In the world of finance and technology, cryptocurrencies have captured the attention of millions, offering a decentralized alternative to traditional monetary systems. However, not all countries have embraced this digital revolution with open arms. As of 2023, some nations have imposed crypto bans, either outright banning them or imposing strict regulations on their usage.
The number of countries with outright bans on cryptocurrencies is relatively small, with only a few adopting this approach. Many others have imposed various restrictions on crypto trading, ownership, and usage, necessitating careful scrutiny of each country’s regulations to ensure compliance.
Many countries have banned the usage of cryptocurrencies for payments but are discovering other aspects of the blockchain technology and digital asset sector like Russia. Following the Russia-Ukraine war, the country seeks an alternative mode of payment for the US dollar and is even building a gold-backed currency and a stablecoin.
However, we will provide a comprehensive overview of countries that have either banned or restricted cryptocurrencies, shedding light on the reasons behind their decisions.
Five Countries Where Crypto Ban Is Imposed
China
China banned cryptocurrencies and related activities for several reasons. The ban came into force in September 2021, and it was aimed at curbing various aspects of the crypto industry within the country. The government first banned Bitcoin and cryptocurrencies in 2013 by announcing new rules regarding crypto transactions at financial institutions. The rules stated that Chinese banks could no longer hold or transact in virtual currencies like BTC.
While the authorities did not ban buying, sending, and holding crypto, it became very difficult for investors to purchase digital assets now that banks did not accept the usage of yuan for the same. Additionally, during the 2017 bull market, the Chinese authorities implemented additional scrutiny on crypto trading and also, to curb the demand of Initial Coin Offerings (ICOs), the authorities banned them.
Finally, in 2021, China banned crypto mining and all crypto trading and transactions. Moreover, anyone found working for a Chinese tech firm associated with crypto can face jail time.
Here are some reasons why the country banned the usage of crypto:
Financial Stability Concerns: The Chinese government expressed concerns about the potential impact of cryptocurrencies on the country’s financial stability. The volatile nature of cryptocurrencies and their speculative nature raised worries about potential risks to the stability of the financial system in China.
Capital Flight Control: China aimed to prevent capital flight through digital assets. Cryptocurrencies offered a way for individuals to move funds out of the country with relative ease, which could have adverse effects on the Chinese economy and foreign exchange reserves. The government sought to control and restrict such activities by banning cryptocurrencies.
Potential for Money Laundering: The Chinese government viewed cryptocurrencies as a means for money laundering and illicit activities. By banning crypto transactions, they aimed to prevent these potential criminal activities and protect the safety of people’s assets.
Regulatory Control: China has a history of imposing restrictions on various aspects of the cryptocurrency industry since 2013. Initially, the bans focused on trading and using cryptocurrencies as a form of money. Over time, the regulations expanded to include mining and other activities in the crypto space.
It’s worth noting that while China prohibited many crypto-related activities, it didn’t explicitly ban individuals from owning cryptocurrencies. So, owning cryptocurrencies remained legal and protected under the ban]. The ban primarily targeted crypto trading platforms, promotion, sale, and mining of cryptocurrencies, rather than individual ownership.
Libya
Libya has implemented a ban on cryptocurrency mining and transactions. The ban on cryptocurrency mining was officially declared as illegal in Libya and has been in place since 2018. The ban was placed by regulators who claimed that there was an increase in the usage of cryptocurrencies for money laundering, financing of terrorism, drugs, guns, forged documents, and even illegal pornography.
Despite the ban, there have been reports of secret Bitcoin mining operations in the country, leading to public outrage and concerns over electricity consumption during rolling blackouts. Libya has one of the lowest electricity charges which has attracted miners from all over the globe. Interestingly, authorities in Libya have taken action to dismantle clandestine cryptocurrency mining networks and detain individuals involved in illegal crypto mining activities. For instance, there have been cases where Chinese nationals were detained for operating large-scale crypto mining farms in Libya.
The Central Bank of Libya (CBL) has also officially banned all transactions related to virtual currencies, including buying, selling, and demining. The ban was put in place to prevent potential criminal activities, such as money laundering, terrorism financing, drug trafficking, and other illegal activities associated with virtual currencies.
On the other hand, legitimate organizations are paying attention to ways in which they can make use of the popularity of the leading cryptocurrency, Bitcoin (BTC). However, as per Cointobuy’s analysis tool, the legal status of cryptocurrency in Libya is controversial, it’s also ranked 226 out of 249 countries in terms of cryptocurrency safety, leading the country to a 1.1/10 safety rank.
Qatar
Qatar has implemented a ban on cryptocurrency activity within the Qatar Financial Centre (QFC). The Qatar Financial Centre Regulatory Authority (QFCRA) announced that all services involving cryptocurrencies, including crypto to crypto trades and crypto to fiat exchanges, are prohibited within the QFC. However, it is essential to note that this ban specifically targets cryptocurrencies, and activity involving digital securities, including security tokens, remains unaffected.
