Germany Moves Toward Legitimizing 'Virtual' Currency

Germany took steps this week toward legitimizing the Internet-based currency known as “bitcoins.”

Germany’s finance minister ruled that bitcoins are considered a “unit of account” akin to a form of “private money,” reports Spiegel. Still, the paper notes that designation “stops well short of treating bitcoins as currency or even e-money.”

The popularity of bitcoins has risen as confidence in currencies has fallen. In 2009, bitcoins were considered valueless; in 2013, their value rose as high as  $230 per unit. Currently, they are trading at around $120 per bitcoin. 

The rise of  so-called virtual currency has governments grappling with interesting questions about taxation.  Spiegel says so far, Germany’s finance minister has ruled that bitcoin profits are tax-free after a year. “But now it appears that some transactions involving bitcoins could be taxed after all,” notes Spiegel. “A tax advisor told the Berlin-based daily Die Welt that VAT would only have to be paid by people who use bitcoins commercially.”

An estimated 7,500 retailers worldwide now accept bitcoins as a legitimate form of payment.