Accepting cryptocurrencies in your business or donations in your webpage it’s usually full of advantages: for starting, anyone in the whole wide world would be able to send you fast and easy payments, the fees for all parts involved are very low and it also works as publicity, since the people inside the crypto-world are always looking for these kinds of business, where they feel welcomed.

To date, there’re some services (crypto-payment processors) with different features that can help you to accept cryptocurrency payments and even can offer you some additional tools, like statistics, reports, automatic transactions, or instant conversion to fiat money. It’s easy, cheap, fast, convenient… but there still might be a little problem.

Cryptocurrency payment processors are legal? Or even more, cryptocurrency payments are?

We’d wish to give you a single (and positive) answer, but the planet it’s too big and divided for that. To sum it up: yes! In most of the world. But that “yes” could be accompanied by some variable conditions. Let’s check a bit about it.

Country yes, country no

There are around 195 countries in our era, so, if they all decided to make their own cryptocurrency regulation, it’d be 195 ways to handle these financial instruments, as far as we know. Luckily, the laws tend to be more or less uniform per continent, with few exceptions.

As we explained before in some cryptocurrency myths, several countries have totally banned cryptocurrencies, and others that have restricted them in different ways. Be it one or the other, the list of countries where direct cryptocurrency payments are banned is short:

  • Algeria
  • Egypt
  • Morocco
  • Bolivia
  • Nepal
  • Pakistan
  • Russia
  • Vietnam
  • Indonesia

And we can say even in these territories the regulation about cryptocurrencies is constantly changing. For now, the authorities from most of the countries have commented on the associated risks to the public, didn’t banned the use of them, and are just watching and studying the developing of the cryptocurrency world; preparing themselves to build future regulatory frameworks that suits best the needs of their citizens.

Additionally, we should mention for sure that cryptocurrencies per se aren’t affected by anti-money laundering [AML] laws in most of the world.  However, if the transaction involves as well fiat money (USD, EURO, CNY, RUB…), i.e. the exchange (buy and sell) for each other, all the pertinent legislations apply for those transactions, and, commonly, the crypto-exchange companies should ask for some kind of license to operate legally. That applies as well for payment processors.

Tricky thing: taxes

Few countries have developed some kind of specific-cryptocurrency regulation, and it’s usually with tax purposes. In those cases, we should consider especially the concept that the authority uses to label cryptocurrencies because the relevant regulations will depend on it.

Image by Steve Buissinne / Pixabay

For example, the U.S. Securities and Exchange Commission (SEC) strikes as security every blockchain token that works as an investment contract, promising eventual earnings to their holders. Accordingly, the issuer should have the appropriate license and the holder should pay their taxes per earning. The tokens from Initial Coin Offerings (ICOs) are the most common in this category.

On the other side, utility tokens —those that weren’t issued to offer future earnings but with other purposes, like mere means of payment— might strike as commodities, properties, digital currencies, or payment methods. The first two involve taxes, the last two usually don’t. But, again, the last two are the weirdest legal state of cryptocurrencies around the world.

Dr. Asress Adimi Gikay, Ph.D. Researcher at Sant’Anna School of Advanced Studies (Italy), shares a theory about this with the author Eric Pacy:

“Classifying cryptocurrencies as commodities as opposed to money could aid in avoiding the application of anti-money laundering [AML] law (…) In 2014, Pacy argued: …regulators and scholars have been reticent to treat cryptocurrencies like Bitcoin as money, electing instead to attempt to fit this new technology into an existing regulatory framework as something other than money. By doing this, they create unnecessary complexity and sometimes absurd results”.

To sum it up? One of the greatest disadvantages of accepting cryptocurrency payments in your business might be the potential taxes and the failure in choosing a regulated entity to process those payments.

For example, you can find a case like this with the taxes: you received 2 BTC when the price where 9.000 USD per coin, but months after when it’s time for you to fill your taxes, the price ascended to 10.000 USD per coin. That’s technically an earning for you —if you didn’t exchange it immediately— and thereby might involve taxes. Every transaction with these characteristics might involve taxes per earnings, indeed.

So, practical solutions could be two:

  • Use a regulated payment processor to handle the payments, and then exchange them immediately with a regulated exchange as well (if the payment processor doesn’t include the function).
  • Enjoy the regulation of your country/territory where taxes for cryptocurrencies doesn’t apply (most of the world, indeed).

From now on, you’ll need to do your own local research and even consult with a lawyer if your business isn’t precisely small. But a great clue that gives away if cryptocurrency payment processors are legal or not in your country is the fact that they offer (or not) the service for your country. Especially if is a regulated entity: then, don’t worry, because they’ll take care of current regulations for you.

The regulations and not the taxes, please note. Regarding that, they just can help you with complete transaction history, reports, and statistics for you to calculate easily your taxes (if applicable); just like ALFACoins service does.

Regulatory efforts on the way

Cryptocurrencies are still very new in the world, so, they lack proper regulations in most territories. If a country doesn’t have an explicit ban or law for them, they’re legal and you can do anything you want with them (except for crimes, of course).

Although, we can inform you there are some regulatory efforts on its way. Russia is making some amendments to their first cryptocurrency laws, but it doesn’t seem it’ll be possible soon to ask for cryptos inside the territory. Indeed, according to them, it’s legal to mine cryptocurrencies, but not to receive remuneration for it (it’s not clear if the tokens count as a reward, though).

From European Union, there are some good reports about this, because they’re aiming to create a new specific entity for the proper regulations of cryptocurrencies, while, at the same time, they’re also working on a flexible legal framework to make the cross-border payments with cryptoassets easiest, faster and cheaper. 

Image by mohamed Hassan / Pixabay

The United States also brought good news last month, because their legal authorities agreed to unify the regulatory framework for Fintech companies and crypto-firms. This means it’ll be easier and less expensive for them to obtain a license.

Following these efforts, other countries like Nigeria, Singapore, and South Korea are preparing new regulations, especially regarding the security tokens and AML laws for crypto-firms.

For now, we can say that, according to CoinMap, there are almost 20k business all around the world accepting cryptocurrencies, and the figure it’s just increasing. It seems like cryptocurrency payments and related services will be in our future.

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Literature professional in the crypto-world since 2016. Writer, researcher, and bitcoiner. Working for a better world, with more decentralization and coffee.

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