Frank Schaeffler, a member of German parliament’s Finance Committee has issued a statement recognizing Bitcoin as “Rechnungseinheiten,” which translates to “units of account”. Many news sources are reporting that this makes Bitcoin ‘private money’ or ‘legal tender’ in Germany.
But what exactly does the designation of “Rechnungseinheiten” mean for German Bitcoin users and businesses?
Via Pymnts.com …
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 statement made it clear that Bitcoin is not e-money and not subject to the EU’s e-money regulations. Also bitcoins held for 12+ months are still free from capital gains tax.
However, there still seems to be some confusion for Bitcoin businesses over whether or not they need to register with Germany’s financial regulator BaFin. There are reports that BaFin classified Bitcoin (and other digital currencies) as “financial instruments“. This would require licensing and other challenging requirements such as €730,000 of capital.
Recently the German exchange bitcoin.de has collaborated with German based Fidor Bank which has pre-emptively applied for a license from BaFin. The outcome of their application may shed some light on the situation.