Mining

# Is Mining Bitcoins Legal or Not? A Detailed Breakdown

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May 30, 2022 February 26, 2024

1. Intro
2. What is Bitcoin Mining?
3. Is Bitcoin Legal Tender?
4. Crypto Regulation in People’s Republic of China
5. Is Mining BTC Legal in the United States?
6. Bitcoin Mining Taxation
7. Energy Consumption Issues
8. Summary

### Intro

The legal status of cryptocurrencies (virtual currencies, digital assets, etc.) is rather multifaceted and largely depends on jurisdictions and governmental control. Nonetheless, the situation is rapidly changing and more and more countries are eager to legalize Bitcoin mining, Bitcoin and altcoins as legal tender because this digital phenomenon can revolutionize the entire fintech industry. Unfortunately, many people all around the world do not know is mining Bitcoins legal or illegal in this or that particular country, taxation rules for cryptocurrencies and cryptocurrency miners, banned jurisdictions and new opportunities for legality of mining Bitcoin. The following article is devoted to the problem of legality of Bitcoin mining, crypto laws, is it allowed to use crypto miner hardware to mine BTC or any other digital currency.

## What is Bitcoin Mining?

First and foremost, it is necessary to determine the concept and meaning of Bitcoin mining. In simple terms, Bitcoin mining is the process of adding new blocks via the digital ledger and verifying new transactions in the Bitcoin ecosystem. A crypto miner solves complex mathematical equations using specialized powerful mining hardware (ASICs, or Application Specific Integrated Circuits). However, Bitcoin may also be mined using GPU or CPU, but their hash capacities are very scarce, that is why ASICs are now the leaders in the crypto mining industry. Furthermore, more and more people prefer to use leased hash power produced by large enterprise grade conglomerates in order to mine Bitcoin legally and without breaking any laws. Bitcoin cloud mining can be subdivided into the following types:

- Hosted mining.
- Rental of computing hashing power capacities.
- Leasing of virtual private servers.

Whatever the case, a person mines Bitcoin using the rented hashing power produced by next-generation mining hardware, thus the crypto miner uses the cloud mining capacities and saves on electricity, hardware and software updates and upgrades, cooling systems, premises, just to name a few. However, the present day Bitcoin mining sector is prone to be oversaturated by large corporations that are capable of financing new cutting edge data centers and maintaining all operational costs. One can hardly argue that Bitcoin mining has become a play field for big and influential players on the market, however BTC cloud mining lets average people get into streamlined mining without any special knowledge. Let us highlight the major benefits of cloud based BTC mining:

- Low entry points for initial investments and daily payouts of newly minted BTC digital assets.
- In the majority of cases. Mining starts instantly or within 24 hours after making a payment.
- No noise or overheat issues.
- Best for long-term investments.
- Great financial portfolio diversification.

## Is Bitcoin Legal Tender?

Bitcoin, as well as other virtual currencies, is attracting the attention of zillions of people all around the world. The army of Bitcoin enthusiasts is getting bigger every second due to its decentralized nature, ease of use and medium of exchange. In the majority of countries, Bitcoin is not forbidden and people can freely buy, sell, HODL, and transact the first and most popular cryptocurrency just like that. Alternatively, some countries impose strict regulatory controls over any crypto related operations and even introduce governmental bans. However, there are those countries which have managed to legalize the status of Bitcoin as a legal tender and now this digital currency is widely used as a national fiat currency to pay bills, taxes, make online payments, buy real estate, book hotel rooms, etc. As of today, there are only two countries that have legalized crypto as legal tender, namely:

- El Salvador.
- Central African Republic.

The major concern why authorities are not eager to use BTC or any other cryptographic currencies as legal tender is that they can not control crypto transactions. This particular issue gives further problems connected with illegal money laundering, terrorism financing, sanction evasion, etc. The above mentioned countries took a plunge and approved the legal status for cryptocurrencies because digital currencies can bring more freedom to the world of finance and ease up the money movement and inflows. By doing so, they can minimize their dependence on the International Monetary Fund and get rid of unnecessary economy barriers.

Countries Where BTC Is Legal and Banned*

Legal | Banned
The United Kingdom of Great Britain and Northern Ireland | China
Iceland | Egypt
Denmark | Iraq
Germany | Qatar
Spain | Algeria
Mexico | Tunisia
Japan | Morocco

*This list is not exhaustive as the situation is rapidly changing due to the speed of economy transformation and tokenization.

## Crypto Regulation in People’s Republic of China

Is it legal to mine Bitcoins in China? Generally speaking, is crypto mining legal in China? Not at all. Back in 2021, the Central Bank of the People’s Republic of China declared that all cryptocurrency related transactions (including trading, Bitcoin mining, investing, brokerage, etc.) are illegal, thus ultimately banning all virtual currencies such as Bitcoin, Bitcoin Cash, Ethereum, Monero and alike. They were defined as illegal financial activities that dangerously threaten the safety of funds. Instead, the Chinese authorities made their prime focus on introducing and popularizing digital Yuan in order to control the digital turnover of money. China took a serious step to crackdown on all and any cryptocurrencies, whereas other countries decided to impose illicit crypto ban, among which are:

- Bahrain.
- Vietnam.
- Libya.
- Kuwait.
- Gabon.
- Burundi.
- Macao.

