods, and the link he provides also notes that virtual currency can not be used to purchase virtual goods except from the issuer, so Bitcoin is effectively banned in China.)
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July 21, 2011, 06:34:57 PM
 #2

In the US, there are laws defining money and regulating its use.  Bitcoin is a money there by definition because it is used as money (almost anything can be used as money), but it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.

So it's actually illegal to conduct any transaction in the US using any foreign currency that's less than 1 USD in actual value? Like say Japanese Yen or India Rupees?


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andrepcg
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July 21, 2011, 06:38:00 PM
 #3

i contacted some web hosting companies about bitcoin in my country, portugal, and one got back to me saying that they were interested but for reasons of management and legislation they couldn't implement bitcoins as a way of paying the services

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kparcell
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July 21, 2011, 06:45:31 PM
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In the US, there are laws defining money and regulating its use.  Bitcoin is a money there by definition because it is used as money (almost anything can be used as money), but it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.

So it's actually illegal to conduct any transaction in the US using any foreign currency that's less than 1 USD in actual value? Like say Japanese Yen or India Rupees?



It is illegal in the US to use foreign currency because it is illegal to use any money that is not denominated in US Dollars.  More specifically, it is illegal to denominate money in a foreign currency.  Interestingly, Canadian coins are in common use in the US near the Canadian border, but I doubt if anyone has ever been prosecuted.
kparcell
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July 21, 2011, 06:47:17 PM
 #5

i contacted some web hosting companies about bitcoin in my country, portugal, and one got back to me saying that they were interested but for reasons of management and legislation they couldn't implement bitcoins as a way of paying the services

Thanks, andrepcg.
Xephan
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July 21, 2011, 06:48:01 PM
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It is illegal in the US to use foreign currency because it is illegal to use any money that is not denominated in US Dollars.  Interestingly, Canadian coins are in common use in the US near the Canadian border, but I doubt if anyone has ever been prosecuted.

That's surprising. I suppose you have special laws to excuse money changers or don't tell me they are basically treated the same way as drug dealers? Cheesy

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kparcell
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July 21, 2011, 06:56:23 PM
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Exchanging foreign currency in the US is strictly regulated, but not considered commerce.  I've heard that many ethnic communities in the US use foreign currency in commerce, but that is nevertheless illegal and if the numbers get big then I suppose they take a risk.
Stephen Gornick
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July 21, 2011, 09:23:34 PM
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It is illegal in the US to use foreign currency because it is illegal to use any money that is not denominated in US Dollars.

Do you have a source for this claim, by chance?

kparcell
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July 21, 2011, 09:45:39 PM
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It is illegal in the US to use foreign currency because it is illegal to use any money that is not denominated in US Dollars.

Do you have a source for this claim, by chance?

Hi Stephen.

I've found that Paul Glover at Ithaca Hours, in Ithaca, New York, is a great source for accurate information on the law regarding US currency through his guide to creating local currency, which he sells.  He was the first to answer this for me, about twenty years ago.  Since then I've had it confirmed by the US Secret Service, which is the primary US government agency that deals with financial crime.

http://www.secretservice.gov/criminal.shtml

By the way, I see you are online now and that you are a "hero", so perhaps you can answer my question by naming one nation that has ruled bitcoin either legal or illegal.
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July 22, 2011, 12:01:37 AM
 #10

So you're saying that Disney dollars, Facebook credits, Wow gold, and frequent flyer points are all illegal in the US because they can be used to buy something and don't have a US dollar value?

Bitcoins in and of themselves are almost certainly without a defined legal status at this point in time - after all, they're essentially just an electronic token and there are literally thousands of different types of those in use.  What might be illegal in some jurisdictions are some of the services which are associated with Bitcoin, but until some attempt at prosecution is made and a court rules on the matter, then little can be presumed.  The law is about more than just statutes - it's also about precedent.

One area where Bitcoins may come under scrutiny soon is online gambling.  The US Department of Justice has already taken action against online gambling sites and third party payment processors for accepting funds from US citizens for online gambling.  It's unlikely that sites attempting to use Bitcoin to get around the US laws related to online gambling will succeed in claiming that they aren't "accepting funds for real money play".

