Bitcoin becomes a Legal Tender in Germany
|November 21, 2013||Posted by Staff under Activism, Financial|
Virtual currency bitcoin has been recognized by the German Finance Ministry as a “unit of account”. Does that mean it can be used for tax and trading purposes in the country?
Bitcoin is not classified as e-money or a foreign currency, the Finance Ministry said in a statement, but is rather a financial instrument under German banking rules. It is more akin to “private money” that can be used in “multilateral clearing circles”, the Ministry said.
“We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,”said Frank Schaeffler, a member of the German parliament’s Finance Committee, who has pushed for legal classification of bitcoins.
Bitcoin is a virtual currency that allows users to exchange online credits for goods and services. While there is no central bank that issues them, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. Currently one bitcoin is worth just over $119.
Legal classification of bitcoin means that commercial profits that stem from using the currency may be taxable. Classification by the German government gave bitcoin legitimacy to be used as a settlement currency in one of the world’s largest economies. This was a big step forward for the bitcoin movement.
Bitcoin could become an alternative to the euro if the single currency ever ceased to exist. Success for bitcoin rests on regulatory fair-treatment and the existence of a level playing field with other currencies.
“A free country should resist and not intervene in citizen’s private choice of money. In my opinion the production of money is none of the government’s business,” Schaeffler said.
Update 1 (Nov 21): The University of Nicosia has begun accepting bitcoins as payment for its courses, as well as launching a Master of Science degree focusing on digital currencies. The suggestion that we here at the Progress Report accept them, too, sounds good.
Update 2 (Nov 5): Reader Simon Lelieveldt says: “The legal tender qualification of the CNBC article was incorrect and has been taken off-line. See also my blog, further presenting the analysis and source documents: http://moneyandpayments.simonl.org/2013/08/bitcoin-legal-classification-in-germany.html”
Ed. Notes: What government should do is not monopolize legal tender but merely set the standards that any currency must reach — number of users, retaining its value — in order to be accepted as legal tender. Ironically, the currency of the Federal Reserve (which Congress allowed to replace US Notes) could not meet the second criterion for sound money. Could that be why the state and elite in America resist competition?