Bitcoin is secure, decentralized, and can be anonymous when users take the proper precautions. These characteristics make Bitcoin resilient in the face of government bans, but that doesn’t mean governments have given up on trying to ban Bitcoin or at least rein in the technology.
Here, we present a rundown of how various countries regulate — or fail to regulate — Bitcoin.
According to a Wikipedia page on the legality of Bitcoin (BTC) in various countries, along with Bitcoin Market Journal and Coin Dance, Bitcoin is banned to varying degrees in Algeria, Afghanistan, Egypt, Macedonia, Morocco, Bolivia, Colombia, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, India, Nepal, Pakistan, China, Taiwan, Cambodia, Indonesia, Nigeria, Thailand, Vietnam, Zimbabwe, and Brunei.
In some of these countries — Algeria, Egypt, Bolivia, Ecuador, Bangladesh, Cambodia, Pakistan, Morocco, and Nepal — Bitcoin is absolutely banned and cannot be held or transacted.
In India, Jordan, Indonesia, Thailand, Vietnam, and Iran, banks are forbidden from facilitating Bitcoin transactions, but it is still possible to hold and trade Bitcoin peer to peer.
Other countries like Colombia, Taiwan, and Saudi Arabia have said there is no legal recourse for those who deal with Bitcoin and lose money, and these governments urge citizens to avoid Bitcoin. China has effectively banned fiat to Bitcoin trading, but most of Bitcoin’s hash power is in China, making the situation unclear.
Banning Bitcoin is like trying to ban mosquitoes. In Florida, during the rainy season, there is something called mosquito patrol which drops poison on mosquitos from airplanes. The mosquitos have evolved to be resistant to the poison, and no amount of poison can get rid of the mosquitos.
Likewise, several countries around the world have banned Bitcoin to varying degrees, and they have deployed various law enforcement measures and banking regulations to inhibit the use of Bitcoin. However, Bitcoin users in such places have become resistant to censorship by using IP switching technology like VPNs and Tor, changing their Bitcoin address with every transaction, and creating underground peer to peer Bitcoin dealing networks instead of using exchanges. Stealth cryptocurrencies like Monero (XMR) and Dash (DASH) can also be used to enhance anonymity in places where cryptocurrency is illegal.
In 2014 Ecuador created a national cryptocurrency and banned all other cryptocurrencies. The national cryptocurrency of Ecuador failed, however, and Bitcoin use has been increasing across the country despite the law. Further, there are active Bitcoin nodes in Ecuador.
Additionally, as of this writing, there are active Bitcoin nodes in Bolivia, Colombia, Vietnam, Taiwan, China, Iran, Indonesia, Cambodia, Thailand, and India. The presence of active nodes in these countries is a testament to Bitcoin’s decentralized nature. Bitcoin can be run on any computer in the world, and the software works regardless of the law. With proper IP encryption via VPN or Tor, there would be no way for the governments of these nations to know that a citizen is running Bitcoin.
In Africa, Bitcoin has been declared illegal in Algeria, Egypt, and Morocco. Despite this, there is clearly Bitcoin trading in Egypt and Morocco, according to data from Localbitcoins. Other countries that have varying degrees of Bitcoin bans but still have active peer to peer Bitcoin trading on Localbitcoins include China, Colombia, India, Iran, Indonesia, Pakistan, Saudi Arabia, Thailand, Nigeria, and Vietnam.
In several of these countries peer to peer Bitcoin trading is perfectly legal. However, the fact that there is peer to peer Bitcoin trading in countries where Bitcoin is completely banned like Pakistan shows that it is nearly impossible to stop peer to peer Bitcoin trading.