The ban on cryptocurrency activity in the QFC aligns with the country’s previous stance on cryptocurrencies. Qatar’s central bank had already declared it illegal to trade bitcoin in the country, citing concerns about the coin’s high volatility and its potential use for financial crimes and illegal activities.
In a recent report by the Financial Action Task Force (FATF), Qatar received criticism for not adequately enforcing the crypto ban that was announced in 2019. The global anti-money laundering watchdog urged the Qatar Central Bank (QCB) to take more proactive measures in identifying and sanctioning virtual asset service providers (VASPs) that violated the crypto prohibition. The FATF expressed concerns that Qatar had been too lax in combating terrorist fundraising and other financial risks associated with cryptocurrencies.
The primary reasons for banning cryptocurrency in Qatar can be summarized as follows:
Volatility and Financial Crimes: The Qatari government expressed concerns about the high volatility of cryptocurrencies, which can lead to significant financial risks for investors. Moreover, cryptocurrencies’ pseudonymous nature could facilitate illegal activities, such as money laundering, terrorist financing, and cybercrimes.
Lack of Regulation and Guarantees: The Qatari authorities pointed out that cryptocurrencies lacked a centralized regulatory framework and were not backed by any guarantors or assets, making them highly speculative and risky for investors.
National Security Concerns: Like several other countries, Qatar also expressed concerns about the potential use of cryptocurrencies for illegal activities that could threaten national security and stability.
Regulatory Compliance: The ban on cryptocurrencies aligns with Qatar’s efforts to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations set forth by global financial watchdogs like the Financial Action Task Force (FATF).
Interestingly, while Qatar has banned cryptocurrency activities, it has allowed some exceptions for digital forms of securities and other financial products that are regulated by the Qatar Central Bank and other financial authorities in the country.
Morocco
Morocco has implemented a ban on cryptocurrencies. The ban was announced by Morocco’s central bank, Bank Al-Maghrib, in November 2017. According to the announcement, virtual currency transactions were considered a violation of foreign exchange regulations and subject to sanctions and fines.
The ban was put in place to protect citizens from potential legal problems and financial losses associated with cryptocurrencies, which were seen as unregulated and volatile with no mechanism for user protection.
Despite the ban, there has been a rise in cryptocurrency ownership and trading activities in Morocco. Reports indicate that cryptocurrency trading on peer-to-peer platforms like LocalBitcoins has reached all-time highs, and the number of crypto users were steadily increasing before the platform closed in February 2023.
Additionally, possession of cryptocurrencies in Morocco has continued to grow, and a significant percentage of the population now owns some form of cryptocurrency, making the country one of the front-runners in Africa in terms of crypto adoption.
The Moroccan authorities believed that cryptocurrencies, like Bitcoin, facilitated illicit activities such as trading drugs, weapons, and ransomware. The ban was also a response to the increasing interest in cryptocurrencies, as Morocco’s central bank wanted to curb potential social risks like terror financing and money laundering.
Moreover, there were concerns about the potential impact of cryptocurrencies on economic and monetary sovereignty, which contributed to the decision to implement the ban.
Kuwait
In July 2023, Kuwait implemented a comprehensive ban on cryptocurrencies and virtual asset transactions, including Bitcoin and Ethereum. The ban was announced by the Capital Markets Authority (CMA), which is Kuwait’s main financial regulator. The CMA’s circular reaffirmed the “absolute prohibition” of major use cases and activities related to cryptocurrencies, including payments, investments, and mining. Local regulators are also prohibited from granting licenses to businesses offering virtual asset services commercially.
The ban applies to all virtual asset transactions, investments, and mining activities within the country. Kuwait’s new rules align with its efforts to combat money laundering and terrorist financing, and they aim to ensure compliance with the Financial Action Task Force’s (FATF) global recommendations for crypto assets. However, the circular clarifies that securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA are exempt from these prohibitions.
The CMA’s circular emphasized the risks associated with virtual assets and cryptocurrencies, stating that they lack legal status, are not issued or supported by any government, and are subject to speculative volatility. The regulator warned the public about the potential consequences of non-compliance with the ban, which could lead to penalties under Kuwait’s Anti-Money Laundering laws.
The reasons cited for the ban include concerns over money laundering and financing of illicit activities associated with cryptocurrencies. Additionally, the regulatory authorities expressed concerns about the high volatility of cryptocurrencies and their lack of regulation, which could expose investors and the public to significant financial risks. The ban is aimed at safeguarding the financial security and stability of the country by curbing potential illicit activities and protecting consumers from speculative risks.
The ban aligns with the global recommendations issued by the Financial Action Task Force (FATF) regarding virtual assets. The FATF is an international organization that sets standards and guidelines for combating money laundering and terrorist financing. By implementing the ban, Kuwait seeks to ensure compliance with the FATF’s recommendations and strengthen its efforts to combat financial crimes.
Uncertain/Changing Laws
Egypt
Egypt had previously banned cryptocurrencies under Islamic law in 2018. The Grand Mufti of Egypt, Shawki Allam, issued a religious decree classifying commercial transactions in cryptocurrencies as haram (prohibited under Islamic law) due to concerns over potential tax evasion, money laundering, and fraudulent activities.
