Regulation & tax
Regulation is the part of bitcoin that changes fastest and reaches you most directly. This section covers the rules that decide whether you can open an account, what your exchange reports about you, and what you owe when you sell.
KYC is the identity check at account opening; AML is the wider programme it belongs to. The Travel Rule is why your exchange asks who owns the wallet you are withdrawing to, and why some withdrawals now carry a name and an address alongside the amount. MiCA is the European framework that replaced a patchwork of national regimes, with licensing, reserve and disclosure requirements that changed which platforms serve which countries.
Tax terms are the other half. Capital gains tax applies to disposals, and in most jurisdictions disposal is broader than selling for cash. Cost basis is the number the calculation starts from, and the accounting method your country allows for choosing it can move the bill substantially.
Bans, restrictions and legal tender status are here because the answer differs by country. Our country guides cover the specifics for all 232; these entries define the terms those guides use. None of this is legal or tax advice, and the rules change.
43 terms. Last reviewed 2026-09-07.
Terms in Regulation & tax
- Anti-Money Launderingalso AMLAnti-Money Laundering rules are the obligations a country puts on exchanges to detect and report suspicious activity, and they are why a platform can freeze your withdrawal without warning.
- Asset-referenced tokenalso ARTAn asset-referenced token is MiCA's catch-all stablecoin category: a crypto-asset that is not an e-money token and that aims to hold a steady value against a basket, a commodity, or several currencies.
- Capital gains taxCapital gains tax is what you owe on the profit when you dispose of bitcoin, and in most countries spending it counts as a disposal exactly like selling it.
- CBDCalso Central bank digital currencyA CBDC is money issued directly by a central bank as a digital record, which makes it programmable and traceable by design and the structural opposite of bitcoin.
- Complaints handling procedurealso Complaints-handling procedure, Complaints-handling proceduresA complaints handling procedure is the free, published channel a MiCA-regulated crypto firm must operate so clients can file a complaint, have it investigated, and hear the outcome within a reasonable period.
- Cost basisCost basis is what you paid for a coin including fees, the figure subtracted from your sale proceeds to compute a taxable gain, and US rules now require tracking it wallet by wallet.
- Crypto-assetCrypto-asset is the European Union's legal term for a digital representation of a value or of a right that can be transferred and stored electronically using distributed ledger technology.
- Crypto-asset custody servicealso Custody and administration on behalf of clients, Crypto-asset custody and administrationCrypto-asset custody service is the MiCA-regulated activity of safekeeping or controlling crypto-assets, or the means of access to them, on behalf of clients.
- Crypto-asset service provideralso CASPA crypto-asset service provider is a company authorized under EU law to carry on one or more of ten listed crypto-asset services, with the permission granted service by service.
- Crypto-asset trading platformalso Operation of a trading platform for crypto-assets, Trading platform for crypto-assetsA crypto-asset trading platform is a multilateral system whose operator brings together third-party buying and selling interests in crypto-assets so that they meet and form a contract.
- Crypto-asset transfer servicealso Transfer services for crypto-assets on behalf of clients, Transfer services for crypto-assetsA crypto-asset transfer service moves crypto-assets from one distributed ledger address or account to another on behalf of a client, and under MiCA it needs authorisation.
- Crypto-asset white paperalso MiCA white paperA crypto-asset white paper is the mandatory disclosure document MiCA makes an offeror publish before selling a token in the EU, self-certified rather than approved by any regulator.
- Cryptocurrency banalso Bitcoin banA cryptocurrency ban is a government prohibition on some or all bitcoin activity, ranging from a blanket criminal ban to a narrower order cutting banks off from exchanges.
- Electronic money tokenalso EMT, E-money tokenAn electronic money token is a crypto-asset that keeps a stable value by referencing one official currency, and MiCA deems it electronic money issued by a bank or e-money institution.
