November saw ample regulatory activity throughout Europe as governments worked to learn more about digital currencies and clarify tax issues related to the value-added tax (VAT). Russia and Ukraine continued on the path to officially banning digital currencies for payment while the Australian government began exploring ways to optimize digital currency use.
The Consumer Financial Protection Bureau (CFPB) published a set of proposals on prepaid debit cards that may apply to digital currencies as well, specifically as they relate to digital wallets. The CFPB is still in the process of examining the full impact of digital currencies, as it has been since it released an advisory on the subject back in August.
Other Agencies Get in on the Act: Elsewhere in the government, a Commodity Futures Trading Commission (CFTC) commissioner stated that the agency has the authority to enforce actions against price manipulations in digital currency markets.
The Australian Senate began its hearings on digital currencies on Wednesday, November 26. The Senate inquiry included testimony by international experts, including Perianne Boring of the United States Chamber of Digital Commerce, and is aimed at maximizing the potential of digital currencies in the Australian economy while avoiding risks as much as possible.
Further Developments: The timing of these hearings follows soon after the Department of Human Services began requiring Australian pension applicants to declare their digital currency assets as part of the application process.
The Russian Finance Ministry announced its plans to ban bitcoin and other digital currencies back in August 2014. The ministry recently released more information on those proposed bans. After a public discussion of the proposed bill was held, the Ministry decided to reduce the fines to be levied for the use of digital currencies in Russia.
Motivations Unclear: The penalty amounts are significantly lower than initially proposed but there do not appear to be specific reasons given for the numbers chosen, or why they were lowered at all.
The UK government is officially looking into the potential benefits and risks of digital currencies as the Treasury issued a “Call for Information” on November 3, 2014. The official inquiry asks thirteen questions about digital currency usage and focuses primarily on digital currencies as payment mechanisms, with less attention paid to speculative investment.
Fact Gathering: The government will cull information from the public, FinTech firms, the financial services industry, regulators and law enforcement agencies. They will then examine the benefits and risks in determining what, if any, regulatory action needs to be taken. The Call for Information closes on December 3, 2014.
The French Autorité de Contrôle Prudentiel et de Résolution (ACPR) held a conference at the beginning of November to clarify its stance on licensing and reporting requirements for businesses in France engaging in digital currency transactions.
Waiting on EU Regulations: Ultimately, the ACPR confirmed that France will follow the European Banking Authority’s lead in developing substantial regulations. The ACPR monitors banks and insurance companies and is linked to France’s central bank.
The Dutch Minister of Finance indicated recently that he did not believe that bitcoin transactions would be subject to the value-added tax (VAT) in the Netherlands. Though not an official position of the Ministry of Finance, it was confirmed that they are considering this exemption as an option, and it will have to go through the usual procedures. This includes commentary from tax advisors and businesses.
Traditional Transactions: If bitcoin becomes VAT-exempt, only the goods and services portion of a digital currency transaction would be taxed. This is similar to fiat currency.
In Finland, the Finnish Central Board of Taxes officially classified bitcoin as a “financial service” and granted it VAT-exempt status. The government stated that since commission fees charged on bitcoin purchases are in effect banking services, they fall under the existing European Union VAT rules and are therefore exempt from those taxes.
Compliance with the EU: It remains to be seen if there will be an EU-wide ruling, and if so, how that will affect existing rulings by individual European nations.
The National Bank of Ukraine (NBU) announced via its website that bitcoin and other digital currencies may not be used as means of payment in the Ukraine. The only legal currency in the country is the Ukrainian hryvnia and digital currencies are classified as merely “money substitutes.”
No Official Ban: Though the NBU has focused heavily on the risk factors of bitcoin, it has not officially banned the digital currency. In fact, no official laws have been passed at all regarding digital currency possession or usage in the Ukraine.
About itBit's Global Digital Currency Regulatory Roundup Series
Every month, itBit scours the globe to bring you the latest in digital currency regulation and compliance news. Our Chief Compliance Officer, Erik Wilgenhof Plante, highlights key regulations and legislation impacting retail and institutional digital currency investors around the world. Click the button below to read our past Global Digital Currency Regulatory Roundup articles!