However, there have been recent developments confirming that Egypt has lifted its ban on cryptocurrencies. According to several reports, Egypt lifted the ban on cryptocurrencies one year after it was initially prohibited. The Central Bank of Egypt (CBE) has issued a new banking law that allows cryptocurrency firms to operate if they obtain the necessary license.
Turkey
Turkey’s central bank has officially banned the use of cryptocurrencies and crypto assets for purchasing goods and services in the country. The ban applies to all cryptocurrencies, including Bitcoin, and prohibits their use directly or indirectly as instruments of payment. The ban was announced in legislation published in the Official Gazette.
It’s worth noting that Turkey’s stance on cryptocurrencies remains in a legal gray area. While the central bank has banned their use for payments, digital asset trading remains unimpeded. However, the government’s efforts to stifle Bitcoin usage have not deterred the growing interest in cryptocurrencies among the Turkish population.
The decision to ban crypto payments came amid an economic crisis in Turkey, characterized by soaring inflation rates and a weak Turkish lira. The economic turmoil has led many citizens to seek refuge in cryptocurrencies, particularly Bitcoin, as a means of preserving their savings from the devaluation of the national currency.
Despite the ban on crypto payments, the adoption of cryptocurrencies in Turkey has continued to increase. The decentralized nature of cryptocurrencies and their potential to act as a reliable store of value have attracted individuals from various backgrounds, with younger investors showing particular interest in the digital assets.
Saudi Arabia
In 2018, Saudi Arabia officially banned cryptocurrency trading, and the Saudi Arabian Monetary Authority (SAMA) warned against the use of cryptocurrencies, calling them illegal. However, now the country is reconsidering its approach.
The Saudi Central Bank has taken steps to boost its digital ambitions and has hired a crypto chief to lead a program dedicated to digital assets. Additionally, there are reports that Saudi authorities are considering formally regulating cryptocurrencies in the country, with a team working in common agreement with several crypto companies to gather opinions on what regulatory standards to adopt. This indicates a potential shift from an outright ban to a more regulatory approach.
Moreover, Saudi Arabia is collaborating with the United Arab Emirates (UAE) to develop a blockchain-based digital currency for cross-border transactions, which reflects a willingness to explore digital assets in a controlled manner.
Implications of a Crypto Ban
A crypto ban can have significant implications for various industry members, including individuals, businesses, and the broader economy. Here are some of the key implications of a crypto ban:
Loss of Financial Freedom: A crypto ban restricts individuals’ ability to use digital currencies as an alternative form of money. It takes away the financial freedom of people to transact and store value outside traditional banking systems.
Impact on Investments: Investors who hold cryptocurrencies may face challenges in liquidating their holdings, leading to potential losses. Moreover, banning crypto-related businesses can disrupt investment opportunities and stifle innovation in the blockchain and crypto space.
Reduced Access to Financial Services: Crypto ban may hinder access to financial services, especially for those who do not have access to traditional banking systems. Crypto has enabled financial inclusion for many unbanked or underbanked individuals worldwide, and a ban could reverse this progress.
Loss of Innovation and Job Opportunities: The crypto and blockchain industry has been a hotbed for innovation and job creation. A ban could dampen this growth and lead to a loss of job opportunities in the sector.
Challenges for Cross-Border Transactions: Cryptocurrencies have facilitated cross-border transactions with lower fees and faster processing times. Banning crypto could make cross-border remittances and international trade more cumbersome and costly.
Underground Economy: A crypto ban may drive crypto-related activities underground, leading to an increase in unregulated and potentially illegal transactions. This can pose challenges for law enforcement in monitoring and controlling financial activities.
Impact on Technology Development: Blockchain technology, which underpins cryptocurrencies, has potential applications beyond finance, such as supply chain management, healthcare, and voting systems. A crypto ban might hinder the development and adoption of these innovative technologies.
Opportunity for Black Market and Scams: In the absence of regulated crypto exchanges, scams and fraudulent schemes could proliferate, taking advantage of investors who still want to participate in the crypto market.
Loss of Tax Revenue: Governments may miss out on potential tax revenues from crypto-related activities if they are pushed into the underground economy or conducted in jurisdictions with more favorable regulations.
International Competitiveness: Banning cryptocurrencies can affect a country’s international competitiveness in attracting crypto-related businesses and investments. Countries with more favorable regulations may become hubs for crypto-related activities, drawing talent and capital away from countries with bans.
Conclusion
The global landscape of countries that have banned cryptocurrencies presents a diverse and complex picture. While the vast majority of nations have adopted a more open approach towards digital assets, some have taken a firm stance against their usage, imposing outright bans or stringent restrictions.
Countries like China have imposed strict restrictions on crypto but was the first country to develop and test the central bank digital currency called the digital yuan. Moreover, it is also working to integrate blockchain technology in its financial system.
While some nations have chosen to restrict the use of cryptocurrencies, others have taken a groundbreaking approach by adopting them as legal tender. These include the Central African Republic and El Salvador.
