Is crypto bot trading legal?
Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >
This beginner-friendly guide explains what a crypto bot is and what the law says about them. Find out which countries have banned crypto trading and whether using automated trading platforms is allowed where you live.
What is a crypto trading bot?
It’s an automated service that buys and sells crypto for you. Bots normally use some kind of software to create a series of guidelines and then execute trades according to those rules.
The idea behind crypto bots is to make it easier and faster to trade cryptocurrency and to make it more approachable for the average user. An automated bot simplifies the decision-making process and means you can trade crypto without needing to put in the time to research everything on the market.
Each bot has its own set of guiding principles and you can adjust them to suit your preferred trading style. The bot then uses this information to search the crypto market to find trading opportunities based on the criteria you set.
Is it legal to use a cryptocurrency trading bot?
It is perfectly legal to use a trading bot in any jurisdiction where crypto trading is permitted. Automated trading is a widely accepted practice in traditional finance and many stock market trades are placed automatically. A bot is simply a means of trading that doesn’t require a human to manually place the trades, and it doesn’t bend the rules in any way.
However, there are obviously some caveats to this. Some crypto bots are outright scams, while others use tactics which are unethical, if not openly illegal. That can include things like ‘pump and dumps’, or directing users to unregulated brokers who will simply take your money and run. Those bots operate outside of the law.
Similarly, you must still abide by investing laws in your country. Find out whether you have to pay taxes on automated trading profits, and make sure you comply with the regulations. There are also some countries which have banned crypto trading outright. You can’t use a crypto bot if you’re a resident in those places.
Countries where crypto bots are illegal
China is the most high-profile country to have banned cryptocurrency completely, but it isn’t the only one. Here is a quick list of the nine countries where cryptocurrency, and thus using a crypto bot, is illegal:
Some other countries, such as Turkey, have restricted the use of cryptocurrency. That normally means a ban on using crypto to buy things, and it’s still legal to buy and sell it as an investment.
Are crypto trading bots legit?
There are some legit crypto trading bots, but there are a lot of scams out there. Legit crypto bots include the likes of Cryptohopper and Coinrule, and there are a few others. These bots are open about how the bot operates and the strategies you can use.
Transparency is a very important quality to look out for, as it can be difficult to tell the difference between a genuine automated trading platform and a scam crypto bot. Generally, the more far-fetched a platform’s claims about how rich it will make you, the more likely it is to be a scam.
How to find a genuine trading bot
There are a few tell-tale signs that can help you find a genuine trading bot as opposed to a scam. Here is a list of what to look out for to identify a genuine platform.
- Clear information about how the bot works. Legitimate trading bots explain how the software works in detail, and allow you to sign up to test the platform without depositing any money first. Scams tend to speak vaguely and hide behind terms like ‘advanced technology’ or ‘quantum computing’ and promise unrealistic returns.
- Names the brokers or exchanges it partners with. Crypto bots work by sending trades to brokers or exchange platforms in order to execute them. Genuine bots state clearly who those brokers are, and you should look for reputable firms like Binance, Kraken, or Huobi. Beware of any platform that doesn’t name its partners, as it means they are likely unregulated and could be dangerous.
- Professional website. A genuine service will have a sleek website that looks like something a real company would have. You will be able to easily find information about the company, who works there, and it should have a support page. Fake platforms have websites that are usually just one or two pages with no information about the team behind the bot.
- Doesn’t hide behind celebrity endorsements. Bots often make wild claims about famous personalities who have used or endorsed the platform in lieu of hard facts about the service. Any bot that claims to be endorsed by the likes of Elon Musk or Bill Gates is almost certainly a scam.
- Low minimum deposits. A genuine robot is likely to require only a small starting deposit, such as £10 or £50. It will also offer a trial period that you can use before you deposit anything to test how the platform works. A scam will ask for $250 or more, and may promise a demo account but you won’t be able to access it until you’ve made the deposit.
- Unique description of the platform. Browse around a few crypto robots and you’ll see that the genuine ones each have a unique selling point and are notably different. By contrast the scams all make very similar claims; trading success rates of 80% or more, $250 minimum deposits, and require a call with a ‘customer service representative’ before you can complete sign up.
What should I do now?
If you’re interested in using a crypto bot, take some time to search online and compare the platforms before you deposit anything. You will quickly get a feel for what appears genuine and legal versus what is not. You should also think about whether crypto bots are profitable and if it’s better to take more manual control.
Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >