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Is Bitcoin Mining Legal?

Posted by QuoteColo on August 29, 2018

The quickest way to answer this is, yes, Bitcoin mining is legal. However, as is the case with many apparently simple answers, there is some necessary nuance to this response. Many countries say it is legal, and these include the United States, Canada, Brazil, Australia, and the countries in the European Union. It is important to note these countries because they are the biggest economies in the world. However, China also allows the mining of Bitcoin but with restrictions. And Russia has labeled it as illegal. The problem isn’t the mining of Bitcoin but the Bitcoin itself that some see as a cause for concern and hence choose to ban the mining of it in addition to the cryptocurrency itself. There are some interesting reasons why.

Bitcoin is Unregulated

The value of money is not just an arbitrary result of supply and demand. Yes, in the forex markets the value of currencies fluctuate up and down. As economies improve, so does the value of their currencies. But countries have the power to control how much their money is worth. This can be done through overt means such as when a country pegs its currency or freezes its value. Or it can be done in more subtle ways when a country simply prints more money, thereby decreasing the value of its currency. This is helpful because if your money is worth less than that of another country, you get more when you give your goods in exchange for their money. Bitcoin is hugely disruptive to this dynamic. Bitcoin’s value is based on supply and demand and on the how hard it is to solve a hash, which is essentially a math problem. A government could never step in and say, “We are going to redesign the complexity of the hash-solving process.” They have no power. Why is this a problem for them?

Why Bitcoin is Illegal in Some Places

It’s all about money. As mentioned before, the value of a country’s currency helps determine how much money the country takes in during trade. If one euro is worth $1.25 USD, and you buy a toy made in France for $12.50, you just gave the economy of France 10 euros. But if one Euro is worth $1.05, and you buy the same toy for $12.50 USD, you just gave the economy of France 11.91 euros. When the euro is lower, all of the countries in the zone make more money off international trade. But if the central currency (the dollar, euro, peso, yuan, etc.) is being used to buy Bitcoins, then the value of the central currency becomes a function of Bitcoin. And because it’s unregulated, that puts control of the money somewhat out of the hands of the leaders of the country who want to make sure the country’s exports hold enough value while still empowering the people to have cash in their pockets that’s worth what they need it to be.

The Good News for the Little Guy

However, many countries see the value of keeping the market as open and free as possible and allow Bitcoin and its mining. If you are able to either mine Bitcoin in these countries or pay for a mining service that resides in these countries, you should be able to find a way of profiting from Bitcoin. Of course, if it is illegal in the country in which you live, you won’t be able to purchase goods or services with the Bitcoin you earn. But, like Russia is in the process of doing, many countries around the world that now label Bitcoin as illegal may legalize it soon.

Categories: Bitcoin

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