Bitcoin advocates may lambast the US government for being slow to clarify its position on bitcoin, but Senator Tom Carper doesn’t think it’s all that bad. The chair of the Senate Homeland Security and Governmental Affairs Committee released a report today exploring the legal status of virtual currencies in 40 countries. The findings? Most countries are still fumbling their way towards clarity, if they’re bothering at all.
“This report has some good news – namely that the United States may not be as far behind the curve on virtual currencies as some have argued,” Carper said. “In fact, the United States might be leading the way for a number of nations when it comes to addressing this growing technology.”
One notable thing stands out about the report, written by the Law Library of Congress. That there are a lot of governments that haven’t regulated bitcoin yet, but who are nevertheless grumbling about it. These include France, the EU, and Estonia.
The Dutch National Bank, Turkey, and Taiwan have warned of the risks associated with virtual currencies, and Portugal, while also keeping its hands off of bitcoin, nevertheless called digital currencies in this class “unsafe”.[post-quote]
The Russian Federation said that there may be a need to regulate virtual currencies globally in the near future. But perhaps the strongest warning came from India, which while not explicitly regulating bitcoin made an official anti-virtual currency statement strongly-worded enough that it caused the country’s biggest exchange to shut down.
The report lists each country’s current stance on bitcoin, but these break down into three broad categories: those who are actively regulating virtual currencies, those who have declared, officially or unofficially, an interest in taxing it, and those who haven’t issued any regulation or tax guidance yet.
Among those actively regulating digital currencies, according to the report, are Brazil, and China, the latter which stopped financial institutions buying, selling, or pricing services in bitcoin, and from providing bitcoin-related services.
Iceland forbids bitcoin from being traded in foreign exchange. Thailand was said to have issued a statement saying that bitcoin was illegal, the report suggests, but adds that the ruling was preliminary, and that bitcoin exchanges there are running.
Those not actively regulating or forbidding bitcoin use, but who are nevertheless moving in the direction of taxation, include Australia, which is warning people to keep good records, and Canada, which has said that bitcoin is subject to the same taxation rules as bartered goods.
Other countries at various stages along the tax route include Finland, Israel (which wants to tax it, but isn’t sure how yet), and now Singapore, says the report.
Slovenia will tax bitcoin on a per-case basis, depending on the type of income, and the UK recently issued a note saying that bitcoin would be treated as single-purpose vouchers, meaning a value-added tax of 10-20%, the report said.
Waiting and seeing
Then, there are the countries that have next-to-no position on bitcoin. Notable among these are Germany, the EU’s major economic engine, which sees virtual currencies as legally binding financial instruments known as units of account that don’t need licensing, the report says. Germany makes bitcoin-based capital gains exempt after a year.
Italy doesn’t regulate virtual currencies for individual use, but the use of electronic currency is limited to institutions registered with the central bank there.
Argentina doesn’t recognize the currency as legal tender, but the report points out that the country’s citizenry are using it anyway, to get around controls on foreign currencies.
Others that have taken little-to-no action on bitcoin yet include Japan, Malaysia, Malta, Netherlands, New Zealand, Nicaragua, Poland, Portugal, Russia, and Spain. South Korea is also keeping its powder dry on regulation, but may impose laws on virtual currencies in the future, the report added.
Carper may be bullish about the USA’s global positioning on bitcoin regulation, but that still doesn’t explain why the top eight exchanges by volume are non-domestic. Only Kraken makes it onto the chart.
And then, there’s the tax issue, which is particularly important for encouraging bitcoin adoption by businesses. Carper acknowledges the need for work here, acknowledging that the IRS has not yet delivered clear guidance.
“This report shows that other countries have addressed how virtual currencies are taxed, and I urge the Internal Revenue to glean the findings from this survey to help determine its own treatment of virtual currencies,” he said.
“Our Committee will also continue to work closely with the Internal Revenue Service to get greater clarity as to their timelines and thought processes on dealing with the potential tax vulnerabilities of digital currencies,” Carper added.
Global law image via Shutterstock