Law Library of the U.S. Congress
This report surveys forty foreign jurisdictions and the European Union, reporting on any regulations or statements from central banks or government offices on the handling of bitcoins as well as any significant use of bitcoins in business transactions. Topics covered include whether bitcoins are recognized as legal tender, the possibility of negative impacts on the national currency, concerns about fraud, and how transactions using the Bitcoin system are viewed by tax authorities.
Of those countries surveyed, only a very few, notably China and Brazil, have specific regulations applicable to bitcoin use. There is widespread concern about the Bitcoin system’s possible impact on national currencies, its potential for criminal misuse, and the implications of its use for taxation. Overall, the findings of this report reveal that the debate over how to deal with this new virtual currency is still in its infancy.
January 2014 Report, (PDF, 426KB) (Updates and additional countries have been added below.)
There are no official statements on the Alderney government’s website regarding its position towards the bitcoin, and it appears to be unregulated on the island. However, journalists have reportedly obtained documents indicating that Alderney is trying to take the lead and become the central hub for the bitcoin, by minting and issuing physical bitcoins and creating an international center with a bitcoin storage vault service that complies with anti-money laundering rules. As Alderney is a Crown Dependency of the United Kingdom, the UK’s Royal Mint would need to be involved in issuing any physical currency, and the Head of New Development at the Royal Mint confirmed to the Financial Times that discussions about issuing the currency have occurred, but at this time, it remains merely a concept.[2]
Under the National Constitution of Argentina[3] the only authority capable of issuing legal currency is the Central Bank.[4] Bitcoins are not legal currency strictly speaking, since they are not issued by the government monetary authority and are not legal tender. Therefore, they may be considered money but not legal currency, since they are not a mandatory means of cancelling debts or obligations. Although bitcoins are not specifically regulated, they are increasingly being used in Argentina, a country that has strict control over foreign currencies.[5] According to some experts[6] a bitcoin may be considered a good or a thing under the Civil Code,[7] and transactions with bitcoins may be governed by the rules of the sale of goods under the Civil Code[8]
In June 2013, a senior Australian Taxation Office (ATO) official told The Australian Financial Review that the ATO is monitoring the bitcoin, including “its volatility, how widely it is accepted, its interaction with conventional currencies through exchange mechanisms and international developments."[9]The article indicated that the ATO intends to catch misconduct and subject the currency to the same taxation requirements that apply to conventional commercial transactions, including the Goods and Services Tax (GST). Another ATO spokesman said that those speculating in bitcoins may face tax implications and should “keep detailed records and evidence about what trades they make and the source of any assumptions about the value of any transaction in Australian dollars.”[10]
In December 2013, the governor of the Reserve Bank of Australia (RBA) indicated in an interview with The Australian Financial Review that the bitcoin has not caused the RBA any “material problem yet,” but that there were risks for speculators.[11] He said that there was nothing to stop people holding or transacting in other currencies in Australia, including the bitcoin.
In October 2013, an Australian Bitcoin bank was hacked, resulting in the theft of over US$1 million of the currency.[12]
UPDATE (Aug. 25, 2014): On August 20, 2014, the Australian Taxation Office (ATO) issued a guidance paper, a Goods and Services Tax (GST) Draft Ruling, and four draft taxation determinations on the taxation treatment of Bitcoin and other virtual currencies. ATO’s view is that Bitcoin is neither money nor a foreign currency. According to the guidance paper and draft rulings, Bitcoin transactions will be treated "like barter transactions with similar taxation consequences."
Additional information on this topic is available
There are no specific laws or regulations regarding Bitcoin in Belgium.
The Belgian Finance Minister, in response to a question by a Belgian senator, stated in July 2013 that while the Bitcoin system seems to be somewhat problematic as a potential tool for money laundering and other illegal activities, such problems should not be overstated. He also stated that, based on studies from the Belgian central bank (Banque nationale de Belgique) and the European Central Bank, the bitcoin does not present any significant risks to price stability, to the financial system in general, or to its individual users. Finally, in this same statement, the Minister of Finance indicated that government intervention with regard to the Bitcoin system does not appear necessary at the present time.[13]
On October 9, 2013, Brazil enacted Law No. 12,865, which created the possibility for the normalization of mobile payment systems and the creation of electronic currencies, including the bitcoin. The Law provides, among other things, for the payment arrangements and payment institutions that comprise the Brazilian Payment System (Sistema de Pagamentos Brasileiro, SPB).[14]
Law No. 12,865 defines “payment arrangement” as a set of rules and procedures that regulate the rendering of a particular service to the public that is accepted by more than one recipient, through direct access by end users, payers, and recipients.[15] “Payment institution” is defined as a legal entity that, by adhering to one or more payment arrangements, has as a principal or secondary activity, alternatively or cumulatively, one of the activities listed in article 6(III). “Electronic currency” is defined as resources stored on a device or electronic system that allow the end user to perform a payment transaction.[16]
Article 7 lists the principles that must be observed by the payment arrangements and payment institutions, according to the parameters to be established by the Brazilian Central Bank in accordance with the directives of the National Monetary Council (Conselho Monetário Nacional, CMN). Article 9 defines the competence of the Brazilian Central Bank, pursuant to the directives established by the CMN. Article 11 determines that the penalties provided for in the legislation applicable to financial institutions applies to the infractions set forth in Law No. 12,865 and in the directives and norms established, respectively, by the CMN and the Brazilian Central Bank.
