As U.S. officials struggle to establish consistent regulations for Bitcoin, the ubiquitous cryptocurrency is gaining legislative traction in Europe.
Last week, Spain's government ruled that Bitcoin would be classified as an electronic payment system akin to PayPal. The ruling did not find Bitcoin to be a full-blown currency, but the EPS designation will help clarify the legal environment for Bitcoin entrepreneurs, especially those involved in Spain’s growing online gambling industry.
In March, the UK reversed an earlier decision targeting Bitcoin miners — individuals or groups who get paid in Bitcoin for using their computers to solve complex math problems to generate new units of cryptocurrency — and fiat exchangers, saying their gains would not be subject to a value-added tax. And last year, Germany categorized Bitcoin as a "unit of account," or "private money." Again, the designation is not "legal tender," but it freed citizens from having to pay capital gains taxes on their Bitcoin holdings.
“I do think some countries in Europe have the opportunity to get ahead [of the U.S.] by being more open to innovation from Bitcoin companies,” Wedbush Securities managing director and payments expert Gil Luria told Fusion. “If countries like Switzerland or the UK decide to be less restrictive on Bitcoin companies, than they can get an edge over the U.S.”
Many of the largest Bitcoin companies, he said, now operate “everywhere and nowhere,” regardless of where they’re actually headquartered, and simply seek out destinations where the risk to their businesses will be lowest.
“That’s, to me, where countries in Europe, if they remain open [to Bitcoin], can attract businesses that are afraid of being regulated in the U.S.”
Europe's interest in Bitcoin is not a one-way street. The Bitcoin Foundation—the world's largest lobbying group in favor of the cryptocurrency—is setting its sights on the region. On Friday, the organization announced that it was retaining the services of regulatory expert Monica Monaco to help out with the European front. According to a press release, Monaco, who spent a decade working for Visa Europe as Senior Manager for EU Relations and Regulatory Affairs, will play a key role in promoting the cryptocurrency to legislators.
"With the new European Parliament and Commission being formed up, now is the right time to engage with Brussels," Jim Harper, the Bitcoin Foundation's Global Policy Counsel, said in the statement. "As we've been doing in the United States, we'll be introducing the foundation, educating policymakers about Bitcoin, and sharing Bitcoin's achievements and potential in terms of financial inclusion with leading policymakers and public officials."
This move is only the latest by the Bitcoin Foundation to strengthen their presence in Europe. Prior to this, the group had already established chapters in Germany, the Netherlands, Denmark, Romania, and Slovenia.
Even before last week’s ruling, Bitcoin enthusiasts in the Madrid were already convincing a slew of local shops on the historic and ritzy Serrano Street to start accepting Bitcoin as payment. With at least 12 stores signing on, organizers have begun dubbing the famed street as "Calle Bitcoin," Europe's answer to of Cleveland Heights, Ohio’s "Bitcoin Boulevard."
The cryptocurrency’s status in Europe is not wholly resolved. Iceland, for example, has effectively banned Bitcoin by preventing its residents from using Icelandic kronur—the country's money—to purchase them (Iceland's residents can still have/possess Bitcoin, but they'd have to mine them). Another bump in the road has come from the Isle of Man, the British semi-autonomous state that had hoped to become a governmental haven for Bitcoin. The nation’s Capital Treasury Services, a company that serves as a financial middleman between business that take Bitcion and local banks, announces that it was abandoning its involvement with Bitcoin. And the EU’s court of justice remains years away from issuing a ruling analysts say could override any decisions member states have taken on VAT applications.
Still, Bitcoin’s legal status in the U.S. remains significantly murkier. Earlier this year, the IRS ruled that Bitcoin should be treated as property for tax purposes. A bill has been introduced to try to get that definition changed, and the federal judge presiding over the Silk Road case ruled this summer that Bitcoin was a currency subject to anti-money laundering rules. The Consumer Financial Protection Bureau has warned consumers to stay away from the cryptocurrency altogether.
In New York, which has tried to position itself as a vanguard of Bitcoin oversight, Department of Financial Services chief Ben Lawsky decided to extend the comment period on his draft proposal of Bitcoin regulations an additional 45 days after Bitcoin supporters criticized the measure for being overly burdensome.
“A lot depends on where New York ends up,” Luria said. “If New York and [DFS Superintendent Benjamin Lawsky end up sticking with the initial draft, which was very restrictive, that may be something that keeps back support of Bitcoin development and entrepreneurship [in the U.S.].”
Major U.S. firms aren’t waiting around. Atlanta-based BitPay, one of the largest Bitcoin payment processors in the U.S., opened its first overseas office in Amsterdam earlier this year. They’ve since jumped from two employees “working in a back office” to six, and plan to have up to 15 by the first quarter of next year.
“We saw pretty staggering growth when we were able to provide attention to businesses and explain Bitcoin, explain how it works,” BitPay marketing VP Stephanie Wargo said.
Fidel Martinez is an editor at Fusion.net. He's also a Texas native and a lifelong El Tri fan.
Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.