Regulations of Bitcoin
The Bitcoin system is a steadily growing trend, that is becoming recognized as a top virtual currency for the world. As a result of this growth, there also has been an increase in concerns over fraudulent, illegal use, as well as the effect it can have on taxes and real forms of currency. Countries have begun to create ordinances and laws on how to properly use Bitcoin. Consider some notable countries in which regulatory issues over the use of Bitcoin has come to the fore:
In October 2013, there was an attempted hacking of the Australian Bitcoin Bank. This resulted in losses of over one million dollars, as well as many concerns over the security of this system. It has been suggested by the Australian Taxation Office and the Reserve Bank of Australia, that they will consider taxing this form of currency in the same manner as they do any other commercial transaction.
Virtual currency has been banned by the Central Bank of Bangladesh since September 2014. With the strict anti-money laundering laws set in place, use of bitcoin is a punishable crime in Bangladesh.
No current ban on Bitcoins exist in Brazil, however this is a rare country that has set laws over the creation of virtual currencies and their respective payment systems.
Regulatory concerns has resulted in the banning of Bitcoin by the Central Bank of Bolivia (BCB). They feel that tax evasion will be too easy to accomplish by business entities, by use of this system of currency.
It has been planned to tax Bitcoin by current tax rules, by Canada’s revenue agency. Meanwhile, Bitcoin is not legally recognized, and is not considered to be legal tender in Canada.
Bitcoin use is restricted in China. Financial institutions and banks may not deal in Bitcoin, whatsoever. The Central Bank of China considered Bitcoin to be a “virtual commodity”, and strongly discourages use of it, per a notice given in December 2013.
Bitcoin is banned in Ecuador. The assets of the Central Bank of Ecuador will back the creation of a new electronic money system, and state run currency, as an alternative to Bitcoin.
Bitcoin continues to be a topic of debate in this region, particularly over its classification. A European Central Bank report in October of 2012 noted virtual currency schemes, and the possible conflict between current European Union laws, and the use of Bitcoin. Due to the lack of regulation, the European Banking Authority has clearly outlined warnings about the risks of using Bitcoin.
The Finnish Taxation Authority has issued instructions on how to use Bitcoin and other virtual currencies. If any gains result from the use of Bitcoin, then those gains are subject to the rules of their capital gains tax.
Currently, there are no laws that regulate virtual currency or Bitcoin in Hong Kong. Despite that, there is caution over potential crimes such as fraud and money laundering, involving the use of Bitcoin and virtual currencies. Therefore, use of this currency is being heavily monitored by the Hong Kong government.
As of now, there exists no specific regulation or prohibitions on the use of Bitcoin. But there has been notices issued in regards to security concerns and money laundering by use of Bitcoin, from India’s central bank, the Reserve Bank of India (RBI). These notices from the RBI resulted in the closure of the largest Bitcoin trading platform in India.
There has been consideration given to taxing all gains made through trade of Bitcoin, by the Israeli Tax Authority. In some situations, there are extortion requests that have been made on banks in Israel over the payment of Bitcoins.
Bitcoin and virtual currencies have been banned by the National Bank of the Kyrgyz Republic, which is the central bank in Kyrgyzstan. The reasons for the ban stems from the risk involved, legality questions, and the lack of centralization of this form of currency.
Use of Bitcoin in Russia is restricted. Bitcoin is considered to be a replacement for money in the eyes of the Bank of Russia, which is the central bank for Russia. They fear the risk of not just illegal activities such as money laundering, but also the potential of Bitcoin helping to fund terrorism.
Bitcoin ATMs are opposed in Taiwan. There are concerns by the capital markets regulator of Taiwan, the Financial Supervisory Commission. They feel Bitcoin is too speculative and risky.
As of now, Bitcoin is not regulated in the UK. Profits or losses by means of Bitcoin trade are subject to capital gains tax. Any goods that are purchased by Bitcoin is subject to VAT (value added tax).
Bitcoin has been not just used, but perhaps even embraced by the United States. While there are rules being explored in regards to the use of Bitcoin in the US, currently there are no set rules that regulate its use.
The Bottom Line
There is no universal manner that exists on how to regulate the use of bitcoin. So many countries have their own manner in which they wish to manage this, but they all have their pros and cons. While the future of Bitcoin is hard to predict, it should be expected to continue to see increases on the regulation of Bitcoin, as it grows in popularity.