Bitcoin And Altcoins To Become Legal Money

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Bitcoin officially recognized as money in Germany

Based on the decision of the European Court of Justice, the German Ministry of Finance recognized the cryptocurrency Bitcoin as a currency and granted it official status.

This week, the German Ministry of Finance issued a decree according to which crypto currency bitcoin recognized as a means of payment. In addition, no tax will be charged for purchases using Bitcoin.

The decree states that cryptocurrencies are the equivalent of legal tender. Thus, in Germany, bitcoin became an officially recognized currency.

In its decision, the German Ministry of Finance relies on the decision of the European Court of 2020, in which bitcoin is clearly defined by currency, and abolishing VAT if cryptocurrency is used when purchasing services or goods.

Along with this, the decision of the European Court of Justice has a double interpretation regarding the regulation of cryptocurrencies. In other words, each EU state can determine independently – Bitcoin is the currency or product.

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Economics textbooks define a legal tender as a medium of payment recognised by a legal system to be valid for meeting financial obligations. Paper currency and coins are common forms of legal tender across countries.

In 1999, American economist and winner of the 1976 Nobel Prize in Economics, Prof. Milton Friedman, predicted that the Internet would become one of the major forces for reducing the role of government and the media.

After almost four decades of Friedman’s forecast, the one thing that is remaining, but seem to be locking around the horizon is a reliable and globally acceptable electronic cash.

Bitcoin and other crypto-currencies are attempting to fill Friedman’s void. But can it be regarded as money? Since its introduction in January 2009, the currency has expanded by 1,624,036 per cent, measured against the U.S. dollar rising from $0.04 to $7,638.62 on June 2, 2020. This growth is phenomenal, thus making Bitcoin the highest performing currency in the world when compared with other popular currencies over the last few years. For instance, during this same period, the price of gold (in U.S. dollars) climbed by 6.4 per cent and the value of the dollar against the Eurozone currency, the Euro, declined by 9.7 per cent.

To serve as money, Bitcoin must satisfy the key attributes of a legal tender. It must be acceptable as a medium of exchange, serve as unit of account and a store of value. How far has it fulfilled each of these criteria?

One of the vital roles of money is in its attribute as a medium of exchange to facilitate transactions. According to Coinmap.org, 11,291 businesses accepted Bitcoin for payment of products and services at the end of 2020. Despite acceptance rates growing by 38 per cent annually, less than one in 700 businesses in the United States of America accepted Bitcoin as a unit of payment at the end of 2020. Data on the acceptance of gold to purchase goods and services were not available, but 100 per cent of U.S. businesses are legally required to accept the dollar for payment for goods and services.

In more conservative markets, such as Africa, Bitcoin remains far less popular as a medium of exchange.

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Some apex financial authorities and Central Banks have issued regulatory disclaimers against Bitcoin. For instance, The Central Bank of Nigeria has again cautioned Nigerians to be wary of investments in crypto-currency as they are virtual currencies that are not legal tender in Nigeria. It further warned that investing in crypto-currencies is a fundamental “own risk” as investors in mediums, such as Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, and NairaEx are not protected by law or any regulation in the country.

In 2020 against the Euro, Bitcoin varied by 71.3 per cent from its average, the dollar varied by 7.3 per cent from its average and gold deviated by only 0.1 per cent from its average. Since the beginning of this year against the Euro, Bitcoin plummeted by 50.2 per cent, the dollar sank by 3.2 per cent and gold rose by 2.6 per cent. Evidently, Bitcoin, from 2009 to 2020, stands as very shaky and not yet a reliable store-of-value.

The most important function of money is arguably as a unit of account, the common measure that people use to set prices or record debts. Across the world, people continue to maintain an overwhelmingly incentive to use their national currency-or a claim on the national currency such a bank deposit-for all ordinary transactions, including retailers price goods and services, calculating profits or losses, employee wages and salaries, payment of taxes, levies, utilities and real assets.

