The legalisation of cryptocurrencies involves the official recognition and authorisation of the existence and use of digital assets within a specific territory. This process includes developing a clear legislative framework and legal approaches to regulating activities directly related to cryptocurrencies, often focusing on taxation and government control.
The legal status of cryptocurrencies has been debated since the introduction of Bitcoin in 2009 (read more about Bitcoin here), and it varies across the world.
In most countries, the use of cryptocurrencies is not illegal, but their legal status and rules for use as a means of payment or goods differ significantly, leading to various regulatory consequences. For example, in Hong Kong, Bitcoin is recognised as a virtual good and does not require special regulation, while in the Czech Republic, cryptocurrencies are legal and recognised as intangible movable property. In the United States, cryptocurrencies do not have legal tender status, and their regulation depends on the laws of each state.
History of the legalisation of cryptocurrencies in Europe
In 2012, the European Central Bank (ECB) stated that traditional financial sector regulations do not apply to Bitcoin.
The following year, the European Banking Supervisory Authority stated that crypto exchanges could not be equated with banks, as regulatory rules had not been developed for them, and accordingly, the assets of their users were not protected.
In 2015, the ECB called cryptocurrencies a volatile asset and urged users to refrain from purchasing them until they were legalised.
In subsequent years, various EU bodies continued discussions about the need for rules to regulate cryptocurrencies. In 2016, the ECB supported a directive requiring crypto exchanges and crypto wallet providers to comply with AML/CFT requirements, emphasizing that it does not recognise digital currencies as either money or currency.
Finally, in 2023, the European Parliament adopted the Markets in Crypto-Assets Regulation (MiCA), which represents a comprehensive legislative framework for regulating the cryptocurrency industry and will come into force in July 2024 (you can read more about MiCA in our article).
The importance of the legal status of cryptocurrencies
Clear legal regulation of cryptocurrencies is crucial for the global financial system for the following reasons:
- legalisation of the cryptocurrency market contributes to its development and integration into the economy;
- investors and their assets will be better protected from fraudsters;
- authorities will find it easier to prevent the illegal use of cryptocurrencies;
- the level of public trust in the crypto industry will increase.
Although the legal status of cryptocurrencies in the European Union is still not fully settled, improvements in the legislative regulation of crypto assets are expected with the entry into force of the MiCA Regulation in July 2024. It represents a significant step forward in the standardisation and regulatory governance of crypto assets.
This could also serve as an example for individual countries to develop their legal frameworks, contributing to a more stable and transparent development of the cryptocurrency industry globally.
