Are Bitcoins Legal?


Bitcoin is the latest development to have hit the online casino industry. This cryptocurrency has taken a while to become popular among online casino operators because of its structure and difference from other regular currencies. The fact that Bitcoins are not regulated by any government outfit and offer a degree of anonymity to the player has been a major red flag for many.

There are other issues that have been raised in the media as well with regard to the use of Bitcoins. One of the most vital has been the propensity of criminal elements to use Bitcoins to conduct their transactions safely and anonymously. The obvious question that arises because of these issues is simple: Is Bitcoin legal? That is what we will discuss on this page.

Is Bitcoin Legal?

‘Is Bitcoin legal’ is a question that has been doing the rounds for quite a while now. There are a number of entities in the governmental and legal structures asking this vital question:

  • Tax authorities
  • Law enforcement agencies
  • Legal regulators

While it is still a controversial topic, the point of legality mainly depends on one critical fact: what you are using it for. On the whole, it is a legal entity, as long as you are using it for the right reasons.

Legal Issues around Bitcoin

There are a few things about Bitcoin that makes governments and regulatory authorities uneasy.

  • The decentralized nature of the cryptocurrency
  • The lack of control by any authority from the government
  • It allows users to transact anonymously online. This opens the potential Pandora’s Box of unlawful activities people could get away with including:
    • Money laundering
    • Funding of terrorist activity
    • The possibility of a single individual or organization monopolizing the entire Bitcoin market.

The fears have been legitimate enough to warrant an investigation by the Federal Bureau of Investigation (FBI) in the USA, at the end of which it released an official document.

  • The document drew the line between the two different currencies:
    • Centralized currency
    • Digitalized or cryptocurrency
  • It concluded that US-based exchanges are regulated.
  • It stated the possibility of offshore agencies and exchanges that are non-regulated allowing underground elements to operate freely.

The skepticism around Bitcoin reached fever pitch with the Silk Road incident. Silk Road was shut down in October 2013 after investigations revealed it to be a black market for people transacting in Bitcoins.

Who Regulates Bitcoin?

Bitcoin was initially a completely non-regulated entity. While that basic fact remains unchanged, governments of different countries have taken stringent steps to rein in Bitcoin. In most countries, it is the national financial regulatory authorities that are monitoring the use of Bitcoins.

In the US the following organizations have been monitoring the use and trade of and in Bitcoins:

  • Financial Crimes Enforcement Network (FinCEN): The FinCEN:
  • Works under the aegis of the US Treasury Department
    • Was the first governmental organization to attempt to put together a framework of guidelines for operation of digital currencies like the Bitcoin.
    • Published the guidelines for the first time in March 2013.
    • The guidelines were crucial because they:
      • Laid down the parameters for legalized use of digital currency
      • Laid down the parameters for a provider to be categorized a money services business.
    • US Commodity Futures Trading Commission (CFTC): While it has not yet officially done so, it has the authority to:
      • Announce official regulatory standards for controlling use of Bitcoins.
      • Regulate Bitcoin wallets
    • US Securities and Exchange Commission (SEC): This is the US’ single biggest regulatory organization.
      • It has published an alert to inform people about nefarious activities undertaken using Bitcoin through its Office of Investor Education and Advocacy.
      • The alert also offers information on how one can refrain from using Bitcoin for making investments.

One must understand that all these are still grey areas.

  • The major strength of Bitcoin is its decentralized structure.
  • Their legality can therefore never be questioned as long as they are used in the right way and for the right business purposes.
  • That is why only monitoring has happened so far in the US.