Bitcoin, the new and often controversial digital currency, has just been ruled as an official “unit of account”, or in other words a form of private money, in Germany by the Federal Ministry of Finance. While this doesn’t mean Bitcoins will pose a threat to the euro, it will be treated as a legitimate form of tender for both commercial and private sales.
To put it briefly, Bitcoin is a decentralized digital currency that is in some form like digital gold. Unlike the more typical forms of currency in use today, there is a fixed supply of bitcoins and the intention is that more can not be put into circulation. There is also no physical form of the currency; it only exists in the digital form and resides on your electronic devices, bypassing any form of a financial institution.
Up until this point, there wasn’t much blocking the use of bitcoins for purchases in Germany, and some areas have seen the use of the digital currency rising. In the Kreuzberg neighborhood of Berlin, bitcoins are widely accepted by many businesses to the point that locals coin the area as Bitcoinkeiz (Bitcoin neighborhood).
One of the key things the recent declaration by Germany’s Federal Ministry of Finance changes is that for the first time bitcoins can now be taxed by the government. Bitcoin users may not see this as a positive outcome since the current tax rate is at 25%, but that might just be the price they have to pay for seeing bitcoins crop up as a more widely used currency. Then again, the federal government is going to have a hard time tracking down a currency that has been designed to keep its users fully anonymous with their private Bitcoin number being the only identifier.
Over the last several months, Bitcoin has seen it’s value fluctuate drastically and isn’t exactly easy to understand for the general public. It is in its early stages so far, but governments around the world are beginning to see it as an alternate form of currency whether they like the idea or not.