Iceland Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
The current state of cryptocurrency regulation in Iceland is unclear due to the residual effect of legislation adopted in the wake of Iceland’s 2008 financial collapse. After Iceland’s economy when bankrupt, the government implemented controls to prevent its citizens from taking foreign currency out of the country to stem the outflow of capital. [1] While this regulation remained in place, it acted as an indirect ban on bitcoin and other cryptocurrencies because they lead to capital movements out of the country. [2]
However, in 2017, The Icelandic Central Bank amended the rules prohibiting the outflow of krónur from the country to allow for cross-border transactions. [3] This effectively lifted the indirect ban that the Central Bank had put on cryptocurrency because cross-border transactions of the nation’s currency are now allowed. However, there are still limitations and restrictions in place that could limit cryptocurrency transactions. For example, there is a requirement to “notify the Icelandic Central Bank of international purchases of Icelandic krónur and derivative transactions, and rules also require a special reserve when there is an inflow of a foreign currency into Iceland.” Further, restrictions remain in place for “i) derivatives trading for purposes other than hedging; ii) foreign exchange transactions carried out between residents and non-residents without the intermediation of a financial undertaking; and iii) in certain instances, foreign-denominated lending by residents to non-residents.” [5]
Cryptocurrencies could be considered “foreign exchange transactions carried out between residents and non-residents without the intermediation of a financial undertaking,” causing the transactions to still be prohibited. However, this remains unclear as the Central Bank has not commented on the standing of cryptocurrency transactions under these restrictions.
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
