Bitcoins are private money in Germany

By Saumya Vaishampayan: Bitcoins have been classified as private money or units of account in Germany, according to media reports.

The recognition of the virtual currency as private money came in response to a parliamentary inquiry from the Federal Ministry of Finance in Germany.

“The German Ministry of Finance does not classify bitcoins as e-money or as a functional currency; they cannot be regarded as a foreign currency. Nevertheless they have to be subsumed under the German term of ‘Rechnungseinheit’ as a financial instrument,” Martin Chaudhuri from the Ministry of Finance told CoinDesk. Rechnungseinheit translates to unit of account in English.

One bitcoin recently fetched $118.52 on Mt. Gox, a popular bitcoin exchange.

This classification brings the question of applicable taxes, especially a sales tax, to the forefront. The German government said commercial transactions in bitcoins shouldn’t be tax exempt, according to a report in TechCrunch citing Die Welt. Germany earlier this year ruled bitcoin activity would be subject to a capital gains tax, but added that investors would be exempt from the tax if the bitcoins were held for one year.

The news in Germany comes after New York’s top banking regulator issued subpoenas to top bitcoin companies and began an inquiry on regulatory guidelines for virtual currencies. Benjamin Lawsky, superintendent of financial services for New York, said in the notice of inquiry on Aug. 12: “If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.”
Earlier in August, a federal judge wrote “it is clear that Bitcoin can be used as money” in a legal ruling affirming the court’s jurisdiction in an alleged bitcoin Ponzi scheme. Judge Amos Mazzant ruled that bitcoins fell under the definition of securities, which means the virtual currency could be regulated by securities laws.

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