Article updated on August 19th at 14:31 (BST)
The German ministry of finance (Bundesministerium der Finanzen) has officially recognised bitcoin, mentioning the digital currency in a reply to an inquiry in parliament.
“The German Ministry of Finance does not classify bitcoins as e-money or as a functional currency, they cannot be regarded as a foreign currency. Nevertheless they have to be subsumed under the German term of ‘Rechnungseinheit’ as a financial instrument,” Martin Chaudhuri, of Bundesministerium der Finanzen, told CoinDesk.
German news website Die Welt reports Member of Parliament Frank Schäffler as saying that this is good news as, for the first time, the federal government is recognising bitcoins as private money.
A few weeks ago, Germany’s financial regulator BaFin amended the German Banking Code to state that bitcoins are “units of value” and, therefore, can be classed as financial instruments.
Stefan Greiner, of German law firm Xenion Legal, said both this and the government’s recognition of bitcoin are, in principle, positive for digital currencies.
“Germany now is the first country in the world which has a clear cut set of rules applicable to bitcoins,” he explained.
Greiner went on to say this could improve the access of bitcoin companies to VC funding as VC companies now have a “manageable regulatory risk environment”.
“This could also facilitate the cooperation between bitcoin companies and banks as banks now know where bitcoin companies are placed in the regulatory framework and which standards these companies must meet.”
Greiner believes these developments will raise the standards within the bitcoin space significantly as the companies involved are now regarded as financial services companies and must fulfil strict standards of operation. For example, companies are required to have an initial capital of 730,000 euros, certain professional qualifications of management and must report to BaFin.
Marco Streng, a bitcoin investor and trader based in Munich, agreed that the government’s recognition of bitcoin is good news for the future of digital currency in Germany.
“We can finally be more confident in dealing with bitcoins. Also it feels really good to have open-minded politicians like Frank Schäffler who can see the potential benefits of cryptocurrencies,” he said.
“I think that having bitcoin-related discussions on a governmental level and also having banks cooperating with bitcoin businesses gives us a special role in the global view of regulations and I hope this serves as a good example for other nations to follow,” Streng added.
What is yet to be clarified is whether sales tax is due on commercial transactions involving bitcoin. Although it has been clarified that bitcoin is exempt from capital gains tax in Germany.
In the meantime, over in the US, the government has launched an inquiry to establish the potential of bitcoin and other virtual currencies. A letter from the US Senate Committee on Homeland Security & Governmental Affairs to the Department of Homeland Security states: “As with all emerging technologies, the federal government must make sure that potential threats and risks are dealt with swiftly; however, we must also ensure that rash or uninformed actions don’t stifle a potentially valuable technology.”