Law No. 12,865 authorizes the Brazilian Central Bank to issue the necessary norms and instructions for the fulfillment of its provisions; this must be done within 180 days of the publication of the Law and in accordance with the guidelines established by the CMN.[17]
Canada does not have a specific law or regulation that regulates bitcoins. In an emailed statement to The Wall Street Journal in January 2014, a Canadian official from Canada’s Department of Finance stated that Canada does not consider bitcoins to be legal tender. The official reportedly stated that “[o]nly Canadian bank notes and coins are recognized as legal tender in Canada. Bitcoin digital ‘currency’ is not legal tender in Canada.”[18] However, the official also stated that the government of Canada would continue to “monitor developments involving virtual currencies.”[19]
The Wall Street Journal article also quoted a spokesman for Bank of Canada, Canada’s central bank, who stated that Bank of Canada has been taking a greater interest in bitcoins and other alternative forms of payment owing to “financial stability considerations.”[20] According to the spokesman,
[s]maller, stand-alone payment systems for which there are many substitutes – like bitcoin – should generally require much less intensive oversight and regulation because they pose much less risk to the Canadian financial system as a whole. . . . Nevertheless, these payment systems should be designed and operated to meet the needs of Canadians which would include convenience and ease of use, price, reliability, safety, and effective redress mechanisms.[21]
In April 2013, Canada’s Revenue Agency reportedly stated that users of bitcoins will have to pay tax on transactions in the digital currency, based on two separate tax rules that apply to barter transactions and things that are bought and sold for speculative purposes.[22] According to another news report, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit, sent out letters to a number of major Canadian Bitcoin service operators stating that their bitcoin exchanges were not at this time “engaged as a money services business in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing and its associated Regulations,” and would not be subject to its rules or have to be registered with FINTRAC.[23]
UPDATE (Feb. 14, 2014): On February 11, 2014, the Canadian Finance Minister unveiled the Federal Budget for 2014, which included a brief mention of Canadian government plans to introduce anti-money laundering and anti-terrorist financing regulations for virtual currencies such as Bitcoin.
Additional information on this topic is available.
UPDATE (July 9, 2014): On June 19, 2014, the Governor General of Canada gave his royal assent to Bill C-31, which includes amendments to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The new law will treat virtual currencies, including Bitcoin, as "money service businesses" for the purposes of the anti-money laundering law.
Additional information on this topic is available.
According to news reports, there are no merchants that accept bitcoins in Chile as of yet. Buying virtual currencies in Chile is still very cumbersome.[24] However, there is a community of information technology professionals who are promoting the use of bitcoins, and have even opened the first virtual money exchange store in the country. Interest in acquiring bitcoins is slowly growing. However, because there is no regulation on the use of bitcoins, transactions are informal in nature and mainly conducted among friends.[25]
In 2013, a group of American Libertarians founded a self-sustaining organic farming community called Galt’s Gulch Chile in central Chile with an economy based on bitcoins.[26]
On December 3, 2013, the central bank of China and four other central government ministries and commissions jointly issued the Notice on Precautions Against the Risks of Bitcoins.[27] Defining it as a special “virtual commodity,” the Notice said that by nature the bitcoin is not a currency and should not be circulated and used in the market as a currency.[28]
Banks and payment institutions in China are prohibited from dealing in bitcoins. The Notice required that, at this stage, financial and payment institutions may not use bitcoin pricing for products or services, buy or sell bitcoins, or provide direct or indirect bitcoin-related services to customers, including registering, trading, settling, clearing, or other services; accepting bitcoins or using bitcoins as a clearing tool; and trading bitcoins with Chinese yuan or foreign currencies.[29]
The Notice further required strengthening the oversight of Internet websites providing bitcoin registration, trading, and other services. It also warned about the risks of using the Bitcoin system for money laundering.[30]
On December 6, 2013, the Croatian National Bank (CNB) reportedly conducted a discussion on the circulation of digital currencies and concluded that the bitcoin is not illegal in Croatia:[31]
[CNB] said that it is not electronic money since it’s not debt to the issuer (although it has some similarities with electronic money), and that it is not legal tender in Croatia but can be legally used. Croatian kunas (HRK) are the official means of payment in Croatia, but in some cases payment in other currencies is allowed, such as when person/company from Croatia is transacting with another entity from outside of Croatia.[32]
No specific guidelines were issued and no formal statement was found on CNB’s website. According to the same report,
CNB commented that money is [a] social institution, and that it’s not unusual that money is evolving as influenced by the Internet, and established that Bitcoin is at the moment not regulated or directly monitored, but that regulation will probably in the future fall under the jurisdiction of central banks.”[33]
The use of bitcoins is not regulated in Cyprus. On December 11, 2013, the Central Bank of Cyprus issued a statement on bitcoins, stating that “it considers the use of any kind of virtual money as particularly dangerous, given that it is not under any regulatory system and its operation is unchecked.”[34]
Denmark’s Finanstilsynet (Financial Supervisory Authority) has issued a statement rejecting the bitcoin as a currency and stating that it will not regulate bitcoin use.[35] In its statement the Finanstilsynet emphasizes that it has evaluated the use of the Bitcoin system and found that Bitcoin does not fall under any of the financial services categories, including the issuing of electronic money, payment for services, currency exchanges, or the issuing of mortages; thus, Bitcoin activity is not covered under current financial regulation.[36] This statement by the Financial Supervisory Authority suggests that Bitcoin should be treated as an electronic service and earnings from its use would therefore be taxable. However, the Danish Tax Authority has not published any comment as to whether Bitcoin earnings should be taxed.
