Deciding which legal jurisdiction applies to the national and international traders/investors of Bitcoin and other cryptocurrencies have plagued governments since the boom of 2017.
Lawmakers and treasuries are still scrambling to get to grips with the inherent risks faced by consumers, missed tax revenues, as well as the gargantuan economic potential the digital space offers. In general, western economies are using ‘soft touch’ legislation to encourage innovation. This regulation is often a patchwork of different economic and legal approaches. Below are examples of different European centric economies and laws, and their views on digital currencies.
Germany – In August 2013 the German Government released a report stating that Bitcoin transactions should be treated as a trading activity and therefore be subject to capital gains taxes unless held for a year or more. The German Federal Ministry of Finance further clarified this position by saying that Bitcoin should be treated as a unit of account and private money, and should, therefore, be subject to sales taxes and VAT.
France – The French Government has placed onerous regulation and a form of ‘Green listing’ on the new industry. The French police raided an exchange and seized over €200,000 worth of Bitcoin. Their government insists that any exchange or wallet should be compelled into holding data to link a person’s identity to a verified physical to addresses.
Bulgaria – In April 2014, Bulgaria declared that Bitcoin was a hybrid currency and asset, and should be subject to a 10% tax when either used as a currency or converted in to, or out, of a fiat currency.
UK – An initial knee-jerk reaction to apply VAT tax on Bitcoin mining was scrapped in March 2014. Therefore the declaration by the UK not to add VAT on Bitcoin services and to treat it as a currency rather than an asset has meant few other international governments are willing to contradict this legislation and put their own country at an economic disadvantage. The UK’s legislation has created a cautious balance between consumer protection and creating a solid base of support for a new digital industry to thrive.
Portugal – Has issued a warning to the public that Bitcoin and digital currencies do not have any Government oversight.
Croatia – Another ‘wait and see approach’ by this country’s government. Croatia has also issued a public warning that there is no government oversight.
Luxembourg – has taken a hard line with respect to digital currencies and Bitcoin, declaring that digital currencies operate like money and are regulated in their issuance by the developers. They should, therefore, comply with all standard monetary regulation.
Switzerland – The Swiss government has declared that Bitcoin should be treated as a foreign currency, with the potential to act as a catalyst of growth for their financial sector.
What direction EU economies and markets will take with digital currency legal regulation is still being decided. One fact remains certain – with global competition greater than ever, countries and their treasuries will not want to miss out on the significant economic potential that digital currencies offer.