By Pete Rizzo, Editor (@pete_rizzo_)
The German parliament stopped short of granting bitcoin full currency status on August 19, but recognized bitcoins as “units of account” when it formally issued regulations for the popular virtual currency.
The ruling means bitcoin will be legal for use in private transactions, PC World reported. German commercial entities that want to conduct business with bitcoin will first need to obtain permission from the Federal Financial Supervisory Authority.
The announcement comes at a time when global governments are looking for direction on how best to regulate bitcoin, and commentators told PYMNTS.com that the development can be seen as a win for both bitcoin users and business owners and investors.
Likewise, the ruling is likely to have reverberations in the international community, where it could serve as a template for lawmakers in countries where the regulatory environment for bitcoin remains unclear.
Additional Implications For Germany
German lawmakers also issued directives on key issues, determining if bitcoin would be subject to capital gains tax and sales tax, how bitcoin mining – the process by which additional bitcoins are generated – should be addressed and whether payment processors could avoid taxation.
Legislators decided commercial activities that use bitcoins should not be tax exempt, TechCrunch reported. Still, there is some confusion regarding this point. The media outlet noted that it was not clear how the sales tax would be implemented, and whether it would affect individuals who only occasionally sell items through third-party businesses such as eBay.
German lawmakers recommended bitcoin mining be governed as private money creation, and that payment processors be exempt from sales tax when dealing with German customers.
Further, notable German lawmakers made the philosophical case for bitcoin.
“We should have competition in the production of money,” said Frank Schaeffler, a member of the German parliament’s Finance Committee, according to CNBC. “I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction.”
The Impact Of Germany’s Ruling
The effects of the declaration are less clear in the United States, where the U.S. Senate formally launched a review of virtual currencies last week. The probe kicks off what is expected to be a lengthy period of interviews and research regarding the policies and procedures it should adopt.
Jeremy Liew, a partner at Lightspeed Venture Partners and bitcoin investor, suggested the United States needs to clarify its regulation of virtual currency. Liew, who has invested in OpenCoin and the Boost Bitcoin Fund, lauded Germany for encouraging bitcoin businesses by providing a “definite and complete framework” for how bitcoin will be regulated.
“Bitcoin companies can now move forward with confidence about exactly what is required of them to be in compliance with German regulations,” Liew told PYMNTS.com.
Liew suggested the ruling would likely be a factor in policy discussions in the United States, but that the country is likely to chart its own course.
James D’Angelo, co-founder of the Boston-based bitcoin community Bitcoin Evangels, said he believes the move is also a win for avid bitcoin users. D’Angelo told PYMNTS.com that he believes Germany is taking a smart step toward taxing bitcoin, and suggested other countries are taking a risk by not following its lead.
“Germany understands that if they throw bitcoiners a bone – acceptance – the bitcoiners will concede on taxation. That might not be the case in a year if and when bitcoin explodes in value and usage,” D’Angelo told PYMNTS.com.