UPDATE (July 18, 2014): On March 18, 2014, the Danish Central Bank issued a statement declaring that Bitcoin is not a currency. According to the statement, "Bitcoin does not have any real trading value compared to gold and silver, and thus is more similar to glass beads." (Press Release, Bitcoin er ikke penge, Danish Central Bank [Nationalbanken] website (Mar. 18, 2104).) The Danish Central Bank went on to point out that Bitcoins are not protected by any national laws or guarantees, such as a deposit guarantee. (Id.)
Also the Danish Tax Authority (SKAT) has dealt with Bitcoin issues recently. On April 1 2014, the Tax Authority published a binding reply in which it declared that an invoice cannot be issued in Bitcoins, but must instead be issued in Danish Kroner or another recognized currency. (Bitcoins, ikke erhvervsmæssig begrundet, anset for særkilt virksomhed, SKAT (Apr. 1, 2014).) The Authority went on to state that any losses in Bitcoins cannot be deducted as a cost of doing business. (Id.)
Additional information on the topic is available
In Estonia, the use of bitcoins is not regulated or otherwise controlled by the government. Because of the Bitcoin service’s growing popularity and increasing use by the country’s population, however, the Bank of Estonia (the nation’s central bank) monitors financial arrangements that use Bitcoin.[37] According to Google’s search statistics, Estonia is the country with the second largest number of Internet searches for the term “Bitcoin”; Russia has the most such searches.[38]
On December 19, 2013, the Estonian business information Web portal Dv.ee published comments by Michkel Nymmel, the head of the Payment Processing Department of the Bank of Estonia, concerning the increased use of various financial schemes related to digital currencies. Nymmel said that according to Bank of Estonia estimates, the bitcoin does not create any threat to financial or price stability because of its limited virtual area of circulation. He did warn that “[w]hile Bitcoin provides users with an alternative to traditional payment systems, the bank believes that there are numerous risks to customers owing to [the] absence of security mechanisms and credit protection measures.”[39]
UPDATE (April 21, 2014): In March 2014, Estonian Tax Authority defined the official government position that Bitcoin is an alternative means of payment and income derived from Bitcoin transactions constitutes capital gain subject to taxation.
Additional information on this topic is available
The European Union (EU) has passed no specific legislation relative to the status of the bitcoin as a currency. In October 2012, the European Central Bank issued a report on virtual currency schemes that discusses the Bitcoin system and briefly analyzes its legal status under existing EU legislation.[40] Some commentators have suggested that the bitcoin may fall within the definition of the Electronic Money Directive 2009/110/EC.[41] That Directive defines electronic money based on three criteria: (a) electronic storage, (b) issuance upon receipt of funds, and (c) acceptance as a means of payment by a legal or natural person other than the issuer.[42] The report states that the bitcoin meets the first and third criteria but not the second. Other experts suggest that the bitcoin falls within the definition of Payment Services Directive 2007/64/EC.[43] In general, this Directive prescribes rules related to the execution of payments through electronic money. However, as the report concludes, the bitcoin falls outside the scope of Directive 2007/64/EC because this Directive does not deal with electronic money and because payment institutions introduced by the Directive are not permitted to issue electronic money.[44]
The report also notes that the bitcoin issue has been raised with the European Commission’s Payments Committee.[45]
On December 13, 2013, the European Banking Authority (EBA), the regulatory agency of the EU responsible for advising EU institutions on banking, e-money regulation, and payments, issued a warning on the dangers associated with transactions, such as buying, holding, or trading virtual currencies. The EBA pointed out that since the bitcoin is not regulated, consumers are not protected and are at risk of losing their money and that consumers may still be liable for taxes when using virtual currencies.[46]
The Finish Tax Authority, Vero Skatt, has issued instructions for the taxation of virtual currencies, including the bitcoin. When transferred to another currency, the rules on taxation of capital gains apply. When the currency is used as a form of payment for goods and services, it is treated as a trade, and the increase in value that the currency might have gained after it was obtained is taxable.[47] The sale of bitcoins at a loss in value compared to the original purchase price is not deductible under the Finish Income Taxation Act, because such a loss in value is not specifically described as deductible in the Act.[48]
There are no specific laws or regulations regarding the Bitcoin system in France.
Banque de France, Fr
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