- ESMA registeralso ESMA crypto-asset registerThe ESMA register is the European Union's public list of authorised crypto-asset service providers, token issuers and published white papers, kept by the European Securities and Markets Authority under MiCA.
- FATFalso Financial Action Task ForceFATF is the intergovernmental body in Paris that writes the anti-money-laundering standards almost every country copies into law, including the rules your exchange applies to you.
- Fit and proper testalso Fit and proper assessment, Suitability assessmentA fit and proper test is the check a financial regulator runs on the people who run and own a licensed firm, covering their criminal record, competence and time commitment.
- Form 1099-DAForm 1099-DA is the US tax form on which a custodial broker reports your digital asset sales to the IRS and to you, starting with the 2025 tax year.
- Insider informationalso Inside informationInsider information is precise, non-public information about a crypto-asset or its issuer that a reasonable holder would likely use when deciding to buy or sell.
- Investor compensation schemeAn investor compensation scheme pays eligible retail clients when an authorised investment firm fails and cannot return the money or financial instruments it was holding for them.
- Know Your Customeralso KYCKnow Your Customer is the set of checks a regulated exchange runs before it lets you trade: identity documents, a selfie, an address, and a permanent record of all of it.
- Legal tenderLegal tender is a legal status that forces creditors to accept a currency for debts, and bitcoin has held it in only two countries, both of which have since withdrawn it.
- Market abuse rulesalso MiCA market abuse regimeMarket abuse rules ban insider dealing, unlawful disclosure of inside information and market manipulation in crypto-assets, and oblige trading venues to detect and report suspicious orders.
- MiCAalso Markets in Crypto-Assets RegulationMiCA is the European Union's crypto licensing law, and it regulates the companies that sell you bitcoin rather than bitcoin itself, which has no issuer to regulate.
- MiCA passportingalso MiCA passport, Cross-border provision of crypto-asset servicesMiCA passporting lets a crypto firm authorised in one EU member state serve clients in every other one by notifying its home regulator, without a second licence or a local office.
- MiCA transition periodThe MiCA transition period let crypto firms that were already trading lawfully in an EU country keep operating without a MiCA authorization until July 1, 2026 at the latest.
- National competent authorityalso NCA, Competent authorityA national competent authority is the body a Member State designates to authorise and supervise crypto firms under MiCA, and one country may designate more than one.
- Order execution servicealso Execution of orders for crypto-assets on behalf of clients, Execution of orders on behalf of clientsOrder execution service is shorthand for what MiCA calls execution of orders for crypto-assets on behalf of clients: concluding agreements to buy, sell or subscribe for crypto-assets on a client's behalf.
- Own funds requirementalso Minimum capital requirement, Permanent minimum capital, Prudential safeguardsAn own funds requirement sets the minimum capital a regulated crypto firm must hold at all times: under MiCA, the higher of a fixed class floor and a quarter of last year's overheads.
- Placing of crypto-assetsalso Crypto-asset placementPlacing of crypto-assets is the MiCA service of marketing crypto-assets to purchasers on behalf of, or for the account of, the offeror or a party related to the offeror.
- Prohibited jurisdictionalso Prohibited country, Prohibited regionA prohibited jurisdiction is a country or region an exchange names in its own terms as one it will not serve, whatever the local law says about bitcoin.
- Regulatory authorisationalso Regulatory licence, Regulatory approvalRegulatory authorisation is the permission a financial supervisor grants a named firm to carry on specific listed activities, valid only for the services the decision itself names.
- Reverse solicitationalso Exclusive initiative exemptionReverse solicitation is the MiCA exemption under which a firm outside the EU may serve an EU client who approached it entirely on their own initiative, without any local authorisation.
- Safeguarding of client assetsalso Safekeeping of clients' crypto-assets and funds, Client asset segregationSafeguarding of client assets is the MiCA obligation on a crypto-asset service provider to hold your coins and cash apart from its own, so its creditors cannot reach them.
