One of the founding premises of Bitcoin is that it isn’t controlled or regulated by any central authority, yet as its market value and public popularity keep climbing, central banks and governments around the world are grappling with how to handle the virtual currency. Some have given their two cents on the digital coin, and for the most part, authorities are treading lightly.
This weekend Norway became the latest nation to officially weigh in on Bitcoin. The Norwegian government said it would not recognize it as real money, instead classifying it as an asset that’s subject to capital gains tax. It also determined that Bitcoin business transactions will be charged a sales tax.
As the richest nation in Scandinavia, Norway’s stance could have a ripple effect through Europe; indeed, the country’s tax authority plans to work with other governments on how to handle the Bitcoin craze from a legal perspective.
The move also adds Norway to the growing crop of nations branding Bitcoin as a commodity instead of a currency. Navigating the murky commodity-currency gray area has proven to be a delicate dance. Bitcoin's value as a global asset—like gold or shares—hangs on people’s trust in it as a potential form of money and businesses accepting the digital coins for payment. But, as Bitcoin’s perceived value as a commodity climbs, people holding the coins are less inclined to spend them.
Thus, governments do hold some force over the decentralized cryptocurrency, insofar as they wield control over the banks, which in turn can either stand in the way of Bitcoins beginning to circulate through the market or help open the floodgates. But the way some financial regulators see it, the risk of mass adoption is still too high; no one’s sure the bubble isn’t about to burst. Here’s a glance at the nations who have piped up about Bitcoin so far, and where they come down on the futurist money.
Germany said earlier this year that it would not recognize Bitcoin as a foreign currency or digital money, but would legalize it as a sort of “private money” or "unit of account," so it could start taxing it.
The European Banking Authority, the central bank of the EU, recently warned consumers about the financial risks of the virtual currency, and is still looking into whether or not to try and regulate it.
Switzerland is also in an exploratory phase, albeit with a skeptical eye. The Swiss government is researching the potential effects of the digital coins on the country's robust financial system, and plans to issue a report on Bitcoin’s risks in the coming months.
France's central bank, the Bank of France, warned about Bitcoin’s volatility early this month, calling it a financial risk for the individuals and businesses that hold the virtual coins.
China, once home to a booming Bitcoin exchange, restricted its banks from allowing Bitcoin transactions earlier this month, worried about its instability and potential use for money laundering. It said Bitcoin doesn't have "real meaning" as a currency.
Korea also rejected Bitcoin as a legitimate currency. Last week financial authorities there said it was too unstable to have “intrinsic value” as a form of money.
Thailand’s central bank refused to license Bitcoin this summer, leading to the Thai Bitcoin exchange being shut down and an all-out ban on buying and selling the coins.
The US has given Bitcoin perhaps its warmest welcome yet. During a senate hearing last month the Feds were optimistic about the potential benefits of virtual currencies and downplayed Bitcoin’s risks, arguing they could be mitigated by extending current finance laws and regulations to the virtual realm.