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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July 22, 2011, 12:29:11 AM
 #11

I think at the moment the legal status of Bitcoin is unclear. You run into this minefield of legal terms that have very specific meanings (that may exclude bitcoin). But on the other hand, countries around the world have agreed to crack down on money laundering and terrorist financing.

Bitcoin may not be a "Foreign Currency" because it is not backed by any world government.

Bitcoin may not be a "Virtual currency" (Banned in China for the purchase or real goods) because is is not backed by any one issuer that can provide virtual goods and services, and is not pegged to a specific exchange rate.

Bitcoin may not be a "commodity" (what most exchanges treat it as) because it has no inherent value.

Bitcoin may not be a "security" (Subject to much more regulation than a commodity) because it acts more like a commodity.

That said, bitcoin users may have trouble with reporting requirements if their activities are considered a Money Services business. Just the act of relaying transactions on the network may subject you to reporting requirements you can't meet because the blockchain deals only with annonymized information. Adding sender information to the blockchain would be in violation of privacy laws because the information is public (and it would bloat the blockchain). That said, I am not convinced the Enabling legislation and regulations are actually that far-reaching. I am in the process of drafting a letter to FINTRAC asking for clarification.

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WiseOldOwl
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July 22, 2011, 03:14:28 AM
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I am very interested in FinCEN's response, please let me know.

The facebook, disney dollars, etc. are ok because they are like a gift card.
It would be illegal if Disneyland let you buy your tickets in pesos or euros because that we cannot do or it undermines the USD. Most countries it is illegal to use a currency other than what is approved by the govt. (especially countries where it would be in the best interest of the citizens to use a stronger currency, like the Zimbabwe situation prior to the usd adoption)  . Its not illegal to have foreign currency, but you do have to go through an exchange before you spend it.

A compilation of legal info in regards to bitcoins and digital currencies is an absolute must for us. I think it deserves a bit more dignity than a thread though. If I can somehow find some free time I will make a pretty basic site for everyone to compile their findings. If anyone else would rather do this let me know so I dont start on it and we both work on the same thing separately.

Great Thread, this should flourish nicely!

*edit - pretty wrong in some parts ^^^ keep reading
I should have phrased this in a more speculative way, sorry.

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Stephen Gornick
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July 22, 2011, 05:02:28 AM
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but you do have to go through an exchange before you spend it.

Do you have a source for this claim, by chance?

kparcell
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July 22, 2011, 12:23:15 PM
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So you're saying that Disney dollars, Facebook credits, Wow gold, and frequent flyer points are all illegal in the US because they can be used to buy something and don't have a US dollar value?

Bitcoins in and of themselves are almost certainly without a defined legal status at this point in time - after all, they're essentially just an electronic token and there are literally thousands of different types of those in use.  What might be illegal in some jurisdictions are some of the services which are associated with Bitcoin, but until some attempt at prosecution is made and a court rules on the matter, then little can be presumed.  The law is about more than just statutes - it's also about precedent.

One area where Bitcoins may come under scrutiny soon is online gambling.  The US Department of Justice has already taken action against online gambling sites and third party payment processors for accepting funds from US citizens for online gambling.  It's unlikely that sites attempting to use Bitcoin to get around the US laws related to online gambling will succeed in claiming that they aren't "accepting funds for real money play".

I've offered to give answers to questions directed at me, but I don't want to misinform, so I'm going to duck this a little because the answers are legally complex and I'm not an expert.  But I'll offer an example to illustrate what this topic is about.

In the US, there was/is a currency called "Liberty Dollars".  It still exists, but it is illegal to use because it was ruled in a court that it is counterfeit US currency.  It's issuer is facing years in prison.  He promoted his alternative currency (AC) as a replacement for the US Dollar, and the US Treasury warned him to stop.  His AC was a terrible currency because it was backed by silver, which is hoarded when the value is high and difficult to spend when the value is uncertain.  People bought it for all kinds of reasons but there was never enough of it in circulation to interfere with commerce anywhere.  However, he was warned for years, but used the warnings to gather attention, and so he was eventually prosecuted and found guilty of a variety of offenses.

