The US state of California has just formally approved bitcoin as legal to use to pay for goods and services.
Under US law, Section 107 of the California Corporations Code stated that nothing except “legal money” could be used to pay for goods and services, or when transmitting payment. This could potentially give retailers a headache, since it meant that tokens like gift certificates and loyalty rewards could technically be seen as illegal.
The new law is known as AB129, and it was actually approved in June last year. However, it didn’t kick in until 1st January, 2015. Now, in California at least, bitcoin can be spent legally, as can other tokens and cryptocurrencies.
Regulation
Of course, the USA is a huge country, and state laws are rarely in sync. In some cases, they are totally at odds.
New York State is still consulting on its plans to regulate bitcoin and force financial intermediaries obtain a ‘BitLicence’. New York’s Department of Financial Services says this would help to protect users and add a layer of compliance, and it would also go some way to prevent money laundering and the funding of terrorism.
People who oppose the regulation say it would be unwarranted surveillance, and BitPay said it could price some start-ups out of the market. However, the plans have been relaxed from the original proposal, which said everyone using bitcoin would be expected to obtain a licence. It also said everyone transmitting money would have to collect names and addresses for everyone else. Thankfully, the DFS realised that this would be totally unworkable.
Outside the US
In the UK, bitcoin is seen as money, and the UK Treasury says that it wants to support innovation while ensuring safety. It is looking into regulation, but has not made any decision yet.
In Australia, bitcoin is not recognised as money in law, and is therefore subject to taxation, including an income tax liability when it is mined. This has prompted some companies to close their Australian operations. The EU is looking at taxation and may still follow in Australia’s footsteps.
Crucially, California has not yet decided whether it will regulate bitcoin, despite the implementation of AB129. Tom Dresslar, a spokesperson for the Department of Business Oversight, said that a decision would be made “in the near future”. California has a high concentration of bitcoin startups and payment processing companies, so it has a fine line to tread in keeping everyone happy.
The Future
Bitcoin legality and regulation is an ongoing issue. Governments are inherently nervous of any decentralised infrastructure, so bitcoin’s future path will be steered by authorities who seek to understand it, control it and – inevitably – monitor its use.