- Sanctions screeningSanctions screening is the check an exchange runs on your name and your bitcoin addresses against government blocked-party lists before it lets a transfer through.
- Self-custody rightsSelf-custody rights are the legal protections, mostly proposed rather than enacted, that would guarantee you can hold your own bitcoin keys and transact without a licensed intermediary.
- Significant tokenalso Significant asset-referenced token, Significant e-money tokenA significant token is an asset-referenced token or e-money token that the European Banking Authority has classified as meeting at least three of MiCA's seven significance criteria, moving its issuer under EBA supervision.
- Supervisory feealso Supervision fee, Annual supervision feeA supervisory fee is the annual charge a financial regulator levies on every firm it supervises, sized to the regulator's own budget rather than to any work done on that firm.
- Travel Rulealso FATF Travel RuleThe Travel Rule requires the exchange sending your bitcoin to hand your name and account details to the exchange receiving it, the way banks pass details with a wire.
- Unhosted walletalso Self-hosted walletAn unhosted wallet is the regulators' name for a wallet whose keys you hold yourself, the thing that sits outside the licensed perimeter and keeps getting rules written about it.
- Utility tokenA utility token is a crypto-asset intended only to provide access to a good or a service supplied by its issuer, and MiCA regulates it through disclosure rather than authorisation.
- Virtual Asset Service Provideralso VASPA Virtual Asset Service Provider is any business that exchanges, transfers, or safekeeps crypto for other people, the category the Financial Action Task Force created to pull exchanges into banking rules.
- Wash saleA wash sale is a loss the tax code refuses to let you claim because you bought the same thing straight back, and the US rule still does not cover bitcoin.
The other 13 sections
- BasicsWhat bitcoin is, what a satoshi is, and the handful of ideas the rest of the glossary is built on.
- Addresses & keysWhere coins get sent, what a private key actually controls, and how one seed produces thousands of addresses.
- Wallets & custodyHot, cold, custodial and multisig, and what each one changes about who can move your coins.
- Privacy & securityThe attacks that take people's bitcoin, and the habits and tools that stop them.
- Transactions & feesWhat a bitcoin transaction is made of, why it costs what it costs, and how to unstick one.
- Buying & exchangesOrder types, spreads and fee schedules: the vocabulary an exchange uses while it is charging you.
- Markets & investingMarket cap, volatility and spot ETFs. The language of price, without the price predictions.
- Mining & consensusHow new blocks get made, what difficulty adjusts, and why the rules hold with nobody in charge.
- Protocol & upgradesSegWit, Taproot, soft forks and BIPs: how bitcoin changes and who gets to decide.
- Lightning & layer 2Payment channels, invoices and routing, for moving bitcoin without paying for space in a block.
- Culture & historyMt. Gox, the genesis block, HODL, and the events and slang that shaped how people talk about bitcoin.
- Nodes & softwareBitcoin Core, full nodes, pruning and RPC: the software that enforces the rules.
- Developer referenceP2P message types, opcodes and script terms: the field names you meet reading bitcoin code.
Frequently asked questions
Is bitcoin legal where I live?
In most places yes, but the detail matters more than the headline. Our country guides carry the legal position for 232 countries and territories, including the eighteen where a ban or a sanctions regime makes legality the first question rather than the last.
Do I owe tax when I sell bitcoin?
In most jurisdictions yes, as a capital gain measured against what you paid. Some tax spending it as well, and a few, Germany among them, exempt coins held long enough. The rules differ enough that local advice usually pays for itself.
Why does every exchange demand my identity?
Anti-money-laundering law requires it of regulated platforms, and the requirement traces to the standards body FATF rather than to the exchanges themselves. Avoiding it generally means avoiding legal protection too, which is a worse trade than it first looks.
What is MiCA?
The European Union's single rulebook for crypto services. It replaced a patchwork of national regimes with one authorisation that passports across the bloc, which is why a licence granted in one member state now lets a platform serve all of them.