The monthly law journal covering legal issues in banking, e-finance, e-money and online payments including, mobile payments (m-payments), micropayments, pre-paid cards and other payment cards, online banking, NFC (near field communication) and other contactless payments, digital currencies such as Bitcoin, mobile wallets and virtual money, e-invoicing, e-billing and e-payments, card fraud and other cybercrime, as well as regulatory regimes such as the E-Money Directive (EMD and 2EMD), the Payment Services Directive (PSD), SEPA, the US Electronic Money Regulations 2011, and the UK Bribery Act 2010. / read more
Bitcoin under German law - By Pia Leonhardt of CMS Hasche Sigle
Recently, in April 2013, the virtual currency 'Bitcoin' attracted public attention because of its strong price fluctuations. Now, in August 2013, bitcoins are again in the media. For the first time, the German Federal Ministry of Finance issued its public opinion on bitcoins as 'private money' and as 'units of account' according to Section 1 (11) (1) No. 7 of the German Banking Act ('Kreditwesengesetz' or 'KWG'). This option puts the spotlight on some tax and regulatory questions.
What is Bitcoin and how does it work?
Bitcoin (informal abbreviation 'BTC') is an open-source software project regarding the same-named digital currency. It was developed by a hacker group called 'Satoshi Nakamoto' in 2009. Thereby, so called 'bitcoin miners' generate bitcoins on a peer-to-peer basis. Everybody who is connected to the network can theoretically mine bitcoins. However, this requires high computing power. Computers have to execute complex number-crunching tasks, which become more and more difficult with every mined bitcoin. As reward for this computing power bitcoins are issued. However, the total number of bitcoins is limited to a maximum of 21 million. Bitcoins can be exchanged for traditional currency, but the exchange rate is a result of supply and demand. Users have a digital wallet in which their bitcoins are stored. Bitcoins can be sent or received by means of one or more bitcoin address (cryptographic public keys). Thus, bitcoins can be transferred through a personal computer or smartphone without an intermediate financial institution. Hence, bitcoins are freely fungible within the network. In Germany, Bitcoin is not (yet) very popular. However, clients can already pay with bitcoins amongst others online or in some shops in Berlin. Proponents and users advertise Bitcoin primarily as being a decentralised and anonymous means of payment. This of course has triggered some interest amongst German tax and regulatory authorities.