Germany recognized Bitcoin as ‘private money’ over half a year ago

Journalist:
April 21, 2014

[dropcap size=big]B[/dropcap]itcoin has long been officially given the status of ‘Private Money’ in Germany. This makes Germany the first country in the World to recognize Bitcoin as a currency, according to report an August 2013 article in Die Welt. Back then, the German Finance Ministry’s response to a query from parliamentary Finance Committee member Frank Schaeffler, was that Bitcoin was recognized as having the status of, ‘Private Money’. This decision clearly opens the way for Bitcoin while opening the way for potential taxation and other forms of financial regulation. recognized

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US IRS has it wrong

This decision was starkly contrasted by the US Internal Revenue Service (IRS) declaring that Bitcoin was in fact a property, and should be treated as a property for taxation purposes rather than as a currency. Germany is clearly taking the contrary view and has decided to treat Bitcoin as a currency. While the US IRS decision makes a certain level of sense when you view Bitcoin as an investment it intrinsically would make purchasing a pizza unwieldy and cumbersome from a tax reporting perspective. It would be necessary to record the price you bought each bitcoin, at the price you bought it, then record the price of the bitcoin as you used it to buy the pizza and then declare the difference, to account for, a potential liability to Capital Gains Tax.

The decision to treat Bitcoin as a currency allows users to treat it as a currency [which they already do] and to spend it without taxation worries; businesses then record it for taxation purposes within their Profit and Loss accounts. Germany has clearly taken the decision to step back and allow the currency to develop. The developing power of Bitcoin, with more and more retailers coming to accept it, means that Governments are moving to decide how to treat it. The status of Germany as a rather conservative financial leader, within the European Union, will be taken as a strong signal.  The US and Germany have taken decisions about how to treat Crypto as other countries opt to just sit back and wait.

Elsewhere in the world

In the months following the German announcement of Bitcoin as ‘private money’, the United Kingdom has also taken a similar stance. Her Majesty’s Revenue and Customs, after learning more about Bitcoin, decided to scrap previous plans to enforce a VAT and treat Bitcoin as ‘private currency’.  America risks being left behind in the Bitcoin regulatory sphere as Europe has taken a clear lead. A Texan Congressman plans to change the US IRS’s decision to treat Bitcoin as a property.

Perhaps, cryptocurrencies are now seen to be moving beyond their perceived shady links with ‘The Silk Road’.  The head of Japan’s central Bank, Haruhiko Kuroda, has pointed out that in his opinion in order for Bitcoin to have a future as a recognized currency, it must establish that it can be a stable and reliable medium of exchange in the aftermath of recent scandals and constant price fluctuations. Germany, has significantly greater experience of privately issued currencies than many other nations so their legal system has experience of handling them. It is difficult not to view this recognition as a very positive development and it will be interesting to see how the market will respond. The recent rumours circulating from The PBOC had a dramatic effect on Bitcoin price so we can reasonably expect good news of this magnitude to affect Bitcoin value positively.  The cryptocurrency world is now moving from strength to strength. We’ve taken the hits and perhaps it is now time to benefit from rewards.  Germany is leading the way, other countries, at least in the EU, will choose to follow. A good Day.

Last modified (UTC): April 22, 2014 15:19

PJ Delaney @P.J. Delaney@delboyir

Masters in Public Administration, Bachelors in Mgt., I live in Ireland, I have a bit of a background in Economics and lots of opinions on everything else.