Newsflash! This Week’s Cryptocurrency Regulation News

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New York issues restrictive bitcoin regulation

New York has become the first state to propose official virtual currency regulations, provoking mixed reactions from the bitcoin community. The proposed “Bitlicense” laws have been pending since January, when Benjamin Lawsky, the Superintendent of the New York State Department of Financial Services (NY-DFS) met with experts in the cryptocurrency space to discuss a framework for official bitcoin regulation.The limits and rules imposed by this “Bitlicense” regulatory framework have angered a lot of bitcoin users. Among other things, the framework stipulates that you need a Bitlicense to mine, transact and run a business involving cryptocurrencies in any way. To obtain such a license, individuals must provide the state with a huge amount of personal, biographical and physical information, including a set of fingerprints.

The bitcoin community is worried that the tedious and intrusive nature of the proposed Bitlicenses will dissuade burgeoning virtual currency businesses and markets from operating and will inconvenience current operations. More ominously, this regulation could set a harsh precedent for the cryptocurrency regulation that is sure to follow from other states

Digital currencies

European Union Court to review bitcoin’s tax-free status

The European Union is to rule on the applicability of value-added tax (VAT) to cryptocurrencies, following conflicting regulatory stances from Sweden and the UK.

At the end of 2013, the UK’s HM Revenue and Customs (HMRC) declaring that bitcoin was not a currency and was going to be treated like a single-purpose face value voucher instead. This means that all bitcoin transactions would be subject to a 20% VAT, making them significantly less competitive. UK-based bitcoin businesses and exchanges were frustrated by what they perceived as a misunderstanding of the nature of virtual currencies, so they lobbied HMRC such that they withdrew their stance in March with a promise to reexamine it.

Currently, the UK, Germany and Estonia have all ruled that virtual currencies are VAT-free. However, this stance clashes with the position taken by other countries in the EU. Sweden has made efforts to clarify the regulatory landscape by bringing the case to the EU court of justice.

The Luxembourg-based tribunal will decide whether virtual currencies can be classed as a service and if trades involving these currencies are taxable. Their ruling will have resounding implications for the tradability and competitive advantage of virtual currencies, both within the EU and globally.

 

Silk Road charges set dangerous precedent for future of online commerce

Ross William Ulbricht, the alleged creator and operator of the online marketplace Silk Road, is facing charges that should make owners of online businesses nervous. Ulbricht, known on the site by the pseudonym “Dread Pirate Roberts” or DPR, asked the federal court where he is being tried to dismiss the criminal charges brought against him as the owner of Silk Road. The ruling the district court judge Katherine Forrest responded with was troubling in several ways, both for Ulbricht and for the Internet economy at large.

To explain, the government is bringing charges against Ulbricht not for transacting with illegal goods himself but for running a website that it alleges was designed to be used for criminal transactions. Though Ulbricht did not personally oversee the transactions himself, the court stipulates that he is responsible since he designed the site’s administrative software.

This ordinance does not bode well for Ulbricht, but it also raises questions for other online retailers. The court says that Ulbricht is at fault because he conspired to design the website to be illegal, as opposed to retailers like Amazon and EBay, whose transactions are primarily legal. However, many critics worry that these lines aren’t clearly delineated and that, as illegal transactions are inevitable on any open trading forum, many online marketplaces are at risk.

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