It’s official! On Monday, the German Ministry of Finance issued a statement indicating that Bitcoin is now a “Rechnungseinheiten als Finanzinstrument,” or a recognized unit of payment. But don’t get too excited! While Bitcoin may now be considered an artificial currency, it’s still not exactly seen as “real money” yet.
Remember that Bitcoin is basically an online token generated by computers solving complex mathematical problems. It doesn’t have any issuing bank unlike standard currencies and transactions can only be done by transferring unique numbers to the “wallets” of parties involved.
Due to its nature, some governments including the U.S. and Thailand, have expressed their skepticism towards the virtual currency. Many fear that widespread legalization of Bitcoin could foster money laundering and tax evasion.
German officials are well-aware of the risks. This is why the government established the following strict set of rules that Bitcoin companies must abide by:
- Must have initial capital of at least 730,000 EUR.
- Management teams must be professionally-qualified.
- A detailed business plan must be submitted to the government.
- All transaction reports must be submitted regularly to the BaFin (Federal Financial Supervisory Authority).
- Only private Bitcoin transactions between individuals are exempted from tax. Commercial transactions will be subject to the German VAT tax rate of 19%.
- Anti-money laundering programs must be integrated into the company’s mechanisms.
I’m sure many of you are asking now, “Okay, that’s cool that Germany is allowing it, but what does that mean for me as a forex trader?”
Germany is one of the world’s frontrunners in the business and financial world. Now that its government is allowing Bitcoin as a means of exchange for goods and services, it will be interesting to see what kind of ramifications it will have on the rest of the euro zone.
As it gains more and more popularity, we could see other financial centers like Singapore, Hong Kong, New York, and London become more open to the Bitcoin industry. As the financial world becomes more acclimated to Bitcoins, we could eventually see Bitcoin trading become a mainstream product that is readily offered by most brokers.