Despite the advantages of cryptocurrencies, not all countries have embraced this technology, and some have imposed strict restrictions or outright bans on cryptocurrency usage.
The emergence of digital currencies, such as Bitcoin and Ethereum, has been an exciting and significant development in the financial world. Cryptocurrencies offer a new way to transfer and store value and assets that is decentralized and potentially more efficient than traditional methods. These new-age currencies use high-level cryptography for security. They are typically decentralized and operate on blockchain technology. The blockchain acts like a distributed ledger that records all transactions across a global network of computers or nodes. Cryptocurrencies provide several potential advantages. They can offer financial services to those without access to traditional banking systems, reduce transaction costs, and enable more efficient and secure transfers. However, they also carry specific risks, such as facilitating illegal activities and disrupting monetary policies.
Despite all the advantages and widespread enthusiasm for this new financial frontier, not all countries have embraced this technological leap. Some have even imposed strict restrictions or outright bans on trading and using digital currencies. The reasons behind these bans are diverse and complex, reflecting numerous social, economic, and political factors. Before examining these countries and their reasons for banning cryptocurrencies, it can be confidently said that these resistances remind cryptocurrency enthusiasts and experts, as well as technology proponents in general, of all the resistance seen over the past two or three centuries against every new change and innovation. In reality, it’s not well-founded reasons or valid concerns but rather baseless conservatism, dogmatism, and the threat to personal and group interests that have created barriers against innovation. For instance, one can recall the early opposition to machines in factories during industrialization and bathtubs in homes in some countries; today, despite all the evidence of the benefits of new ideas, inventions, and technologies, there are ongoing activities against online businesses like Uber, services like video calls, and even the COVID-19 vaccine, involving everyone from ordinary people to high-ranking officials. In any case, technology has progressed and found its place despite all opposition. Cryptocurrencies, due to their clear philosophy and functioning, will prove their relative advantage in practice.
Which countries have banned cryptocurrencies?
Sometimes, to answer a question, it’s necessary to read between the lines and consider unwritten words. This question is of that nature. In fact, it can be interpreted in two ways:
1. Which countries have completely banned cryptocurrencies?
2. Which countries have in some way banned or restricted cryptocurrencies?
The main reason for considering this question carefully is to highlight the significant resistance to blockchain technology and digital currencies from traditional financial systems and central banks around the world. These traditional systems struggle to maintain their authority against the advantages, power, and transparency of this new decentralized world.
Now, let’s address the first interpretation of the question. Currently, 10+1 countries have explicitly and through official legal channels banned any activity related to cryptocurrencies at all levels. In practice, black markets for cryptocurrencies have emerged in all these countries, and there may be secret projects run by the governments of these nations, officially, based on laws, regulations, rulings, or legal interpretations by governments, central banks, or supreme courts, a comprehensive ban exists at all levels. These countries are China, North Korea, Nepal, Bangladesh, Afghanistan, Egypt, Algeria, Morocco, the Dominican Republic, and Bolivia. The “+1” country is Nigeria, where, by law, ordinary citizens are allowed to use cryptocurrencies, but related transactions are banned within the banking and monetary system. This situation isn’t particularly unusual—even advanced and free countries like Canada have similar restrictions. However, Nigeria’s case is peculiar because its banking and currency system is heavily dominated by the central bank, from small exchange offices to major banks, and in practice, people cannot engage in cryptocurrency transactions without facing legal consequences. Therefore, Nigeria effectively has a complete ban.
If we respond to the second interpretation of the question, in addition to the 11 countries mentioned, over 40 countries have implemented some form of restriction or ban on cryptocurrency transactions. Some of these countries have specifically banned Bitcoin, Ethereum, or both, or targeted particular projects. For instance, Indonesia does not have an issue with holding or trading cryptocurrencies, especially Bitcoin, but using them for payment in exchange for goods or services is illegal. Other countries have imposed restrictions or bans on official banking systems, such as Canada, Qatar, Namibia, and Iran. However, the strictness and nature of these bans are related to the banking system, the authority of the central bank or government over banks and financial systems, and related issues. Despite the apparent similarity in the form of the bans, there are significant practical and substantive differences between them. Additionally, three countries—UAE, Russia, and Tunisia—have some restrictions, at least in the banking sector, through reliance on older existing laws. However, in practice, the situation is unclear, and transactions in these countries may or may not be criminalized by governmental or judicial bodies.
Reasons for Banning Cryptocurrencies
Each country has its own reasons for imposing bans or restrictions on digital currencies, which can be summarized into four categories. It must be said frankly that these reasons stem from conservative and dogmatic policies, aimed at opposing cryptocurrencies:
1. Risk of Illegal Activities
One of the main reasons countries ban cryptocurrencies is their potential use in illegal activities. The anonymity of transactions makes digital currencies attractive for unlawful operations like money laundering, tax evasion, and even financing terrorism. Countries such as Bangladesh and Nigeria have explicitly banned cryptocurrencies for this reason.
