Cloud mining — is it legal? We analyze the status of cryptocurrencies in the legislation of different countries.
Since 2015, 99% of the world’s countries have been seriously concerned about the legal foundation and regulation of cryptocurrencies. But even in 2021, we cannot say that this has been done well everywhere, as evidenced by the constant changes. Let’s take a look at the laws of different countries and learn more about mining and cryptocurrency transactions. At the same time, let’s project this legal information onto cloud mining providers and their clients to see if it is legal to do this kind of investment in your country.
Why do we need to regulate mining and cryptocurrency?
When Bitcoin appeared, only enthusiasts took it seriously, so there were very few participants in transactions, mining, and trading. Because of their small number, legislative institutions were not too interested in delving into crypto topics. But in just a few years, when Bitcoin started to be worth good money and the number of participants involved in the blockchain economy grew noticeably, countries became interested in state regulation of the issue.
By now it is clear that cryptocurrencies are firmly entrenched in the lives of hundreds of thousands. Some people are interested in regular mining with huge farms, some prefer to use outsourced cloud mining services, while others are actively trading on exchanges, where they become participants in transactions worth millions of dollars. Such huge amounts of money need to be controlled, so the laws are written in different ways of regulation, new concepts, and completely new terminology is introduced.
But not all countries act in cooperation, most have chosen an individual course of controlling the circulation of cryptocurrencies. Therefore, there are countries in the world where it is possible to mine completely legally, while in others for this can not only be financially punished, but even given a prison sentence. It is clear that there are always loopholes in the law that can be exploited by active crypto-enthusiasts. For example, cloud mining allows you to mine ETH or BTC where it is forbidden, because the location of the service is the location of the mining farm, not the actual residence of the service’s client. That is why many US, Japanese and even Chinese citizens use cloud mining providers with foreign residency and detailed reporting documentation (Hashmart, 24Hashing and others). In order to better understand the intricacies of legal regulation, let’s look at the procedural experience of leading countries in the crypto-industry and IT.
The United States was one of the first countries where the authorities have taken the issue of cryptocurrency regulation seriously. Local miners can even go to court to solve problems with transactions, and higher competent authorities can intervene in these cases. Crypto can be paid for in many services online and offline, which is an indicator of the absolute acceptance of cryptocurrencies from the legal side. Legislative nuances vary across the country and vary from state to state, so we will not describe them separately.
In the U.S., Bitcoin, Etherium, Tether, Dash, and any other cryptocurrency are subject to a capital gains tax, which can be as high as 37% for short-term transactions, or 20% in long-term transactions (including decentralized exchanges). This applies not only to local miners and traders, but to all those in the country. Thus, cloud mining is only legal in some states if you have a license. It is not illegal to be a cloud mining customer in the United States, but you will still have to pay tax on the actual profit.
It was only in 2021 that they started to consider and try to adapt the laws for mining. One of the deputies proposed to make cryptocurrency a common means of payment and introduced a bill for consideration. If passed in 2022, paying at some McDonald’s with Tether would be the easiest thing to do. Currently, there are no penalties for dealing with or mining crypto-assets unless it is related to criminal activity.
The country’s own currency is subject to constant inflation, so Bitcoin has long been popular here. Venezuelans believe that it, like its mining, can save them from the government’s misguided financial policies. The official legality of mining came in 2020, and the National Committee on Digital Assets was appointed as the responsible body. There are no taxes and no licenses, but it is allowed to exchange and receive crypto.
There are problems here, too — periodic power outages, for long periods of time, and the heat. That’s why cloud mining is very popular in Venezuela, which does not depend on the network and temperature.
There are no restrictions on the use of Bitcoin, as well as regulatory laws. Earlier, the government said it would not recognize BTC and altcoins as a full-fledged means of payment. At the moment, they can be mined, traded on exchanges, and there is no taxation of cryptocurrency. But it is practically impossible to pay anywhere.
Argentina is another representative of Latin America with hyperinflation. Even the President himself noted that the introduction of BTC in circulation will circumvent the problem with the permanent loss of value of the peso. But the opinion of the head of state runs counter to the Central Bank, where there are ardent opponents of decentralized means of payment. In 2021, in Argentina it will be possible to pay for purchases in major retail chains and public transportation.
Since 2018, all activities with crypto were strictly prohibited, but it didn’t last long. In 2021, everyone can mine, buy and sell Bitcoin, but only in accordance with the laws. But the laws themselves on it are simple enough:
- Not to engage in criminal activity.
- Not to build pyramid schemes and fraudulent schemes.
- Pay tax on activities as for basic income.
- Have a special license.
To trade cryptocurrency in this republic, you must register yourself as a financial institution. Mining is not regulated in any way, the income from mining is not taxed. As for all countries with hot climates and expensive electricity, cloud-based BTC or ETH mining on outsourcing seems to be profitable here.
С 2018-го года это африканское государство наложило полный запрет на всё, связанное с BTC и альткоинами. Здесь нельзя майнить, торговать, переводить и даже владеть. Остаётся лишь заниматься облачным майнингом на серверах, расположенных за пределами страны, и выводить средства на кошелек нерезидента.
