Quantcast
Emerging Payments

How Bitcoin Is Blossoming in Germany

Print
Email
Reprints
Comment
Twitter
LinkedIn
Facebook
Google+

NUREMBERG, Germany—If you stop by bar Room77 in Berlin's Kreuzberg neighborhood for a beer, you can leave the euros in your wallet and instead pay with the digital currency Bitcoin—a growing phenomenon in Germany and other countries that are changing their views on the currency.

"In our neighborhood there are a few dozens of bitcoin-accepting businesses by now and a bitcoin-based economic cycle starts to develop," says Joerg Platzer, owner of Room77 and principal of the Crypto Economics Consulting Group in Berlin. "I do not have to change the bitcoins we take in back into euro. I can pay my beer supplier, my printer and other goods and services with it already. We call it our 'alternative local currency with global reach.'"

Last month, Germany's Federal Financial Supervisory Authority (BaFin), the country's financial regulatory authority, publicly recognized bitcoins as a "unit of account" that can be taxed and used for trading purposes here. The BaFin statement did not go so far as to classify the oft-embattled virtual crypto-currency as "legal tender," but the move is seen by many as a step in that direction (and toward the denationalization of money, as some German politicians are encouraging).

Bitcoins, which are generated online through a computing-intensive "mining" process, are seen somewhat dubiously by U.S. regulators since they are not issued by a central bank and can be held and traded almost anonymously, making them a seemingly ideal currency for nefarious activities such as money laundering or drug trafficking.

Already, says Jon Matonis, executive director of the trade group Bitcoin Foundation, "there are more and more merchants accepting [bitcoins]" in German neighborhoods like trendy Kreuzberg (think Berlin's Greenwich Village).

"[German regulators] are trying to put some measure of control around it, rather than stymie it or erect barriers to try and discourage it," says Matonis, who lives in Switzerland. He predicts bitcoin use would grow regardless. "Why swim against the tide?"

In Germany, the bitcoin marketplace, "bitcoin.de," has already partnered with Munich-based Fidor Bank AG, which acts as the marketplace's agent to conduct trading—making bitcoin.de the first European bitcoin platform with a direct banking relationship. Given BaFin's prominent role in the European Union, Matonis and others see this as an affirmation that could give bitcoin more respectability in the eyes of other regulators.

"I believe that the proper determination of which asset class bitcoin belongs in, whether that is as money or a commodity or a private 'unit of account', is still an open question that nations are only now grappling with," says Constance J. Choi, general counsel for Payward Inc., a U.S.-based bitcoin trading platform.

In Switzerland, Matonis says Bitcoin is being considered for a three-digit ISO currency code (XBT)—a code that most online currency conversion tools already utilize. (As of Sept. 11, currency site xe.com valued one bitcoin at $133.30.) Other bitcoin-friendly countries like the Netherlands and the United Kingdom are ripe to expand their acceptance of the crypto-currency, Matonis adds. Indeed, this week, U.K. newspaper The Guardian reported that financial officials and bitcoin-using company representatives gathered at Downing Street in London to discuss the British government placing possible regulatory measures around bitcoin. 

A similar meeting between U.S. regulators and the Bitcoin Foundation took place last month in Washington D.C.

"What is clear is that bitcoin is demanding the attention of regulators now, and the EU has legal regimes in place that make it easier for harmonization of legal frameworks across the EU market than in the U.S.," says Choi. "It also speaks to the tremendous social power and widespread belief in the benefits of bitcoin technology that this system is still being adopted and the price of bitcoins continues to hold and steadily climb, despite negative reports and regulators' attempts to bring it within the purview of their jurisdiction."

But will activity in Europe affect bitcoin acceptance in the United States, where the U.S. Senate's Homeland Security Committee recently launched an inquiry into the "threats and risks" of the virtual currency and New York State subpoenaed nearly two dozen digital currency companies for potential illicit activity?

As Choi points out, in March the U.S.'s Financial Crimes Enforcement Network "made it clear …that bitcoin is not money or currency, but rather, operates like money and will therefore be regulated as something akin to money while the proper asset determination is made."

"Bitcoin's entry into the U.S. market is still crippled by each U.S. state's right to define money and regulate money transmission activity in each individual state in ways that may contradict with the U.S. federal government and other state regulations," she adds. "It's a mess."

The U.S. is unlikely to use Germany or other European countries as a model, Matonis says.

"It's wishful thinking to think they would be influenced by others. I don't think the United States take marching orders from anyone," he says, adding that failure to accept bitcoin will just drive trading to more welcoming jurisdictions. "If they don't consider other alternative currencies, they [the U.S.] are effectively ceding the space to others… and that will hurt the United States and the U.S. citizens who have a lack of choices."

JOIN THE DISCUSSION

SEE MORE IN

RELATED TAGS

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Email Newsletters

Get the Payments Update and the Morning Scan when you sign up for a free trial.

Already a subscriber? Log in here
Please note you must now log in with your email address and password.