The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. Whilst the majority of countries do not make the usage of bitcoin itself illegal (with the exceptions of: Bangladesh, Bolivia, Ecuador & Kyrgyzstan), its status as money (or a commodity) varies, with differing regulatory implications. While some countries have explicitly allowed its use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. While this article provides the legal status of bitcoin, regulations and bans that apply to this cryptocurrencylikely extend to similar systems as well.
The European Union has passed no specific legislation relative to the status of the bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.
The European Union has passed no specific legislation relative to the status of the bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.
In October 2015, the Court of Justice of the European Union ruled that "The exchange of traditional currencies for units of the ‘bitcoin’ virtual currency is exempt from VAT" and that "Member States must exempt, inter alia, transactions relating to ‘currency, bank notes and coins used as legal tender’", making bitcoin a currency as opposed to being a commodity.According to judges, the tax shouldn’t be charged because bitcoins should be treated as a means of payment.
According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors. Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.
The European Central Bank classifies bitcoin as a convertible decentralized virtual currency.[5]:6 In July 2014 the European Banking Authorityadvised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.
In 2016 the European Parliament's proposal to set up a taskforce to monitor virtual currencies to combat money laundering and terrorism, passed by 542 votes to 51, with 11 abstentions, has been sent to the European Commission for consideration. The European Commission also notably presented a "parallel" proposal aimed at preventing tax evasion techniques as revealed in the Panama Papers. In 2017 it was revealed that the proposal will require cryptocurrency exchanges and wallets to identify suspicious activity.
In 2013 the G7's Financial Action Task Force issued the following statement in guidelines which may be applicable to companies involved in transmitting bitcoin and other currencies, "Internet-based payment services that allow third party funding from anonymous sources may face an increased risk of [money laundering/terrorist financing]." They concluded that this may "pose challenges to countries in [anti-money laundering/counter terrorist financing] regulation and supervision".
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