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Back in August, Germany became the first country in the world to recognize Bitcoin as “private money.” Note this is not the same as legal tender.
This, perhaps above all, is seen as legitimizing Bitcoin’s image worldwide, where prevailing narratives before mid-2013 or so focused on Silk Road and money launderers.
In Germany itself, Bitcoin spenders and businesspeople are now free to engage in digital commerce without the fear that their activities put them on the wrong side of the law.
But this designation has further implications in Germany and Europe. First, the currency’s decentralized structure means governments cannot simply seize a citizen’s Bitcoins or take a percentage of someone’s deposits, as we saw happen in Cyprus. With prolonged concerns about the euro itself, many in Germany and Europe see Bitcoins as a way to diversify holdings and hedge against EU policies.
Some in Germany argue that currency competition is a good thing.
“A free country should resist and not intervene in citizen’s private choice of money,” said Frank Schaeffler, member of the German parliament’s finance committee. “In my opinion, the production of money is none of the government’s business.”
Note, though, that all Germany really did was classify Bitcoin and find a place in its legal code for digital currencies. This same law covers any privately agreed-upon form of payment that could be used in multilateral clearing or settlement.
That said, Germany still feels it has the right to tax Bitcoin. According to Berlin, everyday commercial transaction in Germany in Bitcoin still falls under the tax regime.
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