There is absolutely nothing illegal to mine Bitcoin. However, mining and even buying Bitcoin is considered illegal in some countries. But in North America and most European countries, Bitcoin mining is very legal, and even the government regulates the use of it.
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In most countries, Bitcoin isn’t considered as currency, but rather an asset. For this reason, Bitcoin is given some sort of legal protection by the government of these countries. In countries where the use of bitcoin hasn’t been allowed, chances are there no laws have been passed regarding the use of it. Mining of bitcoin is very legal.
In this post, we shall be discussing all legal issues concerning to mine Bitcoin. Before we do that, I will like to first give you an overview of what bitcoin is all about. You can skip this part if you have mined bitcoin before or know what it is all about.
What is bitcoin mining all about?
Bitcoin mining is basically a process which lets a user add records of transaction to a publicly used ledger. No bitcoin transaction can be done without first being recorded on a public ledger even though users can choose to remain anonymous. Public ledgers used for the transaction of bitcoin is generally referred to as blockhain and bitcoin transactions are done in blocks.
When a new mining process is initiated, a new block would be created for transaction. After initiating a new transaction, new blocks would be created by dedicated computer processors through the use of certain algorithms before then being added to a public ledger, the blockcahin in this case.
Over the years, it has increasingly become difficult to create new blocks, no thanks to the increasingly difficult nature of bitcoin algorithm which has been made possible by increasing capabilities of computers. Added to that, the number of bitcoin awarded to users every four years reduces by two. During the early years of bitcoin, users were awarded 50 coins, after which it fell to 25, eventually falling to 12.5 now. This has not only made bitcoin scarce but has also increased its value.
To succeed to mine Bitcoin you will need a powerful processor. Currently, dedicated mining machines known as “mining rigs” are being used to mine Bitcoin . These machines have been designed to efficiently mine new bitcoins by simplifying the algorithm involved in the creation of new blocks. An economically viable machine is one that can mine new coins quickly without consuming so much energy.
Why is Bitcoin mining considered illegal in some countries?
Explaining this isn’t that easy as several factors are involved. In some instances, people wrongly assume to mine Bitcoin offers an avenue to counterfeit money, but we all know this is far from the truth. Bitcoin mining is all about creating new currencies and not duplicating or counterfeiting existing ones.
In fact, the reason why some governments ban the mining of bitcoin is that they fear it would compete with their country’s fiat currency. Some are even scared that bitcoin would make people unwilling to use state currency.
One inherent problem with bitcoin is that it can be mine illegally. People that use this black hat technique hack into the computers of other miners, hijack their processor and then use it to mine bitcoins for themselves. When this happens, the processing speed of mining computer is slowed, and more energy is consumer, and this act is generally considered illegal.
In what countries is bitcoin mining considered illegal?
To mine Bitcoin and possession of bitcoin is considered out rightly illegal in some countries, while it is neither legal nor illegal in some other countries due to the ambiguous nature of the government’s message.
In Russia for instance, the use of bitcoin is considered illegal, though some of the anti-bitcoin legislations have been withdrawn. This legislations have been withdrawn not to outlaw bitcoin mining but to punish those found mining the cryptocurrency. There have been cases in Russia where bitcoin miners have been handed down jail terms running into several years. As it stands now, mining bitcoin in Russia is a risky venture because the government hasn’t come out to say in clear terms if it is legal or illegal.
Russia, due to its authoritarian nature frowns seriously at the use of bitcoin. Added to that, the country have been going through series of economic downtimes due to falling oil prices and economic sanctions handed down to Russia due to her involvement in Ukrainian crisis. It is believed that part of the reason why the use of bitcoin is frowned upon by the government is in a bid to salvage the ruble. The ruble has over the years has been severely affected by inflation, and the Russian government fear it would suffer the more should bitcoin be allowed.
In Ecuador, a South American country, bitcoin and every other cryptocurrency is completely outlawed. Surprisingly, the country has created its own cryptocurrency which has been linked to the US dollar, Ecuador’s official currency. The government’s intent for doing this is to reduce the use of physical currency which often wears and tears with time. Obviously, bitcoin has been banned to eliminate competition against the country’s local digital currency. In Iceland, mining of bitcoin is legal, only that users are prohibited to trade bitcoin for kroner, the country’s official currency. The reason for this is that ever since the days of the Great Recession, Iceland’s government had instituted protectionist policies to guard the kroner against inflation.
In India, the government haven’t passed any anti-bitcoin laws even though most government officials frown upon it. As it stands now, it is very risky to mine bitcoin in Russia, Iceland and India.
Countries where bitcoin mining is considered legal
In countries where mine Bitcoin is considered legal, it is expected of users to use white hat strategies in mining their bitcoin, and this would mean using one’s own processing computer and electricity. Stealing someone else’s resources to mine bitcoin is considered illegal.
Mining bitcoin for illegal purposes in countries like South Korea and the United States attracts criminal prosecution, which could be followed by severe jail terms.