One barrier to the adoption of Bitcoin that continues to emerge is the simple one of ambiguity in regulatory terms. Whilst the average user may not be overly worried about owning a small stash of the cryptocurrency, perhaps as a small speculative bet, the scale at which a company may engage Bitcoin alters the legal framework of owning it significantly. This is, surely, one reason why larger corporations have tended to adopt the blockchain as their favoured term when discussing what the underlying protocol beneath Bitcoin is. After all, the blockchain was invented explicitly to support a form of currency, Bitcoin, and it emerges from a cypherpunk tradition, a kind of blend of libertarian ideals and cryptography, that had always sought precisely a way to circumvent government regulation. With that in mind it is perhaps safer to talk about the potential of blockchain technology as a means of establishing a little distance from the roguish cryptocurrency.
— Garrett Cassidy (@GarrettSCassidy) February 9, 2016
The history of Bitcoin is, more or less, the history of cryptographic implementations that culminate in Satoshi Nakamoto’s merging of previous attempts at a cryptocurrency with his own unique insights – specifically finding a way to incentivize a community to keep a trustless network honest. One of the most significant questions for these corporations to answer is how will they find a way to mirror that incentive structure when building their own “walled” blockchains? On this point we will have to wait and we must also recognise that the blockchain has uses beyond its use as a currency. Nonetheless, it is just as important to remember that in as much as the blockchain is in use, it is used as precisely a currency. This leads to a rather direct regulatory concern: what exactly is Bitcoin in the eyes of regulatory bodies?
Over the years we have seen Bitcoin approached in a number of ways from governments and wider institutions, such as the European Union. In some cases, Bitcoin is either outright illegal (Bangladesh) or more or less seems to be (Russia). However, most countries have taken a relatively reasoned approach to the issue. For example, in Norway Bitcoin is conserved an asset. In the European Union, it is general seen as a virtual currency. This is also the case with the US Treasury and the Internal Revenue Service. The United Kingdom is content to see it as private money. The same is true in Germany. As a virtual currency or private money one tends to find, as with Lithuania, Malaysia and Poland that it cannot be considered legal tender. Some countries have slightly more obscure visions as with Hong Kong’s claim that it is a virtual commodity. As a broad rule these statements essentially render Bitcoin fine to use for private, small transactions. Those engaged in mining or trading (properly) face more, as is to be expected, definite regulation. In some cases, users are advised to keep track of their Bitcoin usage, especially if it is income or deemed to be an asset, for capital gains purposes.
— Simon Cocking (@SimonCocking) February 2, 2016
All fine, but what about Ireland? There is no official report on Bitcoin as things stand, but on the 10th December, 2013 Stephen Donnelly, TD directly asked the Minister of Finance, Michael Noonan, about the status of cryptocurrencies. Donnelly inquired about issues around legal tender status and tax evasion. What we learned is that the Central Bank is not in the business of regulating (specifically) Bitcoin and that cryptocurrencies are not legal tender. The specific term used is virtual currencies and so this falls in line with European Union thoughts on the matter. Further, Noonan stressed that, ‘because Bitcoin is a combination of some factors that constitute a commodity and some that constitute a currency, the implications for taxation are varied.’ The specific import of this is that if one is receiving Bitcoins as payment then the same rules as any ‘foreign currency’ apply. The implications for businesses accepting Bitcoin are clear in relation to gains. The response draws heavily on the EU VAT directive on Bitcoin that ‘VAT is generally chargeable on the total consideration for goods and services, including all taxes, commissions, costs and charges…’ There is a brief mention to the potential use of Bitcoin as a means of non-compliance, but this is considered to be quite low for the moment.
However, this is not the only times Bitcoin has emerge as a topic in Seanad or the Dáil. Cáit Keane in the Seanad stressed that ‘Ireland is a high-tech country. It must recognise Bitcoin, use it if there are benefits to doing so and, if possible, regulate it.’ In turn Senator Ivana Bacik has noted, ‘She [Keane] also raised the issue of Bitcoin and the new developments in the US.’ However, this is about as far as the debate ever went. Sometimes Bitcoin gets associated with the dark web. However, there are some misunderstandings about what occurs on the dark web as when Senator Aideen Hayden seemed to think Silk Road allowed child pornography (important as an distinction because an alleged member of the Silk Road team is up for extradition here soon). Broadly, however, the government seems content to allow the regulatory bodies to both take a cautious, long-term approach to the matter as well as being willing to take into account European Union advice.