Key facts:
So far, only two countries have made bitcoin legal tender.
There are countries where there are no laws on bitcoin, but its use is still allowed.
Did you ever read on social media that bitcoin (BTC) is now considered legal currency in Cuba or Panama? Both statements are incorrect.
The confusion – which has given rise to some fake newsor false news- is produced by ignorance of the definition of three concepts that are: legalize, regulate and convert into legal tender. Although they sound similar, they convey three different ideaswhich will be detailed below.
At the end of the reading, you will be able to distinguish with greater precision what is the status of the cryptocurrency created by Satoshi Nakamoto in each country and determine if any upcoming news you read, or hear about it, is true or not.
What is making bitcoin legal tender?
First, let’s see what it means to make a currency — whatever it may be — legal tender in a country or jurisdiction. The Bank of Spain, for example, define legal tender money as the “official currency in a State, in whose territory it enjoys liberating power”. This means, according to the aforementioned entity, “that the citizens of that country are obliged to accept it as a means of paying a debt.”
To this definition, the Internet encyclopedia, Wikipedia, adds that legal tender money is also called “currency” and “monetary unit”. According to this source, it is “the form of payment, defined by the law of a State, which has been declared acceptable as a means of exchange and a legal way to cancel debts.”
Therefore, If I offer any product or service, I am obliged to accept payment in the currency that is legal tender in the country in which I am located. If I am in Argentina, I will not be able to refuse payments in pesos; if I am in Venezuela I will not be able to refuse payments in bolivars; and if I’m in Spain, I won’t be able to say no to someone who pays me with euros.
So, in a country where bitcoin is legal tender, any offeror of products or services, as well as the State that receives tax assets, is obliged to accept BTC for the cancellation of those payments.
Until the time of publication of this text, only in two countries bitcoin is legal tender: El Salvador (law in force since September 2021) and the Central African Republic (law approved and in the process of being regulated and executed).
In El Salvador, article 7 of the law drafted by President Nayib Bukele establishes: “Every economic agent must accept bitcoin as a form of payment when it is offered to him by the person who acquires a good or service.”
The same is true in the Central African Republic with article 10 of the law presented by President Faustin-Archange Touadéra: “Every economic agent is obliged to accept cryptocurrencies as a form of payment.”
In no other country is there this obligation to accept payments in bitcoin. If you read that bitcoin is legal tender in Cuba, Panama, Ukraine, or any country other than El Salvador or the Central African Republic, it is – at least for now – incorrect information.
What is legalizing bitcoin?
The Elementary Legal Dictionaryby Guillermo Cabanellas de Torres, define legalizationamong other meanings, such as the «extension of positive legal norms to spheres or activities previously excluded from the positive order».
So, legalizing something—whatever it is—means that something, previously prohibited (that is, outside the law), is now allowed. For the case that concerns us here, bitcoinlegalizing it means changing the positive legal system so that its use and/or possession is no longer prohibited.
There are countries where bitcoin and cryptocurrencies are prohibited. In America, that is the case of Bolivia. The case of China, where the exchange and mining of any digital currency is illegal, has also been widely reported by CriptoNoticias.
If any of those countries back down with their explicit ban, then one can speak of legalization. The legal system would be modified and bitcoin would go from being prohibited to being allowed (that is, legalized).
There is a frequent confusion about this: what about the countries that never banned bitcoin, but also did not explicitly allow it? In these cases, what is known as the “principle of legality” usually governs and establishes that everything that is not prohibited is allowed.
According to authors such as the Austrian jurist and philosopher, Hans Kelsen, this principle is part of every legal order and its central idea is that the law prohibits certain behaviors, and the rest, not being prohibited, are automatically allowed.
In some countries, this has constitutional status. Among others, this is the case of Argentina, whose Constitution, in article 19 states:
“(…) No inhabitant of the Nation will be forced to do what is not mandated by law, nor deprived of what it does not prohibit.”
Constitution of the Argentine Nation, article 19.
Therefore, No explicit permission from the state is required to use bitcoin or any other cryptocurrency. In any case, its use must be framed within the legal system in force, that is, it must be for purposes that do not violate the laws.
What is regular bitcoin?
As seen in the previous point, the use of bitcoin may be allowed in a certain country, without there being laws that explicitly determine this. Simply because it is not prohibited, it can be used.
When laws or regulations are issued that detail how bitcoin can be used, what taxes will be paid by transactions, in what cases it cannot be usedetc., there is talk of regulation.
The Spanish Royal Academy provides some definitions of the verb «regular» which are useful to understand the idea. It is explained in the dictionary that It is equivalent to “adjust, regulate or put something in order”. It can also mean “adjusting the operation of a system to certain ends.” Finally, it can be “determining the rules or norms to which someone or something must conform.”
Recent cases of regulation on bitcoin are those that occurred in Panama and Cuba, both reported by CriptoNoticias. In those countries, the State, through the bodies that constitute it, sanctioned laws and regulations that stipulate how cryptocurrencies should be used.
For example, in Panama, the approved law establishes that both individuals and merchants may agree to the use of cryptocurrencies without limitation as a means of payment. But this does not mean that they are legal tender, because acceptance is not mandatory.
In the Cuban case, recent legislation establishes the requirements that companies that provide services with bitcoin or other cryptocurrencies must meet. That is a type of regulation towards the industry.
Having seen all this, the difference between making bitcoin legal tender, legalizing it and regulating it should be clear. Are three concepts that sound similar, but differ greatly in implications.