The lesson that the US Treasury wants us to take from this, presumably, is to heed its rulings.  This is why I think that what nations have officially said about Bitcoin is relevant, and I'd like to get a clearer picture of that so that I can better understand the story as it unfolds.  Nobody really cares, I think, about those cute Disney Dollars, or other tiny currencies, and Bitcoin is also tiny but it advertises as a way to circumvent rules, is under scrutiny (according to news posts), and has a wildly fluctuating value...so the writing is probably on the wall.
kparcell
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July 22, 2011, 12:31:21 PM
 #15


Bitcoin may not be a "Foreign Currency" because it is not backed by any world government.

Bitcoin may not be a "Virtual currency" (Banned in China for the purchase or real goods) because is is not backed by any one issuer that can provide virtual goods and services, and is not pegged to a specific exchange rate.


Following the link you provide, I note that China has banned the use of virtual currency for the purchase of real goods, as you report, but that it also restricts the use of virtual currency to virtual goods provided by the issuer of the currency, and thus Bitcoin is effectively banned in China.  You suggest that the definition of a virtual currency includes that it is backed by one issuer that can provide goods and services and that it is pegged to a specific exchange rate.  Do you have a reference for that definition as a general rule, or are referring to China only and extrapolating from the link?

Thanks!
kparcell
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July 22, 2011, 12:36:18 PM
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A compilation of legal info in regards to Bitcoin and digital currencies is an absolute must for us. I think it deserves a bit more dignity than a thread though.

As you say, a compilation is a must for the system, but it's also interesting to discover what users believe, especially given that Bitcoin is advertised as an activity that can circumvent rules, and because Bitcoin is a fiat currency and so user opinion is the source of its value.
WiseOldOwl
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July 22, 2011, 01:18:27 PM
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but you do have to go through an exchange before you spend it.

Do you have a source for this claim, by chance?

Sorry, should have clarified a little.
I meant that in the US you couldn't really buy anything at wal mart with euros. Im pretty sure that the only currency legally protected to settle debt here is US currency. So at some point you would have to exchange it for us dollars in some way, to be able to use it here. I also know that it was common practice for countries to ban the use of foreign currency, although I am reading that this isnt the case as much anymore due to globalization.
http://en.wikipedia.org/wiki/Foreign_exchange_controls

The coin act of 1965 says something like this
Section 102 states: “All coins and currencies of the United States (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations), regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues.” Only United States currencies (including Federal Reserve Notes) are currently legal tender in the US.

This is from 1965 though so there cold be about a book full of exceptions, I am no lawyer, I dont even know if this is valid at all. I want to say right now that this is all brainstorming territory so I feel te probability of being wrong is high in this thread.

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WiseOldOwl
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July 22, 2011, 01:20:47 PM
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A compilation of legal info in regards to Bitcoin and digital currencies is an absolute must for us. I think it deserves a bit more dignity than a thread though.

As you say, a compilation is a must for the system, but it's also interesting to discover what users believe, especially given that Bitcoin is advertised as an activity that can circumvent rules, and because Bitcoin is a fiat currency and so user opinion is the source of its value.

I totally agree I meant a website with a bunch of user input applications like reviews ratings comments forum etc.

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July 22, 2011, 01:35:04 PM
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I meant that in the US you couldn't really buy anything at wal mart with euros. Im pretty sure that the only currency legally protected to settle debt here is US currency. So at some point you would have to exchange it for us dollars in some way, to be able to use it here. I also know that it was common practice for countries to ban the use of foreign currency, although I am reading that this isnt the case as much anymore due to globalization.
http://en.wikipedia.org/wiki/Foreign_exchange_controls

I don't believe the US bans the use of foreign currency. Along the Mexican border shops routinely accept pesos as payment since the alternative is to turn the customers away. They get a couple extra points on the exchange rate, but that is primarily a tax on the ill-prepared. Similarly (as mentioned above) shops along the Canadian border accept Canadian dollars.

The only reason you can't spend euros at Walmart is logistical, not legal. The cash registers aren't setup to deal in currencies other than the US dollar.

Obligatory link: http://www.usatoday.com/money/economy/2009-04-05-scrip_N.htm

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July 22, 2011, 02:28:34 PM
 #20

Using bitcoin in Finland is not so common, or that's what I have heard. And the government has a huge I-don't-give-a-flying-fuck phase about things regarding anything else than the Greece-issue and EU in general.
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