Bitcoin Regulation Roundup: Legislation, Liquidation and Rumor Mill
Jason Tyra examines the most significant bitcoin news from the world’s regulators and law courts.
Regulatory attitudes towards cryptocurrencies around the world are shifting. Hardly a day goes by without a central bank issuing a warning on the digital currency. However, it’s not all bad news – as some authorities are taking a much more positive approach.
In CoinDesk’s regulation roundup, Certified Public Accountant and ACFE Certified Fraud Examiner Jason Tyra examines the most significant digital currency news from the world’s regulators and law courts over the past two weeks.
Chinese banks stop handling bitcoin related business
The rumours are true: bitcoin related businesses with Chinese deposit accounts reported receiving verbal notices from their banks last week that transfers to exchanges would no longer be honoured, causing bitcoin prices on exchanges worldwide to plunge to their lowest levels in more than six months. Though the move was obviously centrally directed, the People’s Bank of China has yet to make an official announcement, over a week later.
Curiously, the People’s Bank of China announced on 11th April that it would not seek a ban on bitcoin.
China’s government and central bank have been ambivalent about bitcoin from the beginning, resulting in periodic rumours of an impending ban. The spread of cryptocurrency among Chinese users has often been cited as the driving force behind bitcoin’s dramatic rise during the latter half of 2013. The Chinese government, on the other hand, is believed to see bitcoin as a threat to capital controls, while claiming that restrictions are necessary to protect Chinese banks from the risk posed by bitcoin.
Bitcoin’s price rebounded above $500 in the week following announcement of the Chinese restrictions. Nevertheless, at least two Chinese exchanges suggested that they might consider moving to other countries if regulatory action made their businesses unsustainable.
Brazil to tax bitcoin investors, not users
Following the lead of the US Internal Revenue Service, the Brazilian tax authority has declared that bitcoin sales are subject to capital gains taxes, but set a 35,000 real (approximately $16,000) per transaction exemption. As a result, the proverbial cup of coffee purchased with bitcoins in that country will not be considered a taxable event.
Brazil’s announcement makes the country one of the most bitcoin friendly in the world. Brazilian bitcoiners mostly welcomed the announcement, which makes bitcoin a realistic alternative to the dollar for those who prefer not to transact in the real.
The country’s currency has fluctuated in the wake of the 2008-2009 financial crisis, in response to monetary policies meant to stimulate demand, that have been implemented and then rolled back by the United States and other nations. As recently as last summer, the mere suggestion that the US Federal Reserve would taper its bond buying campaign in the near future touched off a punishing round of inflation for Brazilian consumers as foreign investors.
US Congressman seeks currency treatment for bitcoin
Texas Congressman Steve Stockman announced that he will introduce legislation designating bitcoin as legal tender and directing the IRS to treat it as currency, rather than property. In the United States, the term 'legal tender' applies to any payment method which can be used and must be accepted to extinguish a debt.
Several US states have considered or enacted legislation in recent years identifying gold or other commodities as legal tender. However, these have mostly been symbolic gestures intended to protest inflationary policies at the federal level. Congressman Stockman’s proposal is believed to mark the first time that a nation state has considered a law to officially recognize bitcoin.
Due to rules governing Congressional lawmaking, the likelihood that Stockman’s legislation will make it to the floor for a vote is considered exceptionally low.
Mt. Gox to liquidate
A Japanese bankruptcy judge denied Mt Gox’s petition for reorganization, leaving the company no choice but to enter liquidation. Citing the plan, the judge described it as “unlikely to be successful”. The court also pointed out that Mt. Gox’s management team, led by CEO Mark Karpeles, lacks the confidence of customers and other creditors.
Karpeles’ troubles seem to be multiplying in the United States as well. The bankruptcy judge handling Mt. Gox’s US bankruptcy case suggested that the company may be denied certain key protections if its CEO failed to appear for hearings. FinCEN has also subpoenaed Karpeles, who asked for more time to obtain an attorney before responding.
Though Karpeles has not been charged with any crime or arrested, either in Japan or the United States, this week’s indictment of Charlie Shrem is unlikely to be a source of comfort as to the likelihood of being taken into custody if he enters the US.
Canadian Senate continues bitcoin study
A Canadian Senate panel heard from a selection of bitcoin stakeholders, including the Bank of Canada, the Department of Finance, and others, as it kicked off an 18-month study of whether and how to regulate cryptocurrencies. Testimony on 9th April included a demonstration of a bitcoin ATM and a bitcoin-denominated purchase – of cupcakes – to help lawmakers understand how bitcoins are used in transactions.
US Capitol image via Shutterstock
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