Crypto Academy

Are cryptocurrencies legal?

Are cryptocurrencies legal?

5 min reading

Many people are interested in the question of the legality of cryptocurrency. Let's try to understand it together.

Are cryptocurrencies legal

Are cryptocurrencies legal?

There is no doubt that cryptocurrencies, including bitcoin (BTC), are the future, which will come sooner or later. Years, decades, or centuries from now, it will finally become clear to everyone that it is a cryptocurrency that provides the best value for money. Although right now miners and traders are still concerned about bitcoin’s legality, the time will come when it will become the most common currency.

Since the beginning of the first cryptocurrency, the global cryptocurrency market has grown significantly, and there are many participants who are looking for benefits in the cryptocurrency industry. The scope of their application ranges from fast and safe completion of payments to exchange operations, investments, the realization of smart contracts and the decentralized computing platform, and many other things. 

The scale of growth of the cryptocurrency industry does not go unnoticed by either government agencies or commercial or ordinary users. One of the pressing issues is to define what the cryptocurrency industry is in its entirety and how it fits into the existing framework of the world system.

Possible risks

However, most of the risks which accompany the circulation of cryptocurrencies are impossible to exclude because they belong to the functional and not the financial area. The most significant is regulatory risk. According to experts, if the cryptocurrency market becomes regulated, many more people will join the adventure. A regulatory ban is always bad news for the sector and impacts the global value of the ecosystem.

Benefits of cryptocurrencies

Cryptocurrencies have many useful properties that regular money sometimes lacks. New money is provided with the energy needed to create the necessary mathematical processes. The increase in speed and efficiency of processors generates inflation, which is counterbalanced by the growing demand for this energy.

Different countries’ attitudes toward cryptocurrencies

Businesses are already ready to use cryptocurrencies, smart contracts, and other blockchain tools, and the world’s largest banks are not only studying but already implementing new modifications of blockchain and alternative analogs. The legal status of cryptocurrencies varies greatly from country to country. A number of the country’s cryptocurrency transactions are officially allowed. They are usually viewed as a commodity or investment asset and are subject to the relevant legislation for tax purposes. In Germany Bitcoin is recognized as a unit of account, in Japan Bitcoin is legal tender with a purchase tax.

Global trends and vectors of cryptocurrency regulation in certain regions were formed 7-8 years ago, and neither then nor now governments and banks around the world have a unified approach to this issue. The U.S. and Canada are trying to integrate cryptocurrencies into the existing legal framework, which causes a lot of problems for both regulators and industry players. Although, in general, cryptocurrency in this part of the world is warmly welcomed and the largest markets and exchanges are operating here. 

In Asia, they are trying to use blockchain and cryptocurrencies to improve the existing financial system. But countries’ understanding of this process is different: while Japan recognized bitcoin as a means of payment, China has taken the path of blockchain monopolization by the state. The legal framework for cryptocurrencies in Europe is rather vague and varies from country to country. Strict rules are set only for procedures. The key regulators in Eastern Europe are Russia and Ukraine with different positions on cryptocurrencies. In Russia, a law came into force, which defined cryptocurrencies as property but prohibited their use as a means of payment. Ukraine passed a law to regulate the circulation of cryptocurrencies in the country.  Other countries either follow the example of their larger neighbors or still do not understand how to regulate cryptocurrency, which is not surprising, given the complex economic and technical nature of cryptocurrencies. Cryptocurrencies have become part of the global economy. That is why in the last few years we have seen a tightening of regulation not even so much of cryptocurrencies themselves, but of the market ecosystem: KYC on exchanges, transaction monitoring of individual wallets, anti-money laundering, and much more. Even in the EU, where it has not yet been decided what to count cryptocurrencies as, exchanges are subject to AMLD5 rules.

Currently, there is no legal and regulatory framework in the world that establishes reference rules governing cryptocurrency ICOs. It follows that and there are no legal protection mechanisms for both investors and persons issuing cryptocurrency tokens. Now in some countries, there are already attempts to include crypto investing in the legal field and giving cryptocurrencies an official status. It is possible to consider these attempts in the creation of conditions for the regulation of the new instrument of financing. An illustrative example is Japan, which was the first country to equate digital to real money, legalized cryptocurrency exchanges by developing rules for their and, as a consequence, created a basis, but not a systematic benchmark for procedures similar to ICOs.

