US and China Bitcoin Laws: How New Rulings Will Effect this Digital Currency

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US and China Bitcoin Laws: How New Rulings Will Effect this Digital Currency

ForexMinute.com – In the past years, Bitcoin’s popularity has increased dramatically for both good and bad reasons. The first and leading digital currency seduced investors into making quick bucks, as well as regulators who wondered that Bitcoin can help them ease money laundering issues.

Today, the authorities from different countries are trying to “legally” avoid the use of virtual currency in illegal financial transactions. For instance, the U.S. government did not straightforwardly oppose the development of a new industry, but is trying to introduce rules that do not allow to use Bitcoins for money laundering. Last week, IRS has proposed to consider Bitcoin as a property not currency. This idea has been controversial among the Bitcoin community. Some believe that it will boost its development, while others believe that Bitcoin will lose its essence as an alternative currency.

Determination of Bitcoins as property rather than currency means that users will have to report the income and pay tax on capital gains, even if they have just used Bitcoins to pay for goods and services. However, even this thing holds something positive for investors. Since January, Bitcoin’s value have dropped by about 40%, and if the investors will incur losses from operations, they can reduce the tax base.

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Meanwhile, authorities in China believe that Bitcoin is a real threat to the stability of their financial system, and strictly regulate the movement of capital and currency in the country. Last week, the People Bank of China (PBOC) has ordered commercial banks and payment systems to close the accounts of Bitcoin exchanges before April 15.

After this news, Bitcoin Price Index (calculated on the basis of quotations from several exchanges trading Bitcoins by CoinDesk) decreased by about 17% – $579 to $478.
The China Central Bank said that individuals can freely participate in online transactions with Bitcoin at their own risk – the prohibition applies only to financial companies. Some of the largest Bitcoin exchanges in China – BTC China, OKCoin and Huobi – though argued that they did not receive any format notice from the NSC and its partner banks, and try to clarify the situation.

The aforementioned decree affected about two dozen currency trading exchanges, because now they cannot open bank accounts and they will not be availed other financial services. ”Sure, it would have a negative impact on the stock exchange,” says BTC China CEO Bobby Lee.

OKCoin CEO Minisin Su said that if exchanges will not be able to open corporate accounts in Chinese banks, they have to translate their business and their servers abroad.

Meanwhile, the WSJ writes citing a person familiar with the situation, there is evidence that China’s central bank is not going to prohibit the trade in Bitcoins. According to the source, the current NSC decree simply reinforces what the Central Bank said in December.

To contact the writer of the article: Yashu Gola at yashu@forexminute.com