Bitcoin is an innovative payment system that is completely digital and offers clean transactions for its users without the hassle of middlemen. The system is decentralized and supports direct transactions between the users. It is one of the first forms of cryptocurrencies and has a very large market base all around the world. Bitcoins can also be used as exchange for many other products, services and currencies.
Bitcoin network is unique in a way that nobody owns it. The users of this network have control over it. No Developer can modify the protocol as the users have the choice of using different software and versions. The usage and protection of this network works well when all the users consent to the protocols applied.
Much of the trust in Bitcoin comes from the fact that it requires no trust at all because Bitcoin is fully open-source and decentralized. This means that anyone has access to the entire source code at any time. Any developer in the world can therefore verify exactly how Bitcoin works.
All transactions and Bitcoins issued into existence can be transparently consulted in real-time by anyone. All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted.
One of the most common questions or rather statement we get is “but Bitcoin is not legal”. When we inform that Bitcoin is legal and in fact regulated in an increasing number of countries, we can sense disbelief. So below we have mentioned the legal status of Bitcoins in some countries with links.
BITCOIN IS LEGAL AND REGULATED IN USA
Financial Crimes Enforcement Network (FinCEN), United States Department of the Treasury has classified Bitcoin as a convertible decentralized virtual currency in 2013.
Global Advisors Bitcoin Investment Fund (GABI) is the first regulated Bitcoin hedge fund to receive regulatory approval from the Jersey Financial Services Commission (JFSC).View article / View article / View article
New York State Department of Financial Services (NYSDFS) started issuing BitLicense to businesses related to virtual currency activities.
Coinbase launched the first regulated Bitcoin exchange in the U.S.
Winklevoss brothers’ Bitcoin exchange, Gemini, had been granted a license by the New York State Department of Financial Services.
European Union’s top court, European Court of Justice, ruled that exchanging Bitcoin should be exempt from value-added tax in the same way as traditional money.
Bitstamp to be the first fully licensed Bitcoin exchange in Europe, w.e.f. July 1, 2016. It has been granted the license by Luxembourg Financial Industry Supervisory Commission (CSSF).
Japan has officially recognized Bitcoin and digital currencies as money w.e.f April 1, 2017. Japan has a new law that will make Bitcoins usable as legal tender.
Inland Revenue Authority of Singapore (IRAS) has issued tax guidelines for Bitcoins stating that businesses that choose to accept virtual currencies such as Bitcoins for their remuneration or revenue are subject to normal income tax rules.View article / View article
ABitcoin exchange-traded fund (ETF) is issued by the Bitcoin Investment Trust (BIT), owned and operated by Grayscale Investments, LLC. It trades with symbol GBTC, and is also known as BITShare.
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in recourse against businesses with fraudulent practices.
New Bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new Bitcoins in exchange.
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies).
In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, Bitcoin's value comes only and directly from people willing to accept them as payment.