As a digital form of currency that operates independently of any central authority, cryptocurrencies have gained attention in recent years – both from proponents of a new form of monetary system and from governments suspicious of its potential impact.

While some countries have embraced cryptocurrency as a promising financial innovation by introducing comprehensive regulatory frameworks to support development, others have heavily restricted or completely banned its use.

Which Countries Have Banned Cryptocurrencies?

Several countries worldwide have prohibited their citizens from dealing with cryptocurrencies, while others have limited their use in specific ways. Countries such as Argentina, Colombia, Iran, and Taiwan have instituted partial bans, such as allowing individuals to hold or mine digital assets while prohibiting banks from accepting them as payment methods. But there are at least 19 countries where crypto is banned completely.

China is perhaps the most prominent country to have restricted cryptocurrency activity. By the mid-2010s, China had solidified its position as the world’s largest cryptocurrency mining hub, with estimates suggesting that it hosted as much as 75% of the world’s Bitcoin mining capacity in 2018.

However, the Chinese government has a complex relationship with cryptocurrencies, imposing a blanket ban on initial coin offerings (ICOs) in September 2017 and subsequently banning cryptocurrency trading platforms in 2019. Individuals continued to trade, however, and as China has been a major crypto market, these bans had a notable impact on the price of Bitcoin and other popular coins and tokens.

The most significant change came in 2021, when the Chinese government intensified its crackdown on cryptocurrency activities, including mining. This led to the closure of many mining operations and a shift in the global cryptocurrency mining landscape. China’s share of the mining market had dropped to around 21% by the end of 2021.

The Chinese government cited concerns about financial stability and money laundering as reasons for the ban. It has also been encouraging the adoption of its CBDC, the e-yuan, offering the benefits of a digital asset while maintaining its control over the money supply.

Nepal has banned cryptocurrency transactions since 2017 when the country’s central bank issued a directive stating that any transactions involving cryptocurrency would be considered illegal. Bangladesh also issued a ban in 2017 warning against the use of Bitcoin and other cryptocurrencies as an offense that can result in imprisonment.

Several African nations have imposed outright bans on cryptocurrencies. The government of Algeria, in North Africa, issued a law in 2018 that criminalizes the use, purchase, sale, and holding of cryptocurrencies, citing concerns about their potential use in illegal activities. In Morocco, the Foreign Exchange Office and central bank issued a joint warning in 2017, emphasizing that transactions involving cryptocurrencies would be subject to penalties. Ghana, Lesotho, and Sierra Leone has bans, as do Egypt, Libya, and Morocco.

In Latin America, Bolivia’s Financial System Supervision Authority issued a resolution in 2014 prohibiting the use of Bitcoin and other digital currencies, citing a lack of consumer protection and the potential for money laundering. In 2022, the Bolivian central bank prohibited the banking sector from using, marketing, or transacting cryptocurrency assets to protect the public from “risks, frauds and swindles” and “the risk of creating economic losses”. Meanwhile, in 2014, Ecuador became one of the first countries to introduce its own CBDC, the “Sistema de Dinero Electrónico” (Electronic Money System), and banned the use of decentralized cryptocurrencies as legal tender.

Like China, several countries have taken evolving positions on the legality of cryptocurrencies within their borders. For instance, Bangladesh’s central bank announced in 2017 that cryptocurrency transactions are illegal under money laundering and terrorist financing regulations. However, the government published its National Blockchain Strategy in 2020, recognizing “the need to explore blockchain technology in order to advance its technical capacity, increase efficiency in e-Governances, and foster innovations… to guide Bangladesh into a blockchain-enabled nation.” But in 2022, Bangladesh Bank issued a notice stating that transactions involving virtual assets, including virtual currencies, are not permitted.

Egyptian authorities have long been critical of digital currencies. In 2018, religious leaders issued a statement that virtual currencies are forbidden under Islamic law. In 2020, the Central Bank of Egypt published licensing rules for issuing, dealing, or promoting cryptocurrencies, indicating that it was potentially on the path to regulating their lawful use. However, in 2023, the central bank reiterated its “previous warnings against dealing with all types of cryptocurrencies, whether through individuals, companies, applications, or digital platforms. Thereby, the Central Bank of Egypt emphasizes that no license has ever been issued or granted to engage in such trading activities in the Egyptian market due to the high risks they comprise, including but not limited to fluctuations and significant price volatility, as well as their use in financial crimes, and electronic piracy.”

In several countries where digital assets are officially banned, individuals continue to actively trade or hold them as a store of value or a way to generate income. And the decentralized nature of cryptocurrencies can make it difficult to enforce restrictions. In Ethiopia, the central bank stated in June 2022, reiterating that cryptocurrency business was illegal. But less than three months later, in August, it appeared to have reversed its decision, stating that cryptocurrency operators were required to register with the Information Network Security Administration (INSA), the government’s cybersecurity agency, within 10 days. The INSA acknowledged that “there is interest among individuals and entities in providing crypto services including mining and transfer. To properly regulate this field, INSA has begun to register individuals and entities that are involved in crypto operations (services).”

Why Some Countries Ban Cryptocurrency

The decision by several governments to prohibit the trading or use of cryptocurrency in their countries is rooted in a combination of economic, regulatory, and security concerns. Here are some key reasons why certain nations have chosen to take a cautious approach or an outright ban:

• Financial stability: One of the primary concerns for governments is the potential impact of cryptocurrencies on their domestic financial systems. Their decentralized and often volatile nature can pose risks to financial stability, as sudden surges or crashes in crypto prices can have a severe impact on investors and financial institutions.
• Consumer protection: The lack of investor protection mechanisms in crypto markets can leave consumers vulnerable to fraud, scams, and market manipulation. Inexperienced investors may fall victim to Ponzi schemes or lose their savings owing to the speculative nature of cryptocurrency markets.
• Money laundering and illicit activities: Cryptocurrencies offer a degree of anonymity, making them attractive to criminals for money laundering, tax evasion, and illegal transactions. Governments are concerned that cryptocurrencies are used to finance terrorism, drug trafficking, and other illicit activities.
• Tax evasion: Cryptocurrency transactions can be difficult to trace, raising concerns about tax evasion. Some governments are concerned that an increase in individuals or businesses using cryptocurrencies to avoid paying taxes could reduce their revenues.
• Lack of control: Cryptocurrencies operate outside the control of central banks and governments. Some governments view this as a challenge to their sovereignty, reducing control over the money supply and monetary policy.
• Financial fraud: Cryptocurrency markets are rife with scams, fraudulent initial coin offerings (ICOs), and Ponzi schemes. Governments often ban cryptocurrencies to protect their citizens from falling victim and losing their money.
• Some countries are developing their own central bank digital currencies (CBDCs) and see private cryptocurrencies as a potential threat to their adoption. They may choose to ban or heavily regulate private cryptocurrencies to promote the use of their own digital currencies.

The Bottom Line

While cryptocurrency has gained widespread popularity as a decentralized and borderless form of digital currency, not all countries have embraced it with open arms. Regulatory positions are frequently changing, with some governments banning cryptocurrency outright while attempting to assess the implications of blockchain technology and digital assets on their financial systems. These restrictions often arise from concerns about financial stability, consumer protection, and the potential for illegal activities such as money laundering.

The rapidly developing nature of the cryptocurrency industry means that regulatory approaches may continue to evolve in the future as governments grapple with finding the right balance between embracing innovation and mitigating potential risks.