Bitcoin is yet and very unlikely to challenge national currencies like the US dollar for these purposes over the near to medium term. It has many great qualities as money because it is durable, easily divisible, easy to move from one place to another, relatively scarce and enjoys growing measure of acceptability. Still, the core functions of money as a store of value, medium of exchange and unit of account are yet to be fulfilled by the crypto-currency. In addition, the fact that fiat currency reigns supreme across the world represents a huge obstacle to the mass adoption of any crypto currency.

Thus, Bitcoin, for now, stands more as a “poker chip” than money. However, the resilience and rapid acceptance of Bitcoin for payment is enhancing its wide-spread use as money in the years ahead but this is not likely in 2020 through to 2021.

Dr. Vincent Nwani, a business analyst, sent this piece from Lagos

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Bitcoin will soon be legally recognized as a method of payment in Japan. The bill with provisions for cryptocurrencies has recently passed through the period of public consultation and will enter into force in April.

Bitcoin.com examines what the bill means and how it could affect Bitcoin with Special Counsel at Anderson Mori & Tomotsune, Ken Kawai, who has held numerous speaking engagements on the legal issues of virtual currency regulations in Japan.

Countdown: The Long Awaited Bill

Since Bitcoin’s inception, its legal position in Japan has not been clear. The first bill containing provisions for virtual currencies including Bitcoin was submitted to the Diet last March. It amends the existing Payment Services Act and the Act on Preventing of Transfer of Criminal Proceeds.

“The revision of the Payment Services Act, which sets out the basic framework of virtual currency regulation, was promulgated last June”, Kawai told Bitcoin.com. The drafts of detailed regulations and guidelines were published in December and the period for public consultation on the bill ended on January 27, he continued, adding that:

The new regulations will enter into force in April 2020.

New Method of Payment but Not Currency

This bill defines virtual currencies including bitcoin and imposes certain regulations on virtual currency exchange services with the aim to prevent money laundering and terrorist financing as well as to protect users.

While the bill recognizes them as a new method of payment in Japan, virtual currencies are not classified as “currencies” however. Kawai confirmed:

“Virtual currency” is distinguished clearly from “currency” in the regulations.

Even though Bitcoin is not considered a currency, being recognized by the government as a payment method will “likely have a positive effect on people’s mind and facilitate usage of VC’s [virtual currencies]”, he believes.

Bitcoin usage has already been growing considerably in Japan. Japanese exchange Coincheck revealed significant growth in its user base, rising from 14,000 users last April to 76,400 in January. In addition, the exchange reported gigantic growth in the number of bitcoin-accepting merchants using its service. Also, Japanese giant GMO Internet group has recently announced that it would be developing a bitcoin exchange and wallet service.

Meanwhile, Japan now has the second-largest bitcoin trading volume globally, according to Coinhills.

While usage as a payment method should not be affected whether bitcoin is legally considered a ‘currency’ or not, Kawai explained that, from a legal standpoint, there are some considerable differences.

“For instance, if they are defined as “currencies”, lending of VCs must comply with Money Lending Control Act (which requires lenders to register as “Moneylenders”) and VCs’ derivatives must comply with the Financial Instrument Exchange Act”, he described.

Some other countries have classified virtual currency as an asset or property for tax purposes such as the U.S. Recently, Israel has issued a draft which considers Bitcoin an asset, therefore imposing Value Added Tax (VAT) as well as capital gains tax on bitcoin transactions.

However, for Japan, this bill does not define virtual currency as “property”. Instead, virtual currencies are defined as ‘proprietary value’, Kawai contrasted, adding that “a precedent of Tokyo District Court denies the concept of having ‘property rights’ of Bitcoin”. Furthermore, “it is not uncertain what is the legal nature of proprietary value in Japanese civil laws”, he clarified, adding that “I do not expect that the government is leaning towards proactively considering it as “property”.

Do you think Bitcoin adoption in Japan will explode when this bill becomes law? Let us know in the comments section below.

Images courtesy of Shutterstock and Anderson Mori & Tomotsune

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