December 13, 2013
Bitcoin reminds me of the old poem by Samuel Taylor Coleridge called The Rime of the Ancient Mariner, where he says 'Water water everywhere, and not a drop to drink'
While Bitcon value has gone from $50 to $1200+, most of us have been mere speculators. Very few have actually got Bitcoins and even fewer have transacted using a Bitcoin. Wall street analysts have predicted that the Bitcoin’s value might reach 10 to 100 times its current value (from $860 on 12th December 2013). Still people are reluctant to buy it. They are afraid if they will be able to freely sell it in their country. Many think that its a bubble, a ponzi scheme and they might lose money. They want to know what their Governments stand is? Are the banks allowed to trade in Bitcoins?
Somewhere along the way, we have gotten used to being regulated.
Lets accept the fact that Bitcoin's biggest strength is its decentralized, digital, and international form and shape. Yet, the currency is lacking mass adoption and is restricted to the privileged few. Even though there are so many ways, websites and means to mine, buy, sell bitcoins. Some experts believe that there is a big opportunity for governments to regulate this currency. Make it legitimate somehow. So we thought of looking at some of the countries which are seeing traction.
A proposal was put forth by 45 members of the swiss parliamentary group for digital sustainability (Pardigli), that calls on the Swiss government to evaluate the opportunities for utilization of Bitcoin by the country’s financial sector. It also seeks clarification on the Bitcoin’s legal standing with respect to VAT, securities and Anti-money laundering laws.
'Its (Pardigli's) members, coming from major parties such as SP, FDP, GLP and the Greens, have concluded that Bitcoin and comparable digital currencies not only pose risks, but also opportunities for Switzerland's financial sector. Furthermore, as Bitcoin is already in use as a means of payment in Switzerland, it makes sense to ensure legal certainty regarding money laundering laws and VAT,' said the group in a press statement.
If everything goes as planned, Bitcoin could be practically recognized by Switzerland as a legitimate foreign currency. The move would drastically reduce legal uncertainty for Bitcoin users in Switzerland, mainly in the Swiss banking sector.
As soon as the Chinese buyers started buying Bitcoins in large numbers, there came the axe. China recently released a statement which essentially bans Chinese Banks and Financial institutions from conducting any business associated with Bitcoins. They said it was a Virtual Good and should not be treated as a form of virtual currency.
Individuals however are free to trade said the central bank but it highlighted some risks associated with Bitcoins such as: It is an attractive tool for Money Laundering, Risky in terms of investment due to its volatility and that it can be utilized by criminal gangs.
Within 60 mintutes of the release of this statement, the value of Bitcoin fell by 10% on BTCChina, one of the world’s biggest Bitcoin exchange.
There is a model developed by Brian Roemelle and some experts that shows a rather shocking result. Single Bitcoin values could reach above $10,000 if just 2% of Chinese and Indians buy and hold just a fraction of the Bitcoins that will be in final circulation for savings purpose. Bitcoin has to pass these kind of acid tests before it becomes a real currency. A Chinese man has apparently become China's first Bitcoin multi-millionaire.
Last week Baidu, China’s biggest internet portal reversed its stand and said it would no longer facilitate the use of bitcoins.
On 19th august 2013 the German Finance Ministry announced that Bitcoin is now essentially a ‘Unit of account’ and can be used for the purpose of tax and trading in the country. It is not classified as a foreign currency or e – money but stands as ‘private money’ which can be used in ‘multilateral clearing circles’, according to the ministry.
The adoption of the new rule shows that Germany is getting ready to tax Bitcoin transactions. This legal classification by the German government gives Bitcoin the legitimacy to be used as a settlement currency in one of the worlds largest economies, according to Kathleen Brooks, research director, Forex.com. I think it is interesting that Germany has gone ahead and given legal status to the bitcoin, as it could become an alternative to the euro if the single currency ever ceased to exist, she stated.
Bank of America became the first major financial institution to initiate analyst coverage of Bitcoin. The bank stated that the virtual currency had the potential to become a major means of payment for e-commerce and a serious competitor to traditional payment methods.
The value of Bitcoin jumped from $478 to $744 in November after the virtual currency received support at a Senate committee hearing. Although it is not an official seal of approval, the hearing has provided some amount of legitimacy to a payment mechanism that has been associated with illegal activities.
The anti-money-laundering agency FinCEN has issued guidelines for Bitcoin users, which it defines as those who acquire Bitcoins to purchase goods and services. But what if you acquire Bitcoins for some other purpose, like investment or to transfer cash overseas? None of FinCEN’s categories seems to fit these individuals. Similarly, Bitcoin miners, the people who process Bitcoin transactions and are rewarded with new Bitcoins, do not fit into any of FinCEN’s regulatory categories. Without clear legal guidance, the Bitcoin community has been forced to wing it.
The Channel Island of Alderney has announced plans to become the first jurisdiction to produce physical Bitcoins, in partnership with the UK's Royal Mint. The British crown dependency wants to become an international centre for Bitcoin transactions and establish services such as exchanges that meet anti-money laundering rules.
Coinfloor, a newly launched Bitcoin exchange in London has gone so far as to bar American customers. Legally it is not safe to open up to US customers in the beginning. Partly because of regulation, we think there is a larger market in the UK and in Europe and then in Asia, said the company.
The UK's Financial Conduct Authority told Coinfloor that it has no plans to regulate Bitcoin exchanges, allowing it to launch unencumbered.
Bitcoin was created by a Japanese cryptographer with the codename Satoshi Nakamoto, in 2009.
The world’s 2nd largest Bitcoin exchange Mt. Gox resides in Tokyo, Japan.
Mt Gox announced last month, that they had tied up with JapanNet Bank. As a result of this partnership, Mt. Gox users in Japan will have to make all domestic Japanese Yen (JPY) deposits to the exchange’s JapanNet Bank account.
Government has not taken a stand on Bitcoin yet. But things seem to be quite open.
The world’s first Bitcoin ATM debuted in Canada in the last week of October 2013.
The Canada Revenue Agency, in November issued a statement clarifying the tax treatment of Bitcoin. The statement is a brief outline which states that tax rules apply when Bitcoin is used to pay for goods and services in the same way the rules apply for barter transactions.
The CRA also points out that since digital currency can be traded like a commodity, any resulting gains can be treated as taxable income or capital for the taxpayer and links to an archived document on Transactions in Securities.
Fincen's Canadian counterpart, Fintrac, has assured various Bitcoin businesses that they are not subject to money transmitter regulations.
The Bitcoin crusaders are having a gala time. Especially the ones who had been mining or buying bitcoins. One miner (asked to keep it anonymous) said, the governments and Banks are working hard to curb the growth of this global currency. But it is quite difficult to do that...First they ignore you, then they laugh at you, then they fight you, then you win - Mahatma Gandhi