2. Financial Stability and Control
Some countries claim that cryptocurrencies could potentially disrupt a country’s financial stability or authority. In economies where cryptocurrencies have become widespread, central banks may lose control over monetary policy, affecting their ability to manage inflation and ensure economic stability. This concern was one of the reasons Bolivia banned cryptocurrencies in 2014.
3. Investor Protection
On the other hand, some countries argue that the high volatility in the cryptocurrency world can lead to significant financial losses for investors. Cryptocurrencies also lack the regulatory and insurance protections that investors enjoy in traditional financial markets. In response to these risks, countries like Nepal have banned cryptocurrencies to protect their citizens from potential financial harm.
4. Technological Limitations
In some countries, technological limitations and a lack of public understanding about cryptocurrencies have led to bans. These countries often have underdeveloped financial infrastructures and may not be equipped to handle the complexities and risks associated with digital currencies.
Are these concerns and issues real?
In a word, these concerns are “completely far from reality.” Therefore, we will address each of them individually.
Let’s momentarily assume that the restrictions and bans are born from legitimate and understandable concerns, and that we overlook the efforts and obstructions from powerful groups affiliated with governments and the existing financial mafia in traditional financial systems. Under this assumption—without any diplomatic pretense—it can be said that any reason for banning cryptocurrencies boils down to two issues: first, the lack of appropriate regulation in traditional financial and economic governance, and second, the underdevelopment in various sectors of countries. We will elaborate on these issues below.
Regarding the first reason for banning and restricting cryptocurrencies, let’s consider Nigeria. The Nigerian government has banned the official, transparent, and clear exchange and trading of cryptocurrencies, particularly Bitcoin, arguing that such activities could facilitate fraud, the development of terrorist and extremist groups like Boko Haram, and undermine the authority of the central bank. On the surface, the central bank appears to have complete authority over all financial matters, but in practice, much like the Qajar kings who held ultimate power but were unable to implement reforms, it is completely inept in controlling the financial market and the country’s economy, and a completely corrupt system dominates the country. This issue has also extended to cryptocurrencies, with black and hidden markets emerging where people can exchange their cryptocurrencies for regular money or engage in cryptocurrency transactions. This has led to significant transaction fees for buying and selling well-known cryptocurrencies. For example, reports show that Bitcoin is traded in Nigeria at several thousand dollars above its international market value. Additionally, a significant number of scams, including Ponzi schemes and counterfeiting, have emerged in the Nigerian cryptocurrency black market. As can be seen, the central bank’s arguments are essentially unfounded, and the problem lies elsewhere; this institution lacks the necessary power and enforcement capability. Moreover, with the ban and the underground activities, problems have become a hundred times more complex, larger, and entirely to the detriment of ordinary people. In other words, a blanket ban results in the creation of black markets or informal channels in various platforms, leaving people unable to benefit from current legal provisions. In this digital realm, people and investors might even delve into the Deep Web and Dark Web which poses greater risks to society as a whole. All this occurs while the inherent transparency of cryptocurrencies and models for transaction validation or mining, or any other blockchain process, in an open, free, and legal market, allows legal authorities to track suspicious activities and blocks scammers and terrorists, forcing them to pursue expensive methods to conceal their transactions or find alternative means from the outset. This has been proven in the investment and stock markets as well: fewer restrictions and higher transparency effectively close off opportunities for fraudsters and speculators.
It is worth mentioning that in a country like Iraq, despite all the bans and relatively better conditions compared to Nigeria, most traders and economic actors utilize the advantages of cryptocurrencies in their transactions and dealings. This is another indication that these bans when based on reasons such as the first one, are fundamentally ineffective.
Now, if we consider the second reason, it might be possible, from a macro perspective or governance policies or temporary conditions in a country, to sympathize with the governments and deem restrictions as temporarily necessary. However, two questions arise: First, has the government of that country or its central bank had the necessary authority in other economic areas? Second, has the inflation and economic problems in that country truly been temporary, or have they persisted for years? Looking at the list of countries that have banned or restricted cryptocurrency activities, it is apparent that most of them have been experiencing economic and political issues over the past half-century. For example, in all 11 countries that have banned digital currencies, internal and external investments are subject to government intervention, and many prices and societal needs are determined by government bodies, which are often unaccountable. This maximum and generally non-transparent government presence is criticized by most political and economic experts and has been a failure since the Industrial Revolution, with real authority and desirable economic impact not seen from these governments and central banks. Therefore, even if we optimistically consider some restrictions in certain countries as understandable, most countries fundamentally have simplified their governance with political and economic authority arguments alone.
