The legal status of bitcoin
In my article last December 2, 2017 about bitcoin, the most popular cryptocurrency in the market – I mentioned that the legal status of bitcoin (and the other cryptocurrencies as well) is different from one country to another – meaning it is still undefined. In some countries, the use of bitcoin is banned; in other countries, the operations of bitcoin exchanges are allowed but they have to be duly registered with the government.
In the Philippines, our Bangko Sentral ng Pilipinas (BSP) issued BSP Circular No. 944 which was approved on February 6, 2017 and published in a newspaper of national circulation on February 9, 2017. In essence, BSP Circular No. 944 requires a virtual currency exchange that deals in Bitcoin to obtain from the BSP a Certificate of Registration to operate as a remittance and transfer company. As a Virtual Currency (VC) Exchange, the bitcoin (or other cryptocurrencies) shall conform to the guidelines issued by BSP on the maintenance of records and comply also with submission of requirements of BSP.
One may ask: How about the legality of bitcoin in other countries? From Wikipedia, we get the following information: “The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. Whilst the majority of countries do not make the usage of bitcoin itself illegal, its status as money (or a commodity) varies, with differing regulatory implications. While some countries have explicitly allowed its use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. While this article provides the legal status of bitcoin, regulations and bans that apply to this cryptocurrency likely extend to similar systems as well.”
Here’s a more detailed report of the legality of bitcoin by some selected country or territory taken from the Wikipedia:
• “European Union – The European Union has passed no specific legislation relative to the status of the bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.
“According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors. Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.
“The European Central Bank classifies bitcoin as a convertible decentralized virtual currency. In July 2014 the European Banking Authority advised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.
“In 2016, the European Parliament's proposal to set up a taskforce to monitor virtual currencies to combat money laundering and terrorism, passed by 542 votes to 51, with 11 abstentions, has been sent to the European Commission for consideration. The European Commission also notably presented a "parallel" proposal aimed at preventing tax evasion techniques as revealed in the Panama Papers. In 2017 it was revealed that the proposal will require cryptocurrency exchanges and cryptocurrency wallets to identify suspicious activity;
• “G7 – In 2013 the G7's Financial Action Task Force issued the following statement in guidelines which may be applicable to companies involved in transmitting bitcoin and other currencies, ‘Internet-based payment services that allow third party funding from anonymous sources may face an increased risk of [money laundering/ terrorist financing].’ They concluded that this may ‘pose challenges to countries in [anti-money laundering/ counter terrorist financing] regulation and supervision’;
•“South Africa – In December, 2014 the Reserve Bank of South Africa issued a position paper on Virtual Currencies whereby it declared that virtual currency had ‘no legal status or regulatory framework’;
• “Canada – Bitcoin is expected to be regulated under anti-money laundering and counter-terrorist financing laws in Canada, based on a federal budget bill (C-31), passed in 2014. Regulations must be enacted before this provision becomes active, however, once they are it is expected that "dealers in digital currency" will be regulated as money services businesses;
• “United States – The US Treasury classified bitcoin as a convertible decentralized virtual currency in 2013. The Commodity Futures Trading Commission, CFTC, classified bitcoin as a commodity in September 2015. Per IRS, bitcoin is taxed as a property.
“In September 2016, a federal judge ruled that "Bitcoins are funds within the plain meaning of that term".
• “Mexico – Bitcoin is legal in Mexico as of 2017. It is to be regulated by the Fintech Law;
•“Nicaragua – News reports indicate that bitcoins are being used in the country;
• “Argentina – Bitcoins may be considered money, but not legal currency. A bitcoin may be considered either a good or a thing under the Argentina's Civil Code, and transactions with bitcoins may be governed by the rules for the sale of goods under the Civil Code;
• “Bolivia – The Central Bank of Bolivia issued a resolution banning bitcoin in 2014;
• “Brazil – Not regulated, according to a 2014 statement by the Central Bank of Brazil concerning cryptocurrencies, but is discouraged because of operational risks. In November 2017 this unregulated and discouraged status was reiterated by the Central Bank of Brazil;
• “Israel – As of 2017, the Israel Tax Authorities issued a statement saying that bitcoin and other cryptocurrencies would not fall under the legal definition of currency, and neither of that of a financial security, but of a taxable asset. Each time a bitcoin is sold, the seller would have to pay a capital gains tax of 25%. Miners, traders of bitcoins would be treated as businesses and would have to pay corporate income tax as well as charge a 17% VAT;
• “Saudi Arabia – Bitcoin is not banned by any governmental party in Saudi Arabia. Only Saudi Arabian Monetary Authority (sama) have warned from using it as it is high risk and recognized in SA and its dealers will not be guaranteed any protection or rights;
• “Jordan – The government of Jordan has issued a warning discouraging the use of bitcoin and other similar systems.
“The Central Bank of Jordan prohibits banks, currency exchanges, financial companies, and payment service companies from dealing in bitcoins or other digital currencies. While it warned the public of risks of bitcoins, and that they are not legal tender, bitcoins are still accepted by small businesses and merchants.”
Have a joyful day! (For comments/ reactions please send to Ms. Villafuerte’s email: villafuerte_nelly@ yahoo.com)