Is Bitcoin mining legal?

The answer to this is, unfortunately, slightly more complicated than one might hope. There are a few reasons for the confusion. Firstly, Bitcoin mining isn't illegal in any way - it's just that most countries don't have any specific regulation about it. This can make it difficult for miners to establish where they stand legally because of how new the currency is and how fraught its status as a website is in many countries.

Secondly, the possibility of Bitcoin miners being cut off from their electricity supply is a real one. Despite the relative newness of Bitcoin, there are already worrying reports of digital companies cutting off miners' power as a result of unpaid bills. This indicates that even under the best conditions, dealing with legal issues can be complex for miners – particularly those who are not located in Europe where Bitcoin mining has been legitimised in some countries.

Legality: Less than Legal

Mining, as it's currently understood, is not illegal in any country. However, due to the specifics of Bitcoin and the way it works as a 'cryptocurrency', some countries are more reluctant to hold miners fully accountable for their actions. The legality of Bitcoin is up for debate because of this; to some it's a currency, but others see it as a commodity and it's exactly this ambiguity that has caused problems for miners.

The fact that Bitcoin is a currency, as opposed to being classed as a commodity, means that miners have rights which are attached to their name. Generally speaking, this includes the right to the value they have created. However, this doesn't mean that mining is completely safe in all countries - many countries have legislation in place that can threaten miners' profits.

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For example, in Germany, where Bitcoin has been legitimateised and miners are legally allowed to trade their Bitcoins for Euros, they can be taxed on their earnings. This means that in order to avoid this additional tax burden, miners need to ensure they stay within the tax responsibilities of the country they live in. To do this effectively, miners usually turn to local laws which will give them some level of legal protection from circumstances such as being cut off from power or having bills not being paid by the owners of their server farms. For those who live in countries such as Norway, this is less of a problem. Their government has stated that Bitcoin activity is not subject to tax so there are no additional charges for miners to pay.

In the US, things are a little more complicated. There is a precedent for private money as an alternative currency, as well as the existence of gold and silver, but individual states can choose to outlaw it if they feel it's necessary. In this sense, miners are not given specific rights to the Bitcoin they are mining. This means that, if it is deemed by individual states to be illegal, miners could face criminal activities charges for carrying out their business.

In the UK, Bitcoin has now been legitimised as a currency and as such all tax obligations must be met.