Last month saw the EU Court of Justice determine that Bitcoin transactions should not be subject to VAT at this point. Many EU-based companies operating in the Bitcoin space will be pleased with the newfound clarity provided by European lawmakers.
2015 has been a year in which regulation of Bitcoin has been a hot topic; BitLicense was introduced in New York State to the dismay of many Bitcoin companies in the area. If Bitcoin is to continue to grow and develop, authorities and lawmakers around the world must work with the industry to create supportive and well-informed legislation.
The decision reflects the growing trend towards hands-off regulation, particularly in Europe, which is in stark contrast to the BitLicense approach. The negative backlash against the BitLicense has galvanized support for an alternative approach, which seeks to assist the innovative nature of the cryptocurrency industry. Overzealous regulation has the potential to cause serious problems for the Bitcoin industry which is really only just beginning to mature into a significant market force and still has a wealth of untapped potential.
The last few weeks have seen the BTC price rise to its highest point of 2015. This perhaps indicates that the large-scale investment into Bitcoin companies that became a trend in the first half of the year is beginning to be translated into a higher BTC price.
The situation is far from ideal as many of the institutions that Bitcoin companies need to work with continue to present obstacles and problems. Issues with banking partners can be an endless headache for Bitcoin companies and ultimately inhibit innovation and progress.
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The blockchain technology which powers Bitcoin is fast-becoming a well-respected technological development which has attracted interest from multinational corporations- including the banks- but start-up enterprises continue to struggle to build the necessary supporting relationships with banks for Bitcoin projects.
The EU VAT ruling is a result of Bitcoin being officially deemed a currency by the authorities and represents a great step towards the cryptocurrency being understood more by both the public and governments around the world.
Many of the difficulties that Bitcoin start-ups have faced are a result of a lack of clarity from lawmakers, thereby making business relationships problematic. The maturing Bitcoin industry needs supportive, well-informed policy decisions if it is to be able to bring the benefits of the cryptocurrency to more users.
The potential for Bitcoin in cross-border transfers and remittances is particularly inhibited by regulations designed to discourage money laundering, which is of course an important issue but the laws effectively stop Bitcoin from being used to its full potential in this area.
Instead, big business continues to dominate with companies such as Western Union and MoneyGram facilitating a large number of remittance payments. The fees involved with these services are markedly higher than using a Bitcoin-driven platform, despite growing competition within the remittance and money transfer sector. This all comes down to the innovative peer-to-peer network behind Bitcoin and the powerful shared blockchain; this technology remains ultimately superior to the mechanisms used by the likes of Western Union.
However, the EU judgement can only be good news for those of us involved with Bitcoin. Clarity from lawmakers and the authorities will always be welcomed as start-ups begin to establish themselves more significantly across almost all international markets. Hopefully, this ruling will serve as inspiration around the world as other governing bodies begin to approach the significant task of regulating and understanding cryptocurrencies.