There has been a complete ban on mining since June 2021. China used to be literally the capital of cryptocurrency mining, it had the largest farms, and the best equipment was produced in the Chinese factory Bitmain. Then the government became seriously concerned about the high electricity consumption caused by the mining boom.
But no one prohibits transactions with crypto, so there are still crypto-owners and miners here. They receive their royalties through cloud servers, which are located in other countries, so they are not banned. Cloud mining on servers outside the country is not taxed.
Any activity with Bitcoin has been officially banned here since 2018. However, the government has recently issued permits to six companies for trading and mining, which may indicate a soon revision of the attitude of the authorities.
Japan is one of the first countries to recognize Bitcoin as a means of payment and to make all transactions with it legal. Coins can be paid, transferred, and given as gifts. But crypto is subject to tax — from the actual profit from short-term transactions 39% will have to be paid to the state (for long-term — 20%).
Investing your money and time in BTC here is legal and profitable. The government is actively working on legislation, but so far it is reduced to the fact that in 2022 there will be a tax on income from mining and trading, if the annual profit exceeds $2,000.
To start working with Bitcoin and altcoins, it is necessary to obtain a license from the MSA. So far this rule applies only to those who are in the territory of the state, which opens the way to cloud mining. In terms of capital gains tax, the situation here is different — there is no tax.
Cryptocurrencies here are securities, so they come under the responsibility of the relevant Commission. All transactions must be conducted in accordance with applicable securities laws, otherwise there is even a prison sentence for illegal trafficking.
Bitcoin and other cryptocurrencies are regulated at the SEC level. It is not illegal to mine, nor is it illegal to buy or sell, but it must all go through the responsible authority. There is even a penalty of imprisonment if actions unregistered by the regulator are found.
The Central Bank of Vietnam has officially banned BTC and altcoins in the country. In Vietnam, you cannot mine or even own crypto, and if you violate these rules, you will face jail time and fines. Cloud mining is still possible, but you need to figure out where to withdraw the money so that it does not fall into the eyes of government agencies.
Crypto-assets here are regulated by the government. You can only trade on your own exchange, ERX, with permission from the authorities, but you can’t mine.
The Middle East has always been attractive to miners because it has inexpensive electricity, no special regulators, and no high taxes. The only problem local traders face is the ban on many crypto-exchanges. So they have to find ways around this restriction. There are no barriers for cloud mining in Kuwait.
The country’s president has long shown himself to be at his best with regard to crypto. According to the latest law, you can mine and trade in Belarus without any taxes from the state. It will last until 2023. In addition, electricity is relatively cheap in Belarus, which makes the country attractive for crypto investment projects.
The government puts a lot of emphasis on cryptocurrency, and is trying to legalize it in every way possible. However, from 2022, miners will have to pay higher electricity rates. The activity does not require licenses and permits, but in order to bring the equipment into the country, one must obtain a document from the National Security Service, as well as simply notify the KRC via the Internet about the start of mining.
Ukraine wants to get the status of the world center of cryptocurrency, for which even open large official NPP-based farms. Taxes for individuals will begin to be collected only in 2025, and will be only 5%, and for legal entities — no VAT and the same 5% of profits.
Uzbekistan is one of a small number of countries where individuals are allowed to sell cryptocurrency, but not to buy. It turns out that mining is officially possible, but with a 3-fold increase in the cost of electricity, and in the case of exceeding the capacity of 100 kW / h — and registration with the state authorities. Therefore, cloud mining Hashmart, reviews of which do not alert potential customers, has become very popular in this country.
The government can’t yet decide what BTC is — money, security, or property. In this regard, there is no regulation at the legal level. So far, it is possible to mine and trade without any concerns. However, if you want to sell cryptocurrency, you will still have to be licensed for financial activity.
Bitcoin is recognized here as official money, which can be paid for, exchanged, saved, etc. At the same time, it is not yet the status of currency, so there is no VAT, and if more than 12 months pass between the purchase and sale, then the tax on the increase in capital is also canceled.
Iceland is a country with a lot of advantages for crypto mining — inexpensive energy, cold climate, lack of taxes and regulation. The only disadvantages are expensive delivery of equipment from the mainland, but in this case, cloud mining can help, which is also not subject to taxes and duties.
Here crypto-businesses have to get a license from financial institutions. Bitcoin has long been common money in Estonia. Due to expensive electricity, it is not reasonable to mine cryptocurrency, because the commission of a cloud provider will be much lower than the losses from organizing and maintaining your own crypto-farm.
The Russian law on mining cryptocurrencies appeared only in 2021. It is possible to mine and trade crypto legally, but it is not possible to buy something with it in Russia. Free access to exchanges, large unoccupied territories, available electricity — made this country popular for cryptoinvestors.
How to make money with cloud mining in countries with a direct ban on cryptocurrency mining?
Some countries refuse to recognize mining officially, because it consumes a lot of electricity, which, therefore, causes serious damage to the environment. But the exchange, buying, and selling of cryptocurrencies within the country are not prohibited. In this case, it is worth paying attention to cloud mining from Hashmart. All of the company’s equipment is located in Siberia, and the cloud mining process is not subject to bans. Coins from cloud mining come from outside and do not participate in the formation of the economies of the states whose residents are their customers. This means that both the process of issuing newly mined coins and their subsequent use is seriously simplified.