The example of these countries has shown that defining the legal status of cryptocurrencies and the processes of Initial Coin Offerings creates guarantees for participants and players in the market itself, and thanks to this there are prerequisites for the emergence of crypto-investment centers. Of course, the lack of legal regulation provides freedom, nevertheless attracting serious players will require certain legislative and legal guarantees.




5 min reading

Learn more about crypto-currency before going into real trading


What Is Crypto-currency?

The fundamental idea behind crypto-currencies is interesting and curious from the point of view of technology and data storage. This article is dedicated to the crypto-currency concept and explains how it works.

What is crypto-currency?

First of all, crypto-currency is a kind of digital currency, where data circulation and accounting are automatic in a decentralized system and is not administered by anyone. The basis of crypto-currency is a blockchain, a place where information is stored with the help of encryption and other cryptographic methods in order to ensure the validity of the work done in the blockchain network (transactions, calculations, etc.) or validate the ownership of crypto-assets (Proof-of-stake).

Features of Crypto-currency

Further, the main distinctive feature of crypto-currency includes the method of their creation or issuance. As you know, each crypto-currency is built on a blockchain system. Cryptocurrencies have no centralized authority and control institution. All operations and transactions that take place within the network are verified and validated by the participants of this network. In other words, the system is self-managed. Moreover, cryptographic blocks in the network are formed from operations that are stacked on top of each other.

 All blocks are connected in a continuous chain, thus new blocks carry cryptographically encrypted information about previous blocks. Important to know, this method provides high crypto-currency security and reliability against hacks since it is impossible to enter information into one block without modifying all subsequent blocks. In general, the formation of new blocks in crypto-currency is called issuance.

This operation is a continuous process of generating new blocks in the crypto-currency network. Thus, there is a difference from traditional currencies where the emission is made by printing and stamping new monetary units, but the emission of crypto-currencies is executed by the mining process.

Important to know, crypto-currency emission occurs in several forms:

    • one-time issuance of all crypto-currency coins, that prevents mining;
    • limited issuance, with the possibility of mining;
    • directly dependent on mining and unlimited issuance.

As you know, the most popular crypto-currency is bitcoin. A vast number of crypto-currency derivatives based on bitcoin source code. However, why are there so many crypto-currencies if they all function the same as bitcoin? A vast number of crypto-currencies took only the source code from the bitcoin project but then they were developed and improved for private goals and objectives. Thus, there are several generations of crypto-currencies that are aimed to improve such functions as the speed of transferring information, transaction speed, decrease commissions and fees, improving safety and privacy, etc. Besides bitcoin counterparts, there are many other crypto-currency projects, such as Ethereum that is second by capitalization position. Nowadays, Ethereum is an example of a crypto-asset with unlimited issuance.

Payment methods

Cryptocurrency transactions are based on unique payment methods. Since there is no administration in crypto-currency, it is impossible to reverse transactions as sometimes happens in banking systems. However, the uniqueness of protection provides the involvement of intermediaries, transactions in the crypto-currency network can not be carried out with the participation of only one party since you always need to involve several users-intermediaries to validate the transaction. Sometimes the participants of the network can block or freeze the funds until all parties come to a consensus. 

Also, all crypto-currencies are based on a pseudonymous transaction method. It means that every user of the network can see all the information about transaction data or account address, but the information about the owner is not available. Despite the facts above, everyone should take care of the security of their crypto wallet. Using reliable platforms, setting 2AF and antivirus will provide an appropriate security level.

However, the development of crypto-currencies is directed towards switching from the pseudonymous method to a completely anonymous one. All the information above proves that the fundamental idea of the crypto-currencies features is based on their generating method, autonomy, reliability, and anonymity. Perhaps, the concept of crypto-currencies will be improved with many new features added in the future.




