Bitcoin as a legitimate currency has faced scrutiny from all angles, from its wild fluctuations in value, to corruption and theft from Bitcoin banks and trading sites, and a shady history as to its most prominent use as a means of purchase for illegal items and services.
The United Kingdom just announced this week that it would be lifting its VAT or Value Added Tax of up to 20 percent from all Bitcoin trades, while keeping the tax on actual transactions or sales made by legitimate businesses. The U.K.’s position is being hailed as progressive and forward-thinking in a time where governments are hesitant to place regulation on the digital currency so often used for illicit activity such as money laundering, and the purchasing of drugs or child pornography.
This week, shortly after the collapse of the Tokyo-based Mt. Gox Bitcoin exchange, Japan announced it would also be making moves toward the taxation and regulation of Bitcoin. The regulation would be handled in a similar way to gold and other precious metals; it would be treated as a commodity rather than a currency. As a commodity it would become subject to Japan’s consumption tax, which as of April will sit at 8 percent.
Japan, however progressive and proactive their actions may be, will face the same problems currently facing the U.K. The ability to track, control, and regulate the use of Bitcoin is extremely limited. Bitcoin has risen to prominence first and foremost as a way of making anonymous purchases. The identity of any citizen using Bitcoin would be near impossible to track if they so wished, and the practicality is limited to storefront purchases where Bitcoins are exchanged for bona fide goods or services.
Whether major governments make moves toward a more open or closed position on regulating digital currency will be looked upon as precedent-setting and imperative to its future as a stable alternative to government-sanctioned currency. Japan is opening its doors as well to a slew of new revenue that will aid the growth of the nation.
Edited by Rory J. Thompson
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