In January 2009 an innovative idea about digital currencies was implemented,thus resulting the Bitcoin to be launched. Although its founder is not yet known, the main concept behind that was the promise of lower transaction fees than traditional online payment mechanisms and, unlike government-issued currencies, it is operated by a decentralized authority.
Bitcoin operates with the peer-to-peer (P2P) system, namely a mean of transaction and two-way sending of bitcoins to its users without the mediation of a centrally structured financial system and governmental direction. The activating factors of the Bitcoin are its users, the maintainers of its operation (“mining or ASIC mining”), the OpenSource Code developer team and the partner companies. But how innocent is this form of transaction?
The answer will derive from the scrutinization of the matter. It’s obvious that Bitcoin is an electronic mean of payment, although the concept of electronic currency could not be placed under the umbrella of its definition: “Currency is any means of payment issued by the state or other service which is authorized by it, as a carrier of value, and which is intended for circulation in transactions“. Bitcoin is neither issued by the States, nor by the European Central Bank, and does not follow the regulatory rules of monetary policy. It’s hybrid, a mean of payment based on the platform’s users themselves, a mean that the market itself has brought to force, the market regulates, maintains, develops and perhaps the market imposes on our transactions.
Many companies around the globe offer Bitcoin as a payment method to their customers. In Greece, cafes, food sales companies, computer system companies, as well as medical supply and equipment companies have incorporated Bitcoin on their operations. It is noteworthy that the University of Nicosia, Cyprus, accepts tuition fees payment for its postgraduate programs in Bitcoins.
In terms of its legal treatment, Bitcoin could be considered as tangible, in legal terms (article 947 § 2 of the Civil Code) and electronic money. According to the meaning of article 21 of Law 4021/2011 “the issuers of electronic money, at the request of the electronic money holder, redeem, at any time and in its nominal value, the monetary value of electronic money”.
In the European legal framework, according to the German Income Tax Law’s (Einkommenssteuergesetz) Articles 22-23, any object which may constitute property and has a certain economic value, is considered as an object of taxation of any economic property. Therefore, Bitcoin can be subjected to taxation, but the E.U. member states should again be cautious, since this may lead to its de facto recognition as a property by itself, before the State set the legislatory framework. In any case, Bitcoin as an object of economic value and mainly as a mean of payment has been recognized by major countries, such as Canada, Australia, Israel, Switzerland, the United Kingdom and Finland, while it is worth noting that in China it was banned full circulation and use of Bitcoins.
The European Court of Justice has ruled that fictitious currencies, such as Bitcoin, cannot be classified as tangible goods under Article 14 of the VAT Directive, since they are used as mean of payment and not as a financial instrument by itself. Virtual currency transactions are an exchange of means of payment, as is the case with conventional currencies, which are statutory means of payment, so virtual currency transactions are a supply of services (Article 24 of the VAT Directive).
To sum up, we have to seriously consider the importance of making certain decisions about the prevailing legal framework regulating cryptocurrencies before the market itself fully adopt the electronic transactions. To be more specific, from the one hand we will have to deal with the regulation of a virtual currency that is not issued by the European Central Bank in cooperation with the democratically legitimized governments of the Member States but on the contrary, it’s centrally controlled by the P2P system itself. On the other hand, we cannot allow a rapidly growing field which is successively supported by companies with millions of employees unregulated. The vast majority of financially viable companies conduct cryptocurrency transactions. So, the matter should be soon dealt by the European Union at a central level in order to ensure the balance between the users’ rights as well as the safety of the international trade.