Is Bitcoin legal?

Generally speaking, yes. But there are a few places around the world where Bitcoin use is limited or illegal. Most notably, Russia is currently pushing a bill to make Bitcoin illegal to use in the country. Bitcoin usage is also currently banned in Bolivia, Bangladesh, Ecuador, Iceland, and Kyrgyzstan.

Legal status of Bitcoin, CC BY-SA 3.0, credit to Wikipedia user Habarithor

Note that even though Bitcoin is legal in the US, certain usage of it may be illegal without the proper registrations and licenses.  The US Treasury requires that Bitcoin users follow the same regulatory guidelines for money transmission as is required of US dollars, so operators of Bitcoin services in the US must carefully consider what licenses may be required to interact with their customers.

For example, a Bitcoin service providing exchange between BTC and USD would be required to hold a MSB license for all the states of its users and track user data according to KYC/AML guidelines.  These requirements exist to help prevent operators from running off with customer’s money and to help prevent money laundering.

For updated information, see the wikipedia article on the Legality of Bitcoin by country.

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