Bitcoins
were dealt a blow in Norway as the government of Scandinavia’s richest nation
said the virtual currency doesn’t qualify as real money.
“Bitcoins don’t fall under the usual definition of money or
currency,” Hans Christian Holte, director general of
taxation in Norway, said in an interview. “We’ve done some assessments on
what’s the right and sound way to handle this in the tax system.”
Norway
will instead treat Bitcoins as an asset and charge a
capital gains tax, after Germany in August said it will impose a levy on the
virtual currency.
More
and more nations are taking an official stance on the software since it emerged
in 2008 as a virtual currency that’s not controlled by any government or
central bank. Bitcoins can be used to pay for
everything from hand-made rugs to window cleaning. Students at the University
of Nicosia in Cyprus can even pay for their tuition with the software.
China,
U.S.
There
are about 12 million Bitcoins in circulation,
according to Bitcoincharts. Users of the digital
money are finding that its wider adoption depends on policy makers and banks as
governments from China to the U.S. try to create a set of rules to protect
users.
Bitcoin
exchanges, payment processors and other startups say
they need banks to connect them to the existing payments system and provide
basic services like checking accounts. To do that, the fledgling companies must
convince the regulators that police the banks that Bitcoins
aren’t being used to conceal illicit activity.
Norwegians
marveled at the potential of the virtual currency
when it emerged in October that a university student became a krone-millionaire
after buying the coins. Kristoffer Koch bought $24
worth of Bitcoins in 2009 and then forgot about them
until this year, according to Norwegian broadcaster NRK. When he checked his
investment’s value, it had soared to more than $800,000, helping him buy an
apartment, NRK said Oct. 25.
In
Norway, profits from Bitcoin will fall under the
wealth tax and losses can be deducted, Holte said.
There will be a 25 percent sales tax that applies to
businesses, he said.
Introduced
five years ago by a programmer, or group of programmers, going under the name
of Satoshi Nakamoto, Bitcoins
can potentially reduce banking-transaction fees, making it an attractive option
for trading via the Web or in stores.
While
tax revenue from Bitcoins isn’t substantial, Holte at the Norwegian tax authority said he plans to work
with other countries to hammer out the legal aspects of Bitcoin.
Bitcoins’
survival will ultimately depend on whether consumers and vendors decide they
can trust it as a legitimate payment form, Ehling
said.
“If
there’s a crisis or power outage, you need some bills in your wallet in case
your credit card doesn’t work -- same goes with Bitcoins,”
he said. “It’s sustainable if people use it more and more, and if they trust
it. People start with buying small things, but if they start to make bigger and
bigger transactions, it could begin to challenge other currencies. Right now,
we’re not there.”