All in all, there are more than forty two countries with illicit bans, but the number of countries who recognize Bitcoin and altcoins as a medium of exchange is growing every year. In general, cryptocurrency mining is illegal in the territories where the governmental bodies explicitly oppose virtual currencies because of their ability to compete with the national currency, undermine the government’s hegemony, etc. We can make a step further and enumerate the countries where crypto is legal but there is a banking ban sanctioned by the regulatory bodies:

Country | Situation
Colombia | Legal but with a banking ban
Argentina | Legal but with a banking ban
Canada | Legal but with a banking ban
Jordan | Legal but with a banking ban
Taiwan | Legal but with a banking ban
Cambodia | Legal but with a banking ban
Nigeria | Legal but with a banking ban

Source: https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_country_or_territory

## Is Mining BTC Legal in the United States?

There are so many questions surrounding the topic “Is mining Bitcoins legal in the US?” and people oftentimes do not know the definite answer to Bitcoin mining is it legal in the United States of America or not. The legality status of BBTC digital mining ultimately depends on your geolocation. To put it simply, crypto, Bitcoin or Bitcoin mining are not prohibited in the US, but the point is that which state you reside in can impact the option to buy or sell crypto, what crypto mining services you can use, etc. As in the case of the European Union, it has not passed any specific legislation pertaining to the status of Bitcoin as a legal tender, but VAT is not applicable to the conversion rate pertinent to fiat and virtual currencies.

At the federal level, there is no one specific agency that controls. Monitors or regulates BTC mining. But it is worth pointing out that most regulatory activity for cryptocurrency related operations in the United States of America is performed by the SEC, CFTC and IRS, OCC and FinCEN. Case in point, Arizona was the first state in the US to adopt a regulatory framework to foster the development of the new fintech store, blockchain, crypto mining and trading.

Regarding the crypto mining industry, there few state jurisdictions where possession and ownership of virtual currencies is prohibited (illegal, that is). Plattsburgh is likely to be the sole city to ban crypto mining, besides the United States of America Marine Corps forbidden all crypto mining apps from all state-owned mobile apparatuses. Every person who is involved in to the mining of BTC must be aware not only of the legal status and corresponding jurisdiction laws and acts, but of the uses for BTC and other virtual assets.

## Bitcoin Mining Taxation

It goes without saying that centralized taxation is the simplest way for authorities to express their vested interest in Bitcoin mining as an industry. Taking the case of El Salvador, where crypto and crypto mining are fully legalized on the state level, taxation favors the spread and popularization of virtual currencies, BTC and Bitcoin mining as a whole. By and large, the legalization of crypto serves as a powerful magnet for new capital inflows from rich investors. However, in countries with conventional economies, Bitcoin and Bitcoin mining tax laws have been implemented in the form of taxation of capital gains and reporting the actual losses. By observing how newly suggested tax laws are being worked out and adopted, the Bitcoin mining legislation will ultimately influence how juicy the ongoing digital Bitcoin mining madness will be unfolding all around the globe. Let us see how Bitcoin mining is trending nowadays by contrast with other altcoins.

Cryptocurrencies Mined by Region Based on Share of Hashers

Cryptocurrency | Europe | North America | Asia Pacific | Latin America
Bitcoin | 100% | 86% | 94% | 88%
Bitcoin Cash | 22% | 38% | 34% | 63%
Litecoin | 33% | 24% | 25% | 25%
Ethereum | 22% | 33% | 34% | 63%
Zcash | 28% | 19% | 16% | N/A

Source: https://www.jbs.cam.ac.uk/wp-content/uploads/2021/01/2021-ccaf-3rd-global-cryptoasset-benchmarking-study.pdf

## Energy Consumption Issues

We are all perfectly aware that Bitcoin runs on the Proof-of-Work algorithm, which in its turn requires a tremendous amount of energy to solve highly complicated math problems. Over the past decade or so, the Bitcoin mining sector has flourished and the computers are now thousand times more efficient than ever before. More and more hashers are looking to switch to renewable sources of energy to mine Bitcoins because the society becomes more eco conscious. In El Salvador, for instance, the government has devised a special program to boost Bitcoin mining using the energy produced by volcanoes.

Nonetheless, the main source of energy for crypto mining is hydroelectric power as of today. Its total share amounts to more than 60% of hashing providers. Other sources of eco-friendly energy (solar and wind respectively) are ranked further. This self-sustaining energy initiative has boosted some cryptocurrency miners to the frontline in the mining sector. We can rank the use and type of energy required for mining cryptocurrencies categorized by power sources of hashing providers.

Power Sources of Hashing Centers

Energy Source | Share of Hashers
Hydroelectric | 62%
Coal | 38%
Natural gas | 36%
Oils | 17%
Solar | 15%
Nuclear | 15%

Source:https://www.jbs.cam.ac.uk/wp-content/uploads/2021/01/2021-ccaf-3rd-global-cryptoasset-benchmarking-study.pdf

## Summary

The lion’s share of global jurisdictions and lawmakers have yet to enact modern acts and bills to regulate virtual currencies, Bitcoin and crypto mining, meaning that, for the majority of countries, the legality of crypto mining remains rather idiosyncratic. Notably, the decentralized nature of Bitcoin attracts more and more people and the hype is growing. The BTC cloud mining service providers let all crypto enthusiasts get their piece of the juicy BTC pie because the supply of BTC coins is limited and there is likely to be a shift from the PoW to PoS framework in the not so distant future. Therefore, do not waste precious time and make big things happen with Hashing24 — all your crypto dreams come true. Just try it yourself by a) using Demo mining first and then b) you can go real and mine BTC round-the-clock via the cloud.

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