Where are cryptocurrencies legal? Where are they given legal protections? Where are they merely permitted? Where are they banned? Are digital currencies more accepted in other parts of the world? What would it take for cryptocurrencies to be accepted?
Cryptocurrency concerns: Instability Uncontrolled inflation Loss of faith in government to provide financial stability Downfall of banking infrastructure Money laundering
No official government stance yet. U.S. Senate hearings Nov 2013 Acknowledge legitimate uses of BTC Not ready to regulate BTC yet “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of many of us.” – Tom Carpenter, U.S. Senator, Delaware However, U.S. not adverse to cashing in $25 mil BTC from Silk Road
Financial institutions reluctant to support BTC. “Saying bitcoin in a bank is like yelling fire in a theater” - Kinnard Hockenhull, Bitbox founder E.g., Coinabul, San Diego precious metals buyer (Nov 2013) “banks are unable to accurately assess risks without clear guidelines” Unsure if assisting in illegal transactions.
Financial institutions Digital currencies are in conflict with banking systems. Regulators concerned can’t protect customers. Bank-backed politicians. Government support may be needed to help BTC stabilize.
Internal Revenue Service (IRS) statement: “The IRS continues to study virtual currencies and intends to provide some guidance on the tax consequences of transactions involving them. The agency is also aware of the potential tax compliance risks posed by virtual currencies.”
New York state may be first state to regulate digital currencies Regulations coming later this year “BitLicences” for businesses that use digital currencies Consumers need to know more information about cryptocurrencies (e.g. transaction irreversibility)
Vicco, KY Police chief to be paid in BTC Self requested “I pretty much think it will eventually take over," he said, "or I hope it does.“ – Tony Vaughn, Police Chief Springfield, MO Star Trek convention official currency is Peercoin
BTC not a legitimate currency “Only Canadian bank notes and coins are recognized as legal tender in Canada. Bitcoin digital ‘currency’ is not legal tender in Canada.” Tax rules proposed for digital currency transactions (April 2013)
First BTC ATMs Toronto & Vancouver VirtEx developing BTC debit cards BTC converted to Canadian currency Merchants can use card terminals such as CoinKyte.
Royal Canadian Mint developing official currency backed by Canadian dollar (MintChip) Currency encrypted on “tamper proof” chip USB, MicroSD, SIM card Cloud storage
MintChip Transactions directly initiated E.g., mobile-to-mobile, text, email, etc. $10 or less per transaction Currency conversion via authorized brokers For use with wireless point-of-sale (POS) systems using near field communication (NFC)
Standard Bank Customers can buy & sell BTC through online banking Can use BTC to pay from regular bank account Managed by Switchless, South Africa’s only Bitcoin exchange.
Law No. 12,865 (Oct 2013) Indirectly permits “normalization of mobile payment systems and the creation of electronic currencies” “Payment arrangement” – rules regarding a transaction “payment institution” – entity agreeing on rules “electronic currency” – resources on an electronic system allowing a payment transaction Rules still exist governing behavior of financial institutions
BTC use banned “The ruble shall be the official monetary unit (currency) of the Russian Federation. It shall be equal to 100 kopecks. The issue of any other monetary units or quasi-money shall be prohibited in the Russian Federation.” - Russian Federation Federal Law, Article 27 “Systems for anonymous payments and cyber currencies …are money substitutes and cannot be used by individuals or legal entities” – Prosecutor General’s Office Use of BTC “potentially suspicious” Associated with illegal activities
People’s Bank of China Notice on Precautions Against the Risks of Bitcoins (Dec 3, 2013) Official Statement (Dec 5, 2013) BTC is not recommended for use 24 hours of continuous open transaction, no price limit, the price likely to be controlled by opportunists. Resulting in volatility, the risk is great. Ordinary investors blindly follow and can easily suffer heavy losses. High risk of money laundering Risk of being exploited by criminals or organizations Financial institutions may not conduct business with Bitcoin, nor may BTC be sold or traded by a third party. Ordinary people have freedom to participate (Above text paraphrased from Google translation of Chinese website)
BTC not a real currency or payment method Instrument for money laundering and illegal activities Conversions of BTC to real currencies should only be handled by authorized payment service providers. …who are authorized by the government of France
Bank of France: “Even if Bitcoin is not currently a credible investment vehicle and therefore do not pose a significant risk to financial stability, they represent a financial risk for those who hold them.”
No ban on digital currencies Reserve Bank of India (RBI) public advisory Financial, operational, legal risks Due to pressure, BuySellBitCo.in suspended operations.
Germany: Cryptocurrency is a taxable asset India: Reserve Bank of India: use at your own risk Croatia Not illegal. “it is not electronic money since it’s not debt to the issuer“ Cyprus: Not regulated Regards “the use of any kind of virtual money as particularly dangerous“
Denmark – Bitcoin not regarded as a currency. “…will not regulate bitcoin use.“ Japan, South Korea No laws or regulations Taiwan “highly speculative virtual commodity.” Thailand “using bitcoins... was illegal because of a lack of existing laws” United Kingdom Not regulated … yet BTC are “single purpose vouchers” (tax 10-20%)
“Bitcoin's supporters have consistently argued that the currency is impossible to fully ban, since it exists as a decentralised network of transactions. But if it can be rendered useless to merchants and customers, an actual ban may be unnecessary.”
Until legality issue is determined worldwide, BTC (and other cryptocurrencies) may not stabilize E.g., Bank of China condemning BTC led to 20% drop in trading price (temporary)
Cryptocurrencies are so new, most governments are not ready to regulate “Better safe than sorry” approach “Let’s see what will happen” approach As cryptocurrencies become more broadly used, the U.S., and other governments, will likely take a position.
Opinion: In order for BTC to become a currency, a government will need to control it. “ The most important hurdles would be that government would need to register each bitcoin to an individual and be able to track each transaction to make sure it is not being used for illegal ends” – Peter Cohan (adjunct lecturer Babson College, President of Peter S. Cohan & Associates, a venture capital firm)