Bitcoin faces latest regulation barrage - this time it's from Finland

Today has brought another state-led assault on Bitcoin - Finland, like neighbour Norway, has deemed the virtual currency a commodity, rather than a currency.

Finland’s central bank has said that Bitcoin doesn’t even meet the definition of an electronic payment method.

Speaking to Bloomberg, Paeivi Heikkinen, head of oversight at the Bank of Finland in Helsinki, said: "Considering the definition of an official currency as set out in law, it’s not that. It’s also not a payment instrument, because the law stipulates that a payment instrument must have an issuer responsible for its operation."

Finnish authorities are the latest in a line of countries trying to get to grips with the strengthening cryptocurrency.

While Norway has said it’s not a currency - it'll be treated as an asset and, therefore, will be subject to capital gains tax - fellow Scandinavian country Denmark is waiting for recommendations from its financial watchdog, in order to inform lawmakers on how to deal with Bitcoin and rival cryptocurrencies.

Elsewhere, the US has remained pretty laid back about the Bitcoin, labelling it a "legitimate financial service", other countries have been less compromising.

The German federal ministry of finance has recognised the virtual money as "private money" and imposed a 25 per cent capital gains tax back in August.

And in July, Thailand became the first country to ban it after its central bank ruled it was not a currency. Chinese lenders are also prohibited from handling it.

Here in the UK, Bitcoin is currently being reviewed by HMRC. It’s currently taxed as face-value vouchers, meaning the full 20 per cent VAT is incurred on the value of the exchanged Bitcoin.

But if it’s deemed to be ‘private money’, paying VAT would only be required on the commission charged on any trading exchanges, when a retailer converts the virtual currency back to sterling.

Bill Dodwell, head of tax policy at Deloitte, commented:

Many large businesses will be put off from accepting virtual currencies such as Bitcoins given the fringe nature of the industry and lack of transparency.

HMRC clarifying its tax treatment will give more certainty to participants in the market and over the transactions taking place.

This may boost confidence in cryptocurrencies and lead to wider adoption.

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