Germany has recognized Bitcoin as “private money”, making it the first country to accept a cryptocurrency as a “currency” according to reports in Die Welt.
The decision opens the way for broader acceptance of Bitcoin while raising the possibility of taxation and other forms of financial regulation.
The decision means that while personal use of the virtual currency will be tax-free, commercial enterprises using Bitcoin will be taxed.
The decision was part of the German Finance Ministry’s response to a query from Parliamentary Finance Committee member Frank Schaeffler.
"For the first time, the federal government recognizes Bitcoins as private money," said Schaeffler.
The decision comes hot on the heels of a United States Internal Revenue Service (IRS) decision, recently reported
by the Coin Telegraph, to tax Bitcoin as property not currency, which has lead to increased challenges for the Bitcoin community.
While such a decision appears to be appropriate when it comes to regulating Bitcoin investments, for those who use Bitcoin to pay for goods and services the IRS ruling may be cumbersome, experts believe, as it makes it necessary to keep track of every purchase and the value of the currency at time of sale.
The German Finance Ministry enables users of the cryptocurrency to continue using it without government interference, while simultaneously giving the government the opportunity to tax the profits of companies that use the digital currency.
Such a decision may ultimately enable the currency to maintain its independence while removing one of the main objections governments have to the currency.
The status of digital currencies within the financial system is hotly debated as more and more people worldwide begin to use cryptocurrencies while more companies offer goods and services for cryptocurrency.
Cryptocurrencies have also been criticized for promoting anonymity and lack of regulation. There has been a series of scandals surrounding cryptocurrency connected with the Silk Road online market, which has been referred to as the “Amazon.com of illegal drugs,” as well as accusations of fraudulent transactions.
World governments are divided as to how to respond to the emergence of cryptocurrencies, with state and federal governments sometimes coming to different decisions over its use.
While the United States and Germany have recently made decisions over the virtual currency, other countries are still on the fence.
In a recent interview with The CoinTelegraph, Australian Bitcoin Association Vice President Pantelis Roussakis said the Australian government was “largely uninterested, the sums at the moment are too small to be worth the effort”. Yet ambivalent attitudes are likely to change should the number of users continue growing, experts in the field agree.
Meanwhile the head of Japan’s Central Bank, Haruhiko Kuroda, recently stated that in order for Bitcoin to have a future as a recognized currency, the cryptocurrency must prove that it can be a stable and reliable medium of exchange in the aftermath of recent scandals and constant price fluctuations.
Is Bitcoin a real currency and do you support the German Financial Ministry’s decision? We would love to hear from you – let us know your opinion in the comments below.