In the past few weeks, Cryptocurrency has taken over the Internet by storm by showing its high volatility in the market. Cryptocurrency has become so popular, but due to its high volatility it raises the question of whether it is a currency or trillion dollar business? This curiosity made us to provide a Simplified answer to this question.
To answer this question, we need to understand what can be called as a Currency and what is Cryptocurrency.
Currency or Money is anything which has / is:
Medium of Exchange for goods or services;
Unit of Measurement;
Store of Value; and
Universally accepted.
Cryptocurrency or digital asset has / is:
Virtual / online medium of exchange for goods or services;
Unit of measurement keeping physical currency as a base;
Store of value in digital ledger of every cryptocurrency owner; and
Currently not universally accepted.
Yes, that's correct 'Cryptocurrency is currently not accepted by all Countries'.
Following are the major Companies that are accepting cryptocurrency in few countries:
Major Companies like:
Microsoft;
Wikipedia;
AT&T;
Burger King;
KFC;
Overstock;
Subway;
Paypal;
Pizza Hut; and few others are accepting cryptocurrency payments;
Cryptocurrency legality in different countries:
United States of America:
U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has been issuing guidance on Bitcoin since 2013;
The Treasury has defined Bitcoin not as currency, but as a Money Service Business (MSB);
These guidelines have been placed under Bank Secrecy Act;
Cryptocurrency is welcomed at U.S. Derivatives Markets;
Canada:
Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA);
Bitcoin exchanges are considered as Money Service Businesses.
This means that any income generated out of cryptocurrency transactions are considered as business income;
Australia: Similar to Canada, Australia considers Bitcoin neither money nor a foreign currency, with the Australian Taxation Office (ATO) ruling it an asset for capital gains tax purposes.
The European Union:
European Court of Justice (ECJ) ruled that buying and selling digital currencies is considered a supply of services in all European Union (EU);
In Finland, the Central Board of Taxes (CBT) has given Bitcoin a VAT exempt status by classifying it as a financial service;
Bitcoin is treated as a commodity and not as a Currency in Finland;
In Cyprus, Bitcoin is neither controlled nor regulated.
Germany is open to Bitcoin; it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.
United Kingdom (UK): UK is pro-Bitcoin stance and wants the regulatory environment to be supportive of the digital currency;
India: With India, initial stance of the Government was not to consider Cryptocurrencies "as Legal Tender or Coin" and intended to prevent the wrong usage of cryptocurrencies and blockchain. They also don't consider it as part of the payment system i.e. one cannot use crypto to buy and sell things but there is no comment on investing as an asset. And the same was banned by Reserve Bank of India (RBI) on trading in cryptocurrency. However, in year 2020, Supreme Court of India lifts the RBI's ban on trading in cryptocurrency and leading Banks like HDFC Bank, Yes Bank, ICICI Bank and the State Bank of India (SBI) have resumed their transactions with cryptocurrency exchanges. Currently Government of India is working on introducing a new 'Cryptocurrency Bill' which allows certain window for people to do experiments on the blockchain, bitcoins or cryptocurrency.
China: Bitcoin is essentially banned in China. All banks and other financial institutions like payment processors are prohibited from transacting or dealing in Bitcoin. Cryptocurrency exchanges are banned. The government has cracked down on miners.
Russia: Bitcoin is not regulated in Russia, though its use as payment for goods or services is illegal.
Vietnam: Vietnam's government and its state bank maintain that Bitcoin is not a legitimate payment method, though it is not regulated as an investment.
Bolivia, Columbia, and Ecuador have banned cryptocurrencies.
Due all the above restrictions imposed by various countries globally, cryptocurrency is not a legal tender but trading in cryptocurrency is legal. It's a volatile market and definitely not suited for the faint hearted.
And yes, it's more than a 'Trillion dollar business'.
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The contents of this article are for information purposes only and do not constitute advice or legal opinion and are personal views of the author. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / Simplify Associates are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
About the Author:
Kamalakar KS is the Founder and Managing Partner of Simplify Associates. He has experience in various fields such as Accounting, Company law, Assurance & Audit, Payroll, Incorporation & Registrations and Direct & Indirect taxes in various industries such as Information Technology, Manufacturing, Trading, Retail, Agriculture and others.
AREA OF EXPERTISE:
Accounting, Book-keeping, Financial Reporting, Statutory Audits, Payroll processing and International reporting.