7 min reading

Increase your vocabulary by exploring crypto definitions with bit4you Academy


Train yourself with definitions


    • Altcoins are alternative cryptocurrencies that were launched after the success of bitcoin. Altcoins are created by diverging from the fundamental rules of the cryptocurrency’s network or by developing a new cryptocurrency from scratch.
    • Bitcoin (BTC) is the first peer-to-peer digital cryptocurrency in the world, based on blockchain, launched in 2009 by Satoshi Nakamoto.
    • Cryptocurrency is a type of digital currency based on cryptographic methods and blockchain technology.
    • Ethereum (Ether) is an open-source, blockchain-based, decentralized software platform, launched in 2015 by Vitalik Buterin and used for its cryptocurrency, ether. It enables SmartContracts and Distributed Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party.
    • FUD is acro of «Fear, Uncertainty, and Doubt». When the crypto community calls some news FUD, it means that the news is probably not an objective assessment, but a rumor that can affect the price of bitcoin.
    • Scammer is a hacker or “thief” in the crypto world.
    • Token is the unit of cryptocurrency. Tokens are a kind of shares of new companies and cryptosystems. They can be received with the help of buying it during ICO or when entering exchanges.
    • White paper a document describing the main issues and methods of their solution within the framework of the presented project. White paper usually contains a detailed description, information about the current market situation and growth forecasts, conditions for the issuance and use of tokens, a list of team members and project consultants.
    • Initial coin offering (ICO) is an investment attraction procedure based on the sale of the company’s assets. Assets can be either tokens or a cryptocurrency received by emission.


    • ASIC (Application Specific Integrated Circuit) is used in the process of mining cryptocurrency using special equipment. Asics are created specifically for mining crypto. ASICs are engaged in decoding the blockchain and creating new blocks. ASIC calculations are carried out using special chips, and ASIC power is higher
    • Cloud mining is a type of mining that does not imply the purchase of equipment. The company buys necessary mining equipment and rents it out remotely.
    • Complexity of mining is a parameter that determines how much computing power is required to find a block in the coin network. The difficulty of mining grows as the hash rate increases.
    • Miner is a person who is mining cryptocurrency blocks with the help of special equipment.
    • Mining is the process of finding a block in the coin’s blockchain.
    • Mining pool is collectively mining cryptocurrency. Many devices are combined to find a block, the reward is shared among all participants.


    • Block is a list of transactions for a certain period of time. Miners receive a reward for the confirmation of these transactions. Blocks are mined and embedded in the blockchain sequential.
    • Blockchain is data storage technology in the form of a list of checked blocks, each of the blocks refers to the previous ones; the storage devices are not connected to the shared server.
    • Fork is a process of creating an alternative blockchain from an existing one. During a soft fork, a modification is made to change the original blockchain.
    • A hard fork splits the original blockchain into two independent ones. The result is a new cryptocurrency.
    • Halving is a process that lowers the reward for mining cryptocurrency. For example, on the Bitcoin network, halving occurs approximately every four years.
    • Key is a password for a cryptocurrency wallet. It consists of a particular list of characters. There is a possibility to lose your crypto in the case of losing the key.
    • Pending transaction is a transaction that has already entered the blockchain and is awaiting processing by miners.
    • Smart contract is a specific algorithm based on the blockchain. Smart contracts are used to conduct complex transactions such as exchanging assets through decentralized applications.
    • Transaction is the process of transferring funds from one account to another.
    • Wallet is a method of storing bitcoins for future use. The wallet stores private keys linked to bitcoin addresses.


    • «to the Moon» is the very rapid growth of price on crypto-asset.
    • All Time High (ATH) is the historical maximum of the value of the crypto-asset.
    • Attack 51% are cryptocurrency blockchain manipulations, which will make it possible to take control over the blockchain. A hacker or a group of hackers connects powerful mining equipment to the network to capture more than 50% of the computing power. It allows them to process transactions that are beneficial to the fraudster, for example, spend more money from the wallet than it has.
    • HODL is a strategy that presupposes buying and keeping an asset for some time, with the hope of its growth in the future. It is an abbreviation from the misspelling of the word “hold” on the forum. 
    • Investment strategy is an approach for the crypto investor to get the best profit, guided by the specific method of investment, assessing risks, capital needs, and goals.
    • Technical Analysis is a set of approaches that allows the assessment of the crypto market and its tendencies by monitoring and analyzing charts, graphs, and indicators. It requires special skills. 
    • Trading strategy is a plan or approach for traders in order to make a profit from deals.
    • Volatility is a rate at which the price of crypto-assets increases or decreases for a given set of returns. Sometimes, it can be turned to make a profit for investors or traders.
    • Whale is a significant market participant with a large amount of funds. It may have enough capital to manipulate the price of the asset in the crypto market.