Now, turning to the third reason, at first glance—and rather superficially—it might seem that restrictions are understandable until a clear framework for market regulation and support for its actors is established. However, two important points are overlooked here: First, the existing legal framework can be utilized until better regulations or laws are drafted. Second, regulations and oversight for any activity or market generally develop gradually, based on needs and acquired experiences, rather than being formulated in a closed room by a few experts with governmental or special interest considerations! Moreover, if there are weaknesses or gaps in the law, a lack of effective and strong enforcement, or the absence of independent user rights advocacy organizations, there is little difference between banning and allowing any activity. At least in the case of decriminalizing the existence of a market like cryptocurrencies, there is the advantage that it can be easily monitored and associations and regulatory bodies can be established by users and investors themselves. In countries like Nepal and Nigeria, the rate of fraud and financial crimes is very high; thus, the weakness in the legal and governance systems must be addressed.
Let’s now address the fourth reason. This might be the only acceptable reason, why a country lacks the necessary technological, software, and hardware infrastructure and therefore needs to implement restrictions until these issues are resolved. Except for China, the remaining countries that have banned cryptocurrencies and a significant number of those that have imposed restrictions face serious problems with their technological infrastructure and energy supply and rank poorly in ICT rankings. Therefore, in these cases, restrictions or intensified temporary oversight may be justifiable, but outright bans cannot be defended, as many of these countries have not previously addressed their problems. Additionally, human experience has repeatedly shown that whenever governments open the door to innovation and technology, infrastructure and development follow. Currently, the world’s largest companies, including Meta and SpaceX, are focused on expanding universal internet access, which has positively impacted technology and reduced internet costs globally (with a few exceptions). Cryptocurrencies and blockchain technologies also have an underlying goal of providing financial transactions and economic opportunities to the most remote and underdeveloped places quickly and with minimal resources. The expansion of the freedom to operate cryptocurrencies allows these new-world projects to invest in the advancement of technological infrastructure.
Beyond these issues, in all countries where cryptocurrencies are broadly banned, we see either a lack of financial and economic development and ineffective governance systems, or politically, socially, and in terms of human capital, these countries are underdeveloped, characterized by authoritarianism and isolation. All 11 countries that insist on these bans have the worst status regarding political openness and social freedoms globally, with either no free press or suppressed independent news channels. This stands in contrast to the very DNA of cryptocurrencies, which is inherently aligned with the free flow of information. If we say that this is one of the implicit reasons for these countries’ fear of decentralized systems, it would not be incorrect.
On the other hand, in matters of privacy, minority rights, and similar issues, these countries are unfamiliar with such concepts due to governmental attitudes and even cultural norms. For example, in North Korea, military governments are in power, and the people are generally deprived of social freedoms; in Afghanistan, both before and after the rise of the Taliban, the situation for women and religious minorities has always been restrictive. Clearly, under such conditions, these governments will not accept the legality and freedom of cryptocurrencies, which, by their nature and philosophy, emphasize decentralization, high transparency, and user autonomy.
With the points we have outlined, it can be concluded that the main reason for banning cryptocurrencies is the weakness in political and economic governance and underdevelopment in technical and industrial fields, not the concerns previously mentioned.
Final Words
The global outlook on the future of digital currencies represents a range of diverse approaches and is characterized by significant variability. Each of these approaches moves towards a specific and different regulatory mechanism, reflecting an effort to balance the benefits of cryptocurrencies with the mitigation of potential risks and harms. While some countries and even certain international monetary and banking institutions view digital currencies, though cautiously and conservatively, as an opportunity to foster innovation and economic growth and are encouraging investment and regulation in this field, others see them as a threat to financial stability, law enforcement, and investor protection. In an open economy, these concerns appear to be unfounded, as ultimately, the market and its participants will find logical and balanced solutions, benefiting from functionality or bypassing inefficacy. The new blockchain world has so far shown no significant or unresolved weaknesses compared to the old and traditional financial systems.
It is important to note that the countries discussed here represent a minority, and many countries have accepted digital currencies at least with caution. Some countries have classified cryptocurrencies as legal assets (such as the United States), while others have declared them as commodities and legal assets (such as El Salvador).
Countries that have banned cryptocurrencies and a significant number of those that have imposed restrictions have done so based on perceived weaknesses in their technical, economic, or legal systems. However, in reality, these actions reflect their worldview and governance style. Furthermore, the discussion about digital currencies is not only a financial issue but also encompasses broader topics such as governance, privacy, and the role of the state in the economy. Nevertheless, the trend seems to be moving towards gradual acceptance and regulation rather than outright prohibition. It can be confidently said that, as has been the case with all historical opposition to innovations, in the future, there will be no alternative for countries but to embrace cryptocurrencies.
Footnote 1: The only exception here is China, a technology giant with acceptable economic governance but considered one of the most repressive countries politically and socially. Recently, however, it has recognized its mistakes regarding cryptocurrencies and is working to dominate this market.
