Thursday, March 01, 2018

Germany To Treat Bitcoin As Legal Tender For Everyday Use, Rest Of EU To Follow?

Here in the U.S., Bitcoin is considered to be property by tax authorities, meaning that if you buy a couple of pizzas with it, you owe capital gains taxes on the appreciated value of the Bitcoins you transfer for those pizzas (unless your Bitcoin has gone down in value, in which case you could actually claim a capital loss on your taxes). It's just like you've sold the Bitcoin for cash, or traded it for another crypto. This puts a huge damper on the use of Bitcoin in this fashion here, mostly relegating it to a investment and trading role, or something only tapped in to for very large purchases.

The news came out yesterday that in Germany, that's not going to be the case. There, when used as a form of payment, Bitcoin will be treated as if it were legal tender, and while applicable "value added taxes" will be levied on the "seller" based on Bitcoin's price at the time of the transaction, no capital gain taxes would be applied as they are in the U.S.

Perhaps more interesting than that is that block rewards received by crypto miners in Germany will not be taxed either, potentially turning that country into a hotbed of mining activity in the future.

The big potential here is that this will set a precedent that the other European Union nations will follow. Germany leads the way on much of what goes on in the EU, so it would not surprise me to see the other member states copy this policy. If they don't, then they risk seeing their Bitcoin owning citizens travel to Germany to use them as movement between EU member states by citizens of any of the member countries is not restricted. All of that capital can easily flow out of member states that make Bitcoin more expensive and cumbersome to use and into the states that treat it better.

This is a big, positive development for Bitcoin and cryptocurrencies in general, one that could further increase adoption of the technology by people who have not yet done so. Consider this: the European Union is currently home to 512 million people...

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