Last November, the U.S. Senate dove head-first into the world of Bitcoin, prompted by Security and Governmental Affairs Committee Chairman Tom Carper, a Democratic senator from Delaware who has become very interested in the digital coin. Representatives from law enforcement and financial agencies told the Senate that they weren’t too worried about Bitcoin. The fact that U.S. officials weren’t going after Bitcoin like pitchfork-wielding villagers after Frankenstein reassured Bitcoin speculators, who rocketed its value from $200 to $1200. Now that the U.S. government’s position on Bitcoin is relatively certain, Sen. Carper wants to know what the rest of the world thinks. His committee tasked the Law Library of Congress with surveying over 40 countries for their official stance on Bitcoin and whether Bitcoin is actually in use.
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“Of those countries surveyed, only a very few, notably China and Brazil, have specific regulations applicable to bitcoin use,” according to the report. “There is widespread concern about the Bitcoin system’s possible impact on national currencies, its potential for criminal misuse, and the implications of its use for taxation. Overall, the findings of this report reveal that the debate over how to deal with this new virtual currency is still in its infancy.”
The currency is only toddler-aged (5) so that’s no surprise.
“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,” says Sen. Carper. “In fact, the United States might be leading the way for a number of nations when it comes to addressing this growing technology. While there is no consistent or clear definition or treatment of digital currencies throughout the world, this report underscores that Bitcoin and other virtual currencies are present and growing in major economies, supporting the call for increased global cooperation.”
According to the report, Germany, Finland, Singapore, and Canada are among the countries that have issued tax guidance on Bitcoin, while Ireland, Israel, and Slovenia have made gestures that they plan to. Carper says he urges the IRS to read the report to help determine its own treatment of virtual currencies. “At the end of the day, I think this report is an important reminder to those of us in Congress as well as federal agencies that this technology continues to play an increasing role in our economy here in the United States as well as around the world, and we need to ensure that our policy making in this area is thoughtful, effective and timely,” he says.
So here’s the rundown:
- Alderney (Channel Islands): Even though it’s been heralded as the possible first Bitcoin Isle, there’s no official government stance. “However, journalists have reportedly obtained documents indicating that Alderney is trying to take the lead and become the central hub for the bitcoin, by minting and issuing physical bitcoins and creating an international center with a bitcoin storage vault service that complies with anti-money laundering rules.”
- Argentina: Bitcoin “may be considered money but not legal currency… Although bitcoins are not specifically regulated, they are increasingly being used in Argentina.”
- Australia: The Ossies are keeping their eye on Bitcoin, and plan to tax it, so those dealing in it down under should be keeping good records. And they’ve seen Bitcoin’s dark side: “In October 2013, an Australian Bitcoin bank was hacked, resulting in the theft of over US$1 million of the currency.”
- Belgium: They are waffling when it comes to creating regulation. “The Minister of Finance indicated that government intervention with regard to the Bitcoin system does not appear necessary at the present time.”
- Brazil: It may not be ready for the World Cup, but it is ready for Bitcoin. It passed a law in October 2013 specifically for electronic currencies.
- Canada: The Great White North famously welcome the first Bitcoin ATM last year, in part because those who own it don’t have to worry about complicated laws around Bitcoin. Canada doesn’t consider Bitcoin to be legal tender, and is as interested in regulating it as it is Monopoly money… at least for now. People using it for transactions need to pay tax as they would for bartering or speculative purchases. Unlike in the U.S. Canada’s financial regulator doesn’t regard Bitcoin exchanges as money services businesses, meaning they don’t need to register with it or flag suspicious transactions.
- Chile: There’s no frenzy here yet, though Ayn Rand expats have invaded. “Interest in acquiring bitcoins is slowly growing. However, because there is no regulation on the use of bitcoins, transactions are informal in nature and mainly conducted among friends. In 2013, a group of American Libertarians founded a self-sustaining organic farming community called Galt’s Gulch Chile in central Chile with an economy based on bitcoins.”
- China: It quelched the bidding fury around Bitcoin in December 2013 declaring that “bitcoin is not a currency and should not be circulated and used in the market as a currency.” While people there are free to buy and sell it, financial institutions have been warned away.
- Croatia: “Bitcoin is not legal tender in Croatia but can be legally used.” Regulation could be coming in the future.
- Cyprus: The country’s financial policies early last year sent scared investors into digital currency, making many take notice of Bitcoin for the first time. It’s bank issued a statement on bitcoins in December, stating that “it considers the use of any kind of virtual money as particularly dangerous, given that it is not under any regulatory system and its operation is unchecked.” Cypriots can use it safely by getting a university education with it.
- Denmark: No love for bitcoin. “Denmark’s Finanstilsynet (Financial Supervisory Authority) has issued a statement rejecting the bitcoin as a currency and stating that it will not regulate bitcoin use.”
- Estonia: No official stance, but “because of its growing popularity and increasing use by the country’s population, the Bank of Estonia (the nation’s central bank) monitors financial arrangements that use Bitcoin. According to Google’s search statistics, Estonia is the country with the second largest number of Internet searches for the term “Bitcoin”; Russia has the most such searches.”
- European Union: Issued a warning about virtual currencies in December. The European Banking Authority “pointed out that since the bitcoin is not regulated, consumers are not protected and are at risk of losing their money and that consumers may still be liable for taxes when using virtual currencies.”
- Finland: The Finnish Tax Authority is on it. Capital gains tax applies when bitcoin is converted to another currency. Using it to buy things should be treated as a trade, while any increase in its value over the price at which it was obtained should be taxed. However, bitcoin losses cannot be deducted.
- France: No love for bitcoin. “There are no specific laws or regulations regarding the Bitcoin system in France,” but the central bank has criticized it as speculative and warned about its use for nefarious dealings.
- Germany: Of course it has rules for Bitcoin, treating it like a foreign currency.
- Greece: There are a few businesses there taking bitcoin, but the government is ignoring it for now.
- Hong Kong: Nothing official, though the treasury secretary there said existing laws forbid its use for fraud or money laundering.
- Iceland: Icy toward Bitcoin. “The Central Bank of Iceland reportedly stated that engaging in foreign exchange trading with bitcoins is prohibited, based on the country’s Foreign Exchange Act.”
- India: Nothing explicit in the law yet, though its banks have warned the public about the “risks of cybersecurity attacks and money laundering” related to Bitcoin, and cautioned investors in December. “India’s largest Bitcoin trading platform BuySellBitCo.in, suspended its operations, citing the RBI’s notice. Also, two days after the advisory, India’s Enforcement Directorate raided the premises of the person in Ahmedabad who had hosted the Bitcoin trading platform, BuySellBitCo.in. According to news reports, the raid occurred because of alleged violations of India’s Foreign Exchange Management Act rules. Recent news reports cite the resumption of operations of some Bitcoin operators and the emergence of new players in the market.”
- Indonesia: Sounds ambivalent. A spokesman for Bank Indonesia reportedly issued a statement on Bitcoin in December 2013, saying that “[b]itcoin is a potential payment method, but it’s different than ordinary currency. . . . It is not regulated by the central bank so there are risks. . . . At the moment, we’re studying bitcoin and we have no plan to issue a regulation on it.”
- Ireland: No official statement, though they’re reportedly thinking about how to tax it.
- Israel: Same as Ireland. They are starting to see cybercrime around Bitcoin though: “An incident of an alleged attempted extortion involving a request for payment in bitcoins was reported on December 19, 2013. At least three Israeli banks have received emails from an unknown individual threatening to release the personal details of millions of their customers unless the payment was made.”
- Italy: Looks to the EU for guidance. “The use of electronic currency is restricted to banks and electronic money institutions—that is, private legal entities duly authorized and registered by the Central Bank of Italy. Aside from these developments, Italy does not regulate bitcoin use by private individuals.”
- Japan: Despite being the home for years to the long-time monster exchange of Bitcoin, Mt. Gox, Japan is silent on the issue.
- Malaysia: Nada.
- Malta: Nothing official, even as businesses develop there. “In October 2012, a Maltese company launched the first bitcoin hedge fund.”
- Netherlands: Doesn’t see virtual currency as being an electronic money, so Bitcoin isn’t covered by existing regulation, but it does recognize something from its past in Bitcoin’s rise. “The Dutch Central Bank (De Nederlandsche Bank, DNB) recently called attention to the risks posed by the purchase of virtual currencies, including bitcoins and litecoins, and warned consumers to be wary…. The former President of the DNB, Nout Wellink, has called dealings in bitcoins a bubble that is “pure speculation” and “hype” and “worse than the tulip mania” of the seventeenth century because “at least then you got a tulip [at the end], now you get nothing.”
- New Zealand: Kiwis are all good with Bitcoin as long as it is not turned into a physical note or coin.
- Nicaragua: The government is not doing anything about Bitcoin but it is in use there. “The Nicaraguan daily El Nuevo Diario reported on January 13, 2014, that an American banker, Greg Simon, recently bought a 1,200-square-meter plot of land in San Juán del Sur, one of the most important tourist areas in Nicaragua, for 80 bitcoins, currently the equivalent of about US$72,000.”
- Poland: Is looking to the EU, with the Polish minister of finance warning that the country needs to figure out how to tax it.
- Portugal: Doesn’t think it’s a “safe currency” but says “users can both buy and sell virtual currency with legal tender and can purchase goods and services in both the real and virtual worlds.” It looks like trading and use is low there.
- Russia: Don’t plan to buy your Olympics swag with Bitcoin. “There are at present no legal acts that specifically regulate the use of bitcoins in the Russian Federation,” but a Russian law firm thinks that using it to buy things there could be illegal given that the Russian ruble is the exclusive means of payment in the Russian Federation per the law.
- Singapore: Has warned investors against Bitcoin, but has not forbidden people from using it not businesses from taking it. The country’s tax authority says whether it should be taxed depends on how it’s being uses.
- Slovenia: It’s not sure what to do about Bitcoin yet, but is sure it should be taxed.
- Spain: Nothing official, but people using it should be paying taxes per bartering rules. Notably, the U.S. is not the only government with a Bitcoin wallet. “Spain was the second country in the world to seize bitcoins during an investigation of fraudulent transactions conducted with bitcoins, according to a November 2013 report by El Mundo.”
- South Korea: Nothing yet.
- Taiwan: Has cautioned investors and businesses away from Bitcoin.
- Thailand: Bitcoin is in a grey zone as existing laws do not apply.
- Turkey: Its banking regulator says existing law does not apply and warned people against using it. Turkish financial experts compare Bitcoin to “to Tulip mania in Holland, the Mississippi balloon in France, or the Enron or mortgage balloons in the United States, because the bitcoin ‘has no use value, but only exchange value.’” (Kudos to the Turkish commentators for digging further into history than tulip beds.) Turkish people evidently don’t care about the warnings. “Nevertheless, bitcoin use is apparently flourishing in Turkey. There is a Turkish Lira-Bitcoin exchange, called BTCTurk, and leftover foreign currency can be exchanged at the Istanbul Ataturk Airport for bitcoins through a Traveler’s BOX, a machine like an ATM.”
- United Kingdom: It’s snubbing Bitcoin. “In the latest quarterly reports from the Bank, Bitcoin is expressly excluded.”