European Court of Justice Rules Bitcoin is a Currency, Not a Commodity

     Beijing time, October 23, early morning news, on Thursday, the virtual currency Bitcoin took another step towards becoming a legal currency because according to the ruling of the European Court of Justice, Bitcoin must be treated as a currency for tax purposes rather than as a commodity.

The European Court of Justice ruled that bitcoin exchanges that charge a fee to convert traditional currencies such as the euro or Swedish kronor into bitcoin are exempt from VAT because under EU regulations, "currency, bank notes and coins used as legal tender" are not subject to VAT.

Europe is one of the largest trading regions for bitcoin, so the ruling represents a major boost for the virtual currency, removing the potential threat that transactions to buy or use bitcoin in Europe could be taxed.

Thursday's ruling also sheds light on a debate within Europe over how to treat the virtual currency. British tax authorities have previously taken a clear position that Bitcoin is a currency, but countries such as Sweden and Germany have long argued that Bitcoin should be treated as a commodity, meaning that its conversion would be subject to sales tax laws.

Thursday’s ruling was not surprising, as one of the court’s top lawyers had advised the court in July, but it was a relief for Europe’s bitcoin businesses, which had previously argued that charging VAT on bitcoin transactions would give a competitive advantage to bitcoin businesses outside Europe that do not face a similar threat.

The ruling is "the first step in ensuring that bitcoin is an alternative to national currencies in the future," said Richard Asquith, vice president of tax compliance firm Avalara.