Welcome to 2014. An easy prediction for this year is that bitcoin will become more integrated within the world’s financial systems. Even if banks and governments aren’t the biggest fans of bitcoins, the reality is that in our current always on connected present world digital currency adoption is a trend that can’t be stopped. As such, it’s in their best long term interests to place digital currencies on their road maps of the future.
For precedence, one needs to look no further than the music industry which ignored MP3 usage and made fun of it as a lower quality experience, rather than view digital music as the future. Rather than evolving, the industry tried to fight against listener habits and have seen their power and influence in the music space decline. In terms of banks, we will see many established players refrain from getting too involved with digital currencies, but overall it will only take a few firms reporting fast growth from bitcoin related partnerships to open the flood gates. It took a few years for online banking to build up steam to, but now we are at the point that if a bank doesn’t provide it, we can question their legitimacy (private Swiss banks excluded).
2013 – The Year That Was
With that introduction we take a look at how far bitcoin came in 2013. After more or less flying under the radar of government eye since its inception in 2009, 2013 was the year it became noticed by the entire world.
Reviewing Regulation from around the world, our friends at Payment Magnates recently published a report titled Bitcoin Regulatory Status in 13 Countries. As the title suggests, the title reviews the current status of bitcoin within 13 different countries.
Some of the highlights:
USA: The country appeared to be headed towards an anti-bitcoin regulatory direction following the seizure of Silk Road (also worth pointing out that the US headed to seizure of Liberty Reserve). The seizure presented that the US is taking an aggressive stance on controlling potential online methods for conducting illegal behavior. As a result, it wouldn’t have been surprising to see subsequent negative financial legislation written up against digital currencies. However, that view changes as Congressional hearings referred to bitcoin as a legitimate financial service and held meetings on understandings its use.
India: Perhaps the most anti-bitcoin take has been in India. The Reserve Bank of India (RBI) has not only published warnings about Cryptocurrencies , but also has closed down bitcoin exchanges. (It's worth noting that the country has also been the target of numerous HYIP schemes that the RBI is actively trying to prevent)
China: The feeling is that the government wants to control it. They are doing this by currently allowing it to be used and owned by its citezens but have banned financial firms from conducting bitcoin related business.
Taxes: During the year, taxation question also evolved. If there is any way for governments to come aboard, financial benefits are always an attraction. In this regard, Germany mentioned that it would be looking into taxing bitcoin related gains. Similarly, Slovenia’s tax authority believed taxation framework should be written up. Not mentioned in the report, but also occurring during the year, in the US, the IRS decided to ‘punt’ taxation decisions until 2014.
Singapore: On the discussion about taxation, Singapore’s government hasn’t yet decided to tax bitcoins. But the Monetary Authority of Singapore (MAS) stated that “"Whether or not businesses accept bitcoins in exchange for their goods and services is a commercial decision in which MAS does not intervene." The hand’s off from the MAS could be a critical factor for 2014 as Singapore has become one of the financial center leaders of Asia in terms of connecting the East and West. In terms of inter-bank foreign exchange transaction, Singapore recently overtook Japan as the top Asian financial center.
