Germany Legalizes Bitcoins

The German ministry of finance has recognized Bitcoin as a form of digital currency in the country

Bitcoin, the four-year-old virtual money, is now a formally recognized digital currency or “unit of account,” which can be used for private transactions in Germany. Germany’s ministry of finance will now be able to tax creators and users of the virtual currency…as soon as they figure out how. Given that Bitcoin wallets and transactions are effectively anonymous, German authorities are trying to work out whether they are able to establish taxes due on Bitcoin transactions between individuals. Commercial transactions involving bitcoins will need to be approved by the Federal Financial Supervision Authority.

Bitcoin is an online virtual currency that may be exchanged for goods and services from establishments that accept them. They are the same as any form of physical currency except that no bank issues them — they are decentralized. A Bitcoin is created by computers or miners that execute complex mathematical problems. The problems solution produces a unique number that essentially is one Bitcoin. Transferring this unique number from one electronic “wallet” to another within the Bitcoin network constitutes a transaction. There are about 10m Bitcoins in existence today and each one is currently worth about $117.

Fears that the Bitcoin could be used for passing funds outside tax oversight or money laundering have also sparked United States authorities to take a closer look at the currency. One US judge has recently ruled that the Bitcoin is “a currency or form of money” in the case of a man in Texas, Trendon Shavers. Shavers is accused by the Securities and Exchange Commission of operating a Bitcoin investment company that was masquerading a pyramid scheme. In July, Thailand’s central bank made it illegal to trade Bitcoins in the country. It is unlawful to “move them in or out of the country” or use them to buy